Amid hopes of a resolution to the trade war between the US and China the FTSE 100 closed up 0.8% at 7,353.51 on Thursday (16 May).
Next Tuesday (21 May) Bank of England Governor, Mark Carney, and his colleagues will testify before MPs (see Economic update). On Wednesday (22 May) UK inflation numbers are published while later in the day the minutes of the latest US Federal Reserve meeting are released. Next Thursday (23 May) UK retail sales data is out. The UK consumer has been surprisingly resilient given Brexit uncertainty and the markets will be looking to see if this can continue. Friday (24 May) should see the results of the European elections emerge. A strong showing for the Brexit Party might lead to escalating fears over a no deal exit from the EU.
A series of updates has put the spotlight on the travel sector this week. Holidays are seasonal and its not unusual for companies to be loss-making through the Winter period. On Wednesday (15 May) TUI (TUI) net losses deepened to €287.2 million versus last year’s €210.6 million negative number. However, this was no worse than had been feared due to the impact of Brexit uncertainty, higher fuel costs and excess capacity. One encouraging area for the firm appears to be its hotels and cruises divisions, which are growing on a year-on-year basis. The day before, on Tuesday (14 May), specialist beach holiday outfit On The Beach (OTB) performed better than its larger peer with a 12% rise in pre-tax profit to £11.9 million and a 41% jump in revenue to £63.5 million in the six months to 31 March. The real shocker came from Thomas Cook (TCG),on Thursday (16 May), which reported a loss of £1.45 billion and revenue down 6% to £3.02 billion as well as warning on future profit. Net debt came in at more than £1 billion and the company has secured a £300 million loan facility to help it navigate this year’s winter lull.
Next Tuesday’s (21 May) inflation report hearings will provide insight into how the Bank of England (BoE) is thinking about interest rates as well as their view on UK growth and inflation. During these hearings the BoE Governor and several MPC members testify before Parliament's Treasury Committee. A rate hike seems unlikely until there is clarity on Brexit, but it will be interesting to see if Governor Mark Carney and his colleagues are concerned about the impact of higher oil prices on inflation.
Investing in micro-cap firms can be risky and, for this reason, some investors prefer to put their faith in professional stock pickers. Smaller companies are more prone to share price volatility and smaller balance sheets can make them more vulnerable to financial shocks. This makes picking the right names important and that’s where the expertise of a fund manager can be an advantage. Examples of micro-cap funds include LF Gresham House Micro Cap (GB00BV9FYS80) and Liontrust UK Micro Cap (GB00BDFYHP14).
22 May – There is a lot riding on delivery service Royal Mail’s (RMG) full year results and strategy update. After a rough time for the company blighted by industrial disputes and missed efficiency targets, investors will be looking for guidance on earnings and cash flow over the medium-term given the implications this has for the sustainability of the dividend.
23 May – Ten pin bowling operator Hollywood Bowl (BOWL) will be looking to knock over investors with its momentum when it reports first half results. A trading update on 10 April revealed total turnover up 5.3% thanks to healthy like-for-like growth of 4.4%. The focus is likely to be on trading since the period end on 31 March and the outlook for the remainder of 2019.
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