The risk of higher interest rates was dominating investors’ thoughts on Thursday (1 March) with the FTSE 100 index closing down 0.8% at 7,175.64.
Next Monday (5 March) the purchasing managers’ index data for the UK services sector is out. It follows a string of disappointing updates on the UK economy. Next Thursday (8 March) the European Central Bank is scheduled to announce its latest decision on interest rates (see Economic update). On Friday (9 March) US non-farm payrolls are published. This typically has a big influence on markets as it is the first release based on hard data to offer an insight into the health of the world’s largest economy. A recently revised GDP estimate for the US revealed the strongest pace of consumer spending in three years.
The broadcasters have been in the spotlight this week as first Sky (SKY) was subject to a new £12.50 bid from US firm Comcast, trumping the £10.75 on offer from Rupert Murdoch’s 21st Century Fox. Back in December 2016, Sky recommended a deal from Fox to buy the 61% of the business it did not already own for £10.75 per share. With the shares now trading above Comcast’s offer, investors are clearly expecting a bidding war to ensue.
Since making its initial approach more than a year ago, Fox’s bid has come under the scrutiny of regulatory authorities with a final decision on whether to approve the deal due from the UK culture secretary in June. Disney has also emerged as a player in this story after agreeing to buy Fox’s media assets including its existing stake in Sky. Clearly this is a prized asset given its leading position in the UK, Italian and German TV markets. Free-to-air rival ITV (ITV) saw its shares fall heavily on Wednesday (28 February). After a streak of five annual special dividends, the company failed to announce one alongside its 2017 results. This looked to be the main disappointment in an otherwise pretty solid set of numbers, the first announced under new chief executive Carolyn McCall.
Having been slower to resort to QE, the European Central Bank (ECB) is also behind its counterparts in the UK and US in scaling back financial stimulus. Under the direction of its chief Mario Draghi, the ECB says it will commence a moderate withdrawal of stimulus in September 2018. However, it has left itself scope to extend QE beyond this date and even increase the level of monthly purchases from €30bn if economic conditions worsen. It also said it would keep interest rates low until well past the end of QE. Some observers see the ECB meeting next Thursday (8 March) as the point at which the central bank will pivot by revising up forecasts for the economy and changing its guidance on QE.
Investors looking for diversified exposure to European stocks could consider exchange-traded fund iShares Europe (SMEA) which has an ongoing charge of 0.33%.
6 March - Retirement housebuilder McCarthy & Stone’s (MCS) upcoming first half trading update is likely to be overshadowed by the impact of changes to the rules surrounding ground rents.
The company says it should be exempt from a proposed reduction in ground rents to zero as it does not employ the rapidly increasing rents targeted by the new policy.
8 March – Takeaway firm Domino’s Pizza (DOM) full year results will be scrutinized to see if the momentum seen in the final quarter of 2017 has been maintained in the first months of 2018. A trading update in January revealed like-for-like sales growth of 6.1%, beating the consensus estimate of 4.7%. Its strongest trading day of 2017 coincided with the final of the X Factor on 2 December.
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