The FTSE 100 closed up 0.3% at 7424.44 on Thursday (20 June) as the Bank of England voted to keep rates on hold and slashed its forecasts for UK growth.
On Tuesday (25 June) the latest meeting of oil producers’ cartel OPEC takes place in Vienna (see Economic update). The same day there’s a reading of US consumer confidence. Next Thursday (27 June) there is a final estimate of US GDP for the first quarter and a meeting of G20 leaders gets underway in Osaka, Japan. The latter could be significant in either escalating or dialling down trade tensions with all eyes likely to be on US President Donald Trump and his Chinese counterpart Xi Jinping. Next Friday (28 June) there is an update on US durable goods orders.
The troubled outsourcing sector was in focus this week. On Monday (17 June) the new chief executive at Kier (KIE), Andrew Davies, announced the suspension of dividends, 1,200 job cuts and the sale of non-core businesses, including the housebuilding division, in a strategic review brought forward thanks to supply chain issues, which are seeing the business haemorrhage cash. Debt will be higher than previously guided, hitting £195 million by its June year end, up £140 million and averaging up to £450 million on a monthly basis from £365 million. As a reminder, it is around six months since the company launched a £264 million rights issue which appears to have done little to solve its balance sheet problems. The same day, there was takeover talk to digest after defence contractor Babcock (BAB) admitted it turned down approaches of a tie-up from outsourcing peer Serco (SRP). Babcock received an ‘unsolicited and highly preliminary proposal’ from Serco in late January regarding a potential all-share combination between the two firms. Babcock says its board ‘carefully considered’ Serco’s proposal and rejected it on the basis that a combination of the two companies had ‘no strategic merit’ and wasn’t in the best interests of its shareholders, customers or stakeholders.
Oil prices are volatile at present with signs of slowing global growth hitting demand and with tensions in the Middle East implying possible disruptions to supply. Whether oil moves higher in the remainder of 2019 could depend on how OPEC responds at its big summit next Tuesday (25 June). In truth, given it is the member with the most influence and, crucially, spare production capacity, the response will depend on Saudi Arabia.
Funds can be a good way to gain exposure to the bond market which otherwise can be relatively inaccessible to ordinary investors. One example of a bond fund is Artemis Strategic Bond which seeks to achieve income and capital growth by investing mainly in fixed income markets.
You can get low-cost exposure to Japanese stocks through exchange-traded fund HSBC Japan (HMJP) which has an ongoing charge of 0.19%.
26 June – An update on trading and operations from oil producer Tullow Oil (TLW) will be monitored for signs that it can regain the momentum which saw it return to profitability in 2018. Subsequent to this milestone the company has encountered some operational issues which caused it to downgrade expectations for the full year.
27 June – Full year results from pubs group Greene King (GNK) are likely to see focus on costs, which have been creeping up of late and putting pressure on the share price. In April the company reported strong Easter trading, especially at its Chef & Brewer eateries which saw sales up by 15%.
Narendra Modi and the BJP look set for victory in what has been a gargantuan undertaking for India and stock markets have surged to record highs on early results.
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