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Newsround: Miners and utilities drag FTSE lower

24 August 2018

Tags: Macro Economics

FTSE News 

The FTSE 100 reversed by the close on Thursday amid falling miners and utilities, leaving the index trading 0.1% lower at 7,563.22.

There is a quiet start to next week thanks to the August Bank Holiday in the UK – although the German Ifo Business Climate survey is published on Monday (27 August).

This survey can be influential on markets due to its track record of accurately predicting future movements in Europe’s largest economy. Next Tuesday (28 August) the Governor of the Bank of England Mark Carney and some of his colleagues are currently scheduled to appear before MPs to testify on their expectations for inflation and the economy. Inflation rose for the first time in 2018 in July, hitting 2.5%. On Wednesday (29 August) a second estimate of US GDP is out (see Economic update) along with a release on the level of the company’s oil inventories. Next Thursday (30 August) the latest monthly house price figures from Nationwide are out. Friday sees the publication of inflation figures for the Eurozone.


Sector in focus

The benefits of the recent heatwave attracting visitors to London could soon be reflected in results from several quoted hotel operators with sites in the Capital. Revenue per available room (RevPAR) increased by a record 9% to £156.15 in July, according to data from industry specialist STR. That beat levels seen in the 2012 Olympics and was also helped by several popular events bringing people to London including Wimbledon and Pride. RevPAR is a vital measure of how well hotels can fill their rooms and is calculated by multiplying the average daily room rate by the occupancy rate. Potential beneficiaries among UK-quoted stocks include Premier Inn owner Whitbread (WTB), Dalata Hotels (DAL), PPHE Hotel (PPH) and InterContinental Hotels (IHG).

For Whitbread and InterContinental, the anticipated boost will be welcome as trading in London was disappointing earlier this year. In the three months to 31 May, like-for-like sales at Whitbread-owned Premier Inn fell 0.9% amid weaker market conditions in London and a strong comparative to last year. For InterContinental, trading in London was also underwhelming in the first half of 2018 with RevPAR down 1.4%.


Economic Update

The second estimate of US GDP for the second quarter is published next Wednesday (29 August). This week US president Donald Trump, in a further break with convention, was publicly critical of the pace of rate hikes being driven through by the US Federal Reserve as he asked for more help on the economy. This is putting the dollar under some pressure and if Trump’s clamour becomes more consistent, the resulting weakness in the US currency could provide some respite for emerging market countries like Turkey which have lots of dollar-denominated debt.


ETF Watch 

Investors looking for globally diversified exposure to government bonds could consider exchange-traded fund iShares Global AAA-AA Government Bond (SAAA) which has an ongoing charge of 0.2%.


 Company Announcements

30 AugustRecruitment firm Hays (HAS) is scheduled to announce its results for the 12-month period to 30 June. Much of the ground will already have been covered in a fourth quarter trading update so the focus is likely to be on the outlook statement. Staffing firms are a good indicator for global growth as companies tend to hire in strong economic conditions and delay hiring when times get tough.

30 August – Newsagent WH Smith (SMWH) is primed to update the market on its trading for its financial year running to the end of August. Trading is likely to repeat the pattern of recent years where the high street business has been outperformed by the travel arm. Serving railway stations, airports, hospitals and motorway service stations, this latter part of the business benefits from a captive audience.

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Writer: Tom Sieber Tags: Macro Economics

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