The FTSE 100 was 0.5% lower by the close on Thursday (2 May) at 7,348.93 after the Bank of England’s Monetary Policy Committee voted unanimously to keep interest rates on hold at 0.75%.
There will be a quiet start to next week in London thanks to the Bank Holiday. On Tuesday (7 May) investors will be able to digest forecasts on the EU economy from the European Commission. Next Wednesday (8 May) a detailed record of the ECB Governing Board's most recent meeting is published, offering in-depth insights into the economic conditions that influenced their decision on where to set interest rates. Next Thursday (9 May) US inflation figures are out. In commentary accompanying this week’s decision to keep interest rates on hold, the chair of the US Federal Reserve chief Jerome Powell noted factors behind subdued inflation were transitory. This was widely seen as rebuff against suggestions a rate cut should be on the table. Finally, on Friday (10 May) the latest UK monthly GDP figures are published (see Economic update).
The UK’s oil majors reported their first quarter results this week. Though oil prices have since recovered, they started the year at depressed levels and, as expected, this had an impact on the performance of both BP (BP.) and Royal Dutch Shell (RDSB) though, crucially, not to the extent which was feared. On Tuesday (30 April) BP reported first quarter earnings down on the same quarter a year ago but marginally ahead of estimates. Underlying replacement cost profit was $2.4 billion compared with $2.6 billion a year ago and forecasts of $2.3 billion. Selling prices and margins were down at the start of the quarter but higher volumes and a good performance from its trading arm helped to support the bottom line.
Like BP, Shell seems to have coped well despite the oil market kicking off 2019 in the doldrums. Q1 profit of $5.3 billion, reported on Thursday (2 May), was down just 2% year-on-year and compared favourably with the $4.5 billion which was forecast. Strong contributions from trading and higher liquefied natural gas (LNG) and natural gas prices helped offset the impact of lower realised oil prices. No wonder chief executive Ben van Beurden felt able to point to a ‘robust’ start to the year. Shell is highly prized for its income credentials and held its quarterly dividend steady at $0.47.
Amid continuing uncertainty over Brexit, monthly UK GDP figures published next Friday (10 May) are likely to draw some focus. The Bank of England has suggested GDP is likely to decline in the near term thanks to the continuing lack of clarity over the UK’s exit from the EU.
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9 May – A trading update from housebuilder Barratt Developments (BDEV) could see the spotlight placed on how its key spring selling season is progressing. Scrutiny is also likely to fall on build cost inflation which appears to be accelerating for some of its peer group. This, in combination with a softening housing market, could put margin performance under pressure.
9 May – Heading into this set of full year results, there are a lot of questions for telecoms firm BT (BT.A) and its new boss Philip Jansen to answer, perhaps most pertinently over the sustainability of the company’s dividend. The pressure on the payout is exacerbated by the company’s big borrowings and substantial pension deficit.
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