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Newsround: FTSE stalls on lower European growth forecasts

14 December 2018

Tags: Macro Economics

FTSE News  

It was bad news from European Central Bank’s Mario Draghi after he cut growth forecasts for Europe in 2018 and 2019, causing the FTSE 100 to slip 2.7 points lower to 6,877 on Thursday (13 December).

Surprisingly next week is actually pretty full in terms of scheduled announcements in the run up to Christmas, with the ongoing drama over Brexit likely to rumble on in the background. Most of the action is centred around the middle of the week. Next Wednesday (19 December), UK inflation numbers are out, and investors will be looking to see if the recent fall in oil prices has had any impact. Later the same day, the US Federal Reserve is scheduled to announce its latest decision on interest rates. Its counterpart in the UK, the Bank of England, makes its own call on rates next Thursday (20 December) (see Economic update). Official retail sales data for the UK is also out. Covering November, it will be interesting to note if the figures confirm gloomy assessments of a sickly high street. On Friday (21 December), Federal Reserve chair Jerome Powell is timetabled to appear before US policymakers, while the final estimate of US third quarter GDP is printed.


Sector in focus

The retail sector’s struggles continued this week as it headed into its crucial Christmas trading period. On Wednesday, fashion retail chain Superdry (SDRY) issued its second profit warning in three months. It’s a fairly familiar high street story of the wrong sort of weather, with November temperatures apparently too mild for the firm’s, or its customers', liking. Superdry expects similar problems through December and the net result is a profit miss this year of about £11 million. Like many retailers, the Christmas run-in is key for Superdry sales, so a steer that profits are likely to come in at around the £55-£70 million mark is a big blow, especially when drawn against consensus forecasts, before the October profit warning, of between £107-£111 million for the year to 30 April 2019.

There was also bad news from TVs, computers and gadgets retailer Dixons Carphone (DC.), which posted a headline half year pre-tax profit slump from £73 million, a year ago, to £50 million, despite a 2% increase in like-for-like sales. There was also a £490 million write-off of assets on the Carphone Warehouse side thanks to flagging smartphone sales, while the dividend was cut. Elsewhere womenswear Bonmarche (BON) warned on profit on Thursday (13 December) blaming ‘unprecedented’ trading conditions.


Economic Update

Next Thursday’s (20 December) update on interest rates from the Bank of England, apart from the decision itself, will be interesting to see if governor, Mark Carney, has anything to say on preparations for a no-deal Brexit. Prime Minister Theresa May having pulled a deal on her draft Brexit agreement also faced down a no-confidence vote from her own MPs this week. As May looks to secure ‘assurances’ from the EU on the unpopular backstop arrangement included in her deal, ministers have said a vote will be held before 21 January.


ETF Watch 

Investors can gain exposure to global mid-cap companies through iShares MSCI World Size Factor (IWFS) for an ongoing charge of 0.3%.


 Company Announcements

17 December – Electricals designer and distributor APC Technology (APC:AIM) is set to announce its results for the year to 31 August with a focus on the continuing progress of its medium-term strategic plan. Given the company confirmed trading was on track in a 7 December update, there are unlikely to be any big surprises in the results.


19 December – Shareholders will be hoping half year results from insolvency specialist Begbies Traynor (BEG:AIM), covering the six months to 31 October 2018, can at least demonstrate the steady performance reported in September is being maintained. Given its area of expertise, Begbies often performs better when the rest of the corporate world is struggling and, as such, its results may also offer some insight into the health of the UK economy.

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Writer: Tom Sieber Tags: Macro Economics

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