Amid falls on other global markets the FTSE 100 stood tall ahead of the latest US interest rate decision. By the close on Thursday (8 November) the index was up 0.3% at 7,140.68.
Next Tuesday (13 November) investors will get some insight into the outlook for consumer spending ahead of Christmas with average earnings data. Overnight on Wednesday (14 November) Chinese industrial production figures are released. The market will be scrutinising the release for any evidence of the impact of current global trade tensions. A weaker than expected number could be bad for commodity markets and resources stocks given the implications for demand. Later in the day on Wednesday inflation numbers in the UK and US (see Economic update) are released, followed next Thursday (15 November) by retail sales figures on both sides of the Atlantic. Finally, on Friday (16 September) Governor of the Bank of England Mark Carney is scheduled to appear before MPs to offer an outlook on inflation and the economy.
There were some worrying signs for the groceries sector this week as Morrisons (MRW), Marks & Spencer (MKS) and Sainsbury’s (SBRY) all updated the market. Morrisons shares came under pressure on Tuesday (6 November) when it reported its quarterly numbers. What investors probably focused on was the like-for-like growth of just 1.3% in the Retail division. This was at the root of the underperformance of expectations, with like-for-like growth coming in at 5.6% against a forecasted 6.1% and compared with growth of 6.3% over the summer – a period which was boosted by a heatwave and the World Cup.
The Wholesale arm performed well with like-for-like sales up 4.3%, which was broadly in line with what analysts had penciled in and this was still the 12th consecutive quarter of like-for-like sales growth for the business. On Wednesday (7 November) Marks & Spencer reported like-for-like food sales down 2.9% due to the timing of Easter, fewer promotions and price cuts, but also reflecting fierce competition. Thursday saw Sainsbury’s reporting a hefty slump in half year profits as it continues to grapple with stiff competitive pressures. Pre-tax profits fell from £220 million a year ago to £132 million in the six months to 22 September with like-for-like sales barely making any progress, up just 0.6%. The supermarket group blamed the drop in profit on a number of charges, including those associated with the integration of Argos and the proposed merger with Asda.
The pace of future rate hikes from the US Federal Reserve may be dictated by how rapidly inflation picks up and therefore inflation figures next Wednesday (14 November) will be closely watched particularly after the recent US midterm elections. Given the divisive nature of US politics at present the Democrats are unlikely to support any Trump administration initiatives. This limits the prospect of further fiscal stimulus for the US economy, which, in turn, could reduce the pressure to increase interest rates and put the US dollar on the back foot.
Investors looking for exposure to Japan could consider exchange-traded fund Xtrackers Japan Nikkei 225 (XDJP) which has an ongoing charge of just 0.09%.
15 November – This third quarter trading update from Aston Martin Lagonda (AML) will give investors the first chance to judge the performance of the luxury car maker since its IPO in October. The shares have since fallen sharply amid more risk-averse market sentiment. Shareholders will be hoping for a solid statement which can get the market back on side.
15 November – First half results from Royal Mail (RMG) come after a torrid time for the delivery company. Focus may fall on the sustainability of the dividend due to the pressure on profit and cash flow from lower than expected productivity gains and cost savings. Management has previously stated it will not pay dividends out of debt.
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