A downbeat performance from the mining sector amid ongoing trade tensions weighed on the FTSE 100 on Thursday. By the close the index was down a handful of points at 7,615.63.
The start of next week is dominated by purchasing managers’ index data on several key UK sectors. First up is manufacturing on Monday (2 July), followed by construction on Tuesday (3 July) and services on Wednesday (4 July). PMI updates offer a good insight into the economic health of the UK because businesses tend to react quickly to economic conditions. Their purchasing managers probably have the most up-to-date view of these conditions. They need to have a good handle on what is going on in the economy to make informed decisions when buying the goods and services required by a company.
Later in the week, following Independence Day celebrations, the US comes to the fore. Next Thursday (5 July) the minutes from the latest meeting of the US Federal Reserve, which may offer insight into how many more interest rate hikes might be in store for the remainder of 2018, are published. On Friday (6 July) the influential US non-farm payrolls release is out (see Economic update).
The latest update on the Letwin Review into practices in the new build housing market contained both good news and potential bad news for housebuilders. As expected, Sir Oliver Letwin has dismissed arguments that the industry is hoarding land to drive up prices. However, he argues developers should widen the choice of design, size and tenure of new homes and thereby increase the rate at which houses are built and sold. This could create concern that measures will be taken to address these issues when the review’s action statement is published, likely alongside the Budget in November.
Arguably housebuilders have benefited from very supportive conditions for some time and tighter regulation could add to the margin pressure created by a stalling housing market. High end operator Berkeley (BKG) recently repeated its warning that profits at the company have peaked (20 June). Several of its peers are scheduled to update the market in the coming weeks, including Persimmon (PSN) on 5 July, Barratt Developments (BDEV) on 11 July and Taylor Wimpey (TW.) on 31 July.
Amid ongoing concern over a trade war between the US and several major trading partners, the markets will be keeping a close eye to see if this is having any negative knock-on effect on economic conditions. The US non-farm payrolls data out next Friday (6 July) is the earliest release, based on hard data, to give a snapshot of the health of the world’s largest economy. It therefore may have the most capacity to move the markets of any global release.
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5 July – A trading update from electronic products distributor Electrocomponents (ECM) could be interesting on two levels. Firstly, to see how the integration of the group’s first major acquisition in two decades, the £88m purchase of IESA, is progressing. Secondly, for the insight it might offer into the performance of the economy. Electrocomponents principally serves industrial companies who might delay or cancel orders if they anticipate an economic downturn.
5 July – The backdrop heading into full year numbers from branded clothing business SuperDry (SDRY) is not massively encouraging. Co-founder Julian Dunkerton stepped down from the business in March and a trading update in May referenced a ‘challenging’ consumer environment. Investors will be watching closely for any downward revision to guidance for high single-digit revenue growth in the current financial year to April 2019.
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