By the close on Thursday (20 December) the FTSE 100 was still struggling to shake off the impact of the hawkish tone adopted by US Federal Reserve chief Jerome Powell as he delivered the latest increase in US interest rates. The index of leading UK shares was down at 0.8% at 6,711,93.
Although MPs are set to break for Christmas, the proximity of the UK’s leaving date from the European Union on 29 March 2019 and the lack, thus far, of any deal is likely to see this issue remain at the forefront of investors’ minds. The day after Boxing Day (27 December) sees a reading released on US consumer confidence, given the recent reaction to the US Federal Reserve hike it will be interesting to note the strength of said reading and whether it might have any impact on the Federal Reserve’s thinking (see Economic update). Its head, Powell, is scheduled to testify before US policymakers on 28 December.
Early in the New Year on the 2nd, 3rd and 4th January, respectively, purchasing managers index data covering the manufacturing, construction and services sectors in the UK is released. These are likely to reflect the ongoing impact of Brexit uncertainty on the economy. Finally, on Friday 4 January the US non-farm payrolls report, the earliest release based on hard data to provide an insight into the health of the world’s largest economy, is out (see Economic update).
The typically pretty dull utilities sector had two significant announcements in the last full week before Christmas. On Tuesday (18 December) the proposed financial package put forward by energy regulator Ofgem, effectively governing how much National Grid (NG.) can charge for access to its gas and electricity supply infrastructure, could reduce the amount the latter returns to shareholders. The company says it is disappointed with the proposals, which would come into effect from 2021. Ofgem has proposed baseline cost of equity returns at 4%, down 50% from previous price controls.
This could well reduce the amount of income on offer from National Grid shares. This followed Monday’s news that SSE (SSE) has abandoned plans (17 December) to merge its retail energy unit with Npower in the face of poor performance by both businesses, looming price caps and volatile commodity prices. The company still wants to separate out its energy supply arm from the electricity generation, transmission and renewables operations.
Guidance for two further hikes in US interest rates for 2019 could be affected by the performance of the jobs market, which is often quite influential in the thinking of the US Federal Reserve. Therefore, the non-farm payrolls data out on 4 January could be significant. This data, which is released by the Bureau of Labor Statistics and excludes the seasonal farming industry, shows the number of people employed in the US during the previous month.
One of the best performing exchange-traded funds in 2018 is iShares S&P 500 Health Care Sector (IHCU) which provides exposure to a basket of US health care stocks for an ongoing charge of 0.15%.
2 January – This fourth quarter update from Next (NXT) will be one of the first releases from the retail sector to cover Christmas trading. The atmosphere in the industry is bleak after a wave of profit warnings and disappointing data points. Next is often a decent indicator for the performance of the high street as a whole and chief executive Simon Wolfson is typically good at managing expectations.
2 January – Nottingham-based Staffline (STAF:AIM) is one of the biggest recruiters in the UK. Its recruitment arm, which accounts for 90% of revenue and 60% of pre-tax profit, is focused on food production and distribution, logistics and online retail. Historically the workers it finds to fill these roles have often come from Eastern Europe. It will be interesting to hear its response to proposals in the Government’s immigration white paper when it updates on trading.
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