By close on Thursday (19 July) the FTSE 100 was just about holding on to a positive position, up 0.1% to 7,683.97, despite weakness in the mining sector.
Beyond the likely continuing focus on trade tensions between China and the US it’s a quiet week ahead for economic announcements. Next Monday (23 July) US existing home sales data is out. This is a leading indicator of economic health as the sale of a house has several knock-on effects including renovation by new owners, brokers fees to complete the transaction and the sale of a mortgage by a bank. Eurozone purchasing managers’ index data for the services and manufacturing sectors are out on Tuesday (24 July). Next Wednesday (25 July) there is an update on US crude oil stocks following recent volatility in the oil price. Next Thursday (26 July) the European Central Bank unveils its latest decision on monetary policy. On Friday (27 July) the first estimate of UK GDP growth for the second quarter of 2018 is published.
Recent results from two of the big UK-listed recruitment businesses offer a relatively encouraging picture of the world economy. Staffing firms are a good indicator for global growth as companies tend to hire in strong economic conditions and delay hiring when times get tough. Recruiters obviously tend to do well if people are moving jobs which is also a by-product of economic strength. A trading update for the three months to 30 June from Hays (HAS) showed growth across all its regions.
Even the UK and Ireland business, affected by Brexit uncertainty, grew 5% on a like-for-like basis. Though notably the growth in the UK is coming from placing people in temporary positions, implying firms are keen to maintain some flexibility in their hiring policy and that they aren’t sufficiently confident to appoint new permanent staff. Rival PageGroup (PAGE) guided for full year profit to be ‘slightly ahead of expectations’ although this was driven by international growth as its own UK division saw income fall 1.9%.
An ongoing theme throughout 2018 has been the increasingly fractious exchanges over trade between China and the US and in this context, the latest Chinese growth figures are spooking the markets. Growth slowed from 6.8% in the first three months of 2018 to 6.7% in the second quarter. China has appealed to the World Trade Organisation over the tariff exchanges and the International Monetary Fund has argued there could be a $430bn hit to the global economy from a trade war. Given the unpredictable nature of the Trump administration investors will likely need to keep tabs on this issue in the week ahead.
Investors looking for exposure to Europe excluding the UK could consider an exchange-traded fund like iShares EURO STOXX 50 (EUE) which tracks a basket of the largest stocks in the Eurozone for an ongoing charge of 0.1%.
26 July – First half results from free-to-air broadcaster ITV (ITV) are likely to be dominated by its two major successes – the big audiences drawn to its coverage of the World Cup and, in particular, England’s participation as well as ITV2’s Love Island. The shares have already begun to rise in anticipation of a World Cup boost from England’s unexpectedly strong run to the semi-finals of the tournament.
26 July – Investors will be expecting Royal Dutch Shell (RDSB) to post strong results for the first six months of 2018. The strength in oil prices through this period should boost revenue, profit and cash flow. However, expectations are set high and there is a danger the company could disappoint, particularly given more recent weakness in the oil price.
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