Investors were unnerved by US President Donald Trump's decision to cancel a planned summit with North Korea. The FTSE 100 fell 0.9% to 7,716.74 with utility companies and oil majors among the underperforming stocks.
With UK markets closed due to the Bank Holiday on Monday (30 May) there is a quiet start to next week with announcements in the remainder having a distinctly US flavour. Next Tuesday (29 May) sees an update on US consumer confidence, followed on Wednesday (30 May) by a second estimate of US GDP for the first three months of 2018. The market will be watching closely for any revision to the 2.3% growth identified in the first estimate. Next Friday (1 June) purchasing managers index data for the UK manufacturing sector is released. Any reading above 50 signals expansion and anything below this level implies a slowdown. The previous reading came in at 53.9. Later in the day, the influential US non-farm payrolls release is out (see Economic update).
The benefits of having successful franchises were made crystal clear in the latest results on Tuesday (22 May) from media firms Entertainment One (ETO) and Bloomsbury Publishing (BMY). Both companies are riding high thanks to ongoing sales from certain titles which have the hallmarks of being evergreen brands, potentially giving them longevity as new generations discover their appeal in years to come. Peppa Pig generated $1.3 billion in retail sales in the year to 31 March 2018, providing £84.7 million revenue to majority brand owner Entertainment One as its cut from merchandise agreements.
It makes additional licensing money from TV and digital platform broadcasting although the exact amount isn’t disclosed as the income is lumped in with Entertainment One’s overall Family division. Bloomsbury says sales of its Harry Potter series grew by 31% in the year to 28 February 2018 – an impressive feat given that the franchise launched 21 years ago. It says ‘every year these classics reach a new generation of readers’. The publisher continues to find new ways to monetise the wizard story including illustrated editions.
Next Friday’s (1 June) release of US non-farm payrolls data is the earliest release, based on hard data, to give a snapshot of the health of the world’s largest economy. It therefore has perhaps the most capacity to move the markets of any global release. It also influences the decision making of the US Federal Reserve which has responsibility for setting interest rates. The minutes of May’s Federal Reserve monetary policy meeting gave no hint of a faster pace of rate hikes in response to inflationary pressures.
Investors looking to gain exposure to Asian stocks outside of Japan could consider exchange-traded fund iShares Core MSCI Pacific ex Japan (CPJ1). For an ongoing charge of 0.2% the product provides exposure to a basket of shares from Australia, Hong Kong, New Zealand and Singapore.
31 May – Recent speculation over a possible break-up of chemicals firm Johnson Matthey (JMAT) may be addressed when the company posts its results for the 12 months to 31 March. The argument is that Matthey should split its prized vehicle batteries arm from the pressured exhausts catalyst division. While the former is seen as a beneficiary of a switch to electrical vehicles, the latter is seen as a victim of this trend.
31 May – Management at transport operator FirstGroup (FGP) will be under pressure to spell out their future strategy for the business after US private equity firm recently pulled out of a bid. Its North American coach business Greyhound has lost out to the airline industry as many travellers have opted instead to go by plane due to cheap tickets.
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