The FTSE 100 closed 0.98%, or 69.61 points, higher at 7,184.32 on Thursday (29 August) as the pound, made weaker by the intensifying Brexit situation and prorogation of Parliament, helped the exporter-heavy index.
Next week sees the release of a range of purchasing managers’ indices (PMIs) across several industries, shining a light on the health of the UK economy as Brexit draws ever closer. The latest manufacturing PMI will be published on Monday (2 September), which shows the rate of factory output and gives an insight into how a possible no-deal Brexit and a global slowdown in trade are affecting the UK. Tuesday (3 September) sees the release of the construction PMI, with economists keeping a close eye on UK construction activity amid concerns another slowdown could result in a spill into other areas of the economy. The following day (4 September), investors will see whether the UK’s dominant services sector has offset any weakness in manufacturing and construction with the release of the services PMI. A weaker pound can help companies in this sector boost their sales abroad. The health of the German economy, and by extension that of the Eurozone, will be in the spotlight on Thursday (5 September) when the latest data on German factory orders is published.
Tobacco has been in the headlines this past week with a possible mega-merger in the US between cigarette giants Philip Morris International and Altria having implications for firms in the industry across the world. Following the news, shares in FTSE 100 listed British American Tobacco (BATS) and Imperial Brands (IMB) cheapened as investors priced in the potential for increased competition. Philip Morris and Altria boast combined sales of $50bn. Both have significant portfolios of next generation products (NGPs), which are less harmful alternatives to cigarettes and are a huge growth area for tobacco firms. The tobacco industry is undergoing a seismic shift, with investors alarmed by the structural decline in cigarette volumes, rising regulation and concerns over the ability of less harmful NGPs to replace the dwindling traditional cigarette profit pool.
The latest US trade balance data published on Wednesday (4 September) will provide a fascinating insight into how the trade war with China is affecting the American economy, particularly as tariffs on hundreds of billions of dollars’ worth of Chinese goods come into effect.
For those looking to take a contrarian view on the UK economy, Jupiter UK Special Situations (GB00B4KL9F89) could be an option. The fund’s manager, Ben Whitmore, aims to identify quality businesses which have been in his view unfairly neglected by other investors. Top holdings include BP, Aviva and GlaxoSmithKline.
3 September – Results for the six months to 30 June from the Restaurant Group (RTN) should provide a further update on the future of Frankie & Benny’s, which has been struggling in recent years, as well as the company’s plans for Wagamama. The Restaurant Group acquired Wagamama at the end of last year, and the transaction has led to the firm being reappraised by the market.
3 September – Investors will be keen to see if packaging company DS Smith (SMDS) can continue the momentum from its acquisitions of Europac and Interstate Resources last year, when it reports its interim results on Tuesday. The acquisitions led to decent profit growth in its full year results in June, and shareholders will hope that growth has continued into its current financial year, particularly given the firm has said it is seeing weakness in some of its markets.
Over the past two weeks increased turbulence on global stock markets has led many market commentators to ruminate on the possibility that the decade plus long bull run will soon come to an end. So, what precautionary actions can you take?
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