The pound fell on the latest ructions in the Brexit process. This had positive implications for the relative valuation of overseas earnings from the FTSE 100 and helped lift the index off its lows to trade broadly flat by the close at 7,704.40.
Next Monday (11 June) monthly manufacturing production figures from the UK are published. Tuesday (12 June) sees the release of earnings data for the UK followed by inflation figures from the US. Wednesday (13 June) is a very busy day with plenty for investors to keep tabs on, including the latest update on UK inflation and an interest rate decision from the US Federal Reserve (see Economic update). Next Thursday (14 June) UK and US retail sales are out as well as the European Central Bank’s (ECB) own pronouncement on rates and financial stimulus. It will be interesting to note if the recent political turmoil in both Italy and Spain is addressed by ECB chief Mario Draghi.
There have been some interesting developments in the banking sector this week. First on Monday (4 June) Clydesdale and Yorkshire Bank owner CYBG (CYBG) announced it was offering Virgin Money’s (VM.) shareholders a bigger stake in the proposed combination to get a proposed merger over the line. Virgin Money shareholders would own around 38% of the combined group under the revised terms. The parties now have until 18 June to formalise a firm offer. By joining forces, the combined bank would serve around six million retail and small to medium size business customers.
Later that same day the Government announced plans to sell another tranche of its stake in Royal Bank of Scotland (RBS), left over from its 2008 bailout of the group at the height of the financial crisis. The 7.7% share stake was sold at a 271p per share strike price. That will raise roughly £2.5bn for the Treasury but it will also mean a rough £2bn loss for the British taxpayer. The Government rump stake will be cut to 62.4%. RBS shares fell in response to the news.
Next Wednesday (13 June) the US Federal Reserve will give its latest decision on interest rates as well as giving its view on the US economy. For now, judging by the way the major stock exchanges are performing, the market apparently believes US president Donald Trump’s bark is worse than his bite on trade. This is despite the imposition of tariffs on steel and aluminium from the EU, Mexico and Canada and a breakdown in talks with China over the last week or so. It will be interesting to see if the Fed is similarly relaxed.
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12 June – Housebuilder Bellway’s (BWY) trading update may be closely scrutinised by the market for any signs of the margin pressure which has affected some of its rivals recently amid stalling house prices. Full year results in March were broadly in line with guidance but included better-than-expected earnings and a big hike in the dividend.
15 June – Supermarket Tesco (TSCO) is scheduled to report on its first quarter trading. The company will be looking to carry over the momentum demonstrated in April’s full year results. These showed sales up 2.3% to £51bn with a £1.3bn reduction in net debt to £2.6bn. Chief executive Dave Lewis’ turnaround of the group has involved going back to basics and focusing on its core strengths.
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