Having fallen sharply early on Thursday (22 February) as renewed fears over US interest rate hikes spooked global markets, the FTSE 100 made a partial recovery later after a strong open on Wall Streeet. By the close the index was down 0.4% to 7252.39.
The coming seven days have limited big economic announcements scheduled and the market direction may be dictated by off diary developments on the Brexit process as well as a string of corporate announcements. Next Tuesday (27 February) a reading of US consumer confidence is out. The announcement is a prelude to a second estimate of US GDP for the final three months of 2017 on Wednesday (28 February). Market will be looking for any deterioration from the worse than predicted initial estimate of 2.6% annual growth. Next Thursday (29 February) purchasing managers’ index data for the UK manufacturing sector is published, followed on Friday (30 February) by a similar release for the construction sector.
Amid a flood of 2017 results announcements, banks have hogged the spotlight this week. First up HSBC (HSBA) disappointed the market on Monday (19 February). For the year the bank posted adjusted pre-tax profits of $21 billion, an 11% improvement on the previous year. However, fourth quarter to 31 December underlying pre-tax profits of $3.6 billion came in around 8% below market expectations. There was also no growth in the dividend. Better news for income investors was to come with results from Lloyds Banking (LLOY) and Barclays (BARC) later in the week.
On Wednesday (20 February) Lloyds announced a £1 billion share buyback which along with robust full year numbers and a 20% hike in the dividend went down well with the market. Despite announcing a £1.9bn loss thanks to some large exceptional items, Barclays kept shareholders on side with drastically improved dividend guidance. The company has pledged to pay 6.5p for 2018. Barclays net loss for 2017 was primarily due to write downs and losses on the disposal of Barclays Africa which came in at £2.5 billion as well as litigation and conduct charges of £1.2 billion. When these items are stripped away, full year adjusted pre-tax profits for 2017 were up 23% to £4.5 billion, although slightly below market estimates of £4.7 billion.
The release of purchasing managers’ index data for the manufacturing and construction sectors should offer an insight into the performance of the UK economy amid ongoing tussles over Brexit policy and after growth for 2017 was revised down to 1.7% putting it at the bottom of a leaderboard of G7 developed economies.
Investors looking for exposure to bonds could consider using exchange-traded funds. One relevant ETF is iShares Europe Corporate Bond (IEBC) which tracks a basket of bonds issues by Eurozone companies for an ongoing charge of 0.2%.
27 February – Elementis’ (ELM) full year results will show just over nine months’ contribution from SummitReheis whose acquisition completed on 24 March 2017. The chemicals group paid $360 million to acquire ingredients manufacturer SummitReheis to bolster its existing personal care arm. At the time of the deal Elementis said the acquisition would boost 2017 earnings materially.
28 February – The key focus in free-to-air broadcaster ITV’s (ITV) full year results is likely to be on TV advertising which is still the biggest contributor to the company’s revenue. It previously guided for a 5% annual decline. Any number better than this could prompt share price gains, while a worse than expected performance could put the stock under pressure.
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