17 November 2017
The FTSE 100 was higher on Thursday (16 November) taking its cue from a strong open for US stocks and a better-than-expected showing for the retail sector. At the close the index of leading UK shares was up 0.2% at 7,386.94.
Next Monday (20 November) European Central Bank chief Mario Draghi is set to testify to the European Parliament in Brussels. The market will look for clues on the future direction of interest rates and economic stimulus. His counterpart in the US, the chair of the US Federal Reserve Janet Yellen, is due to speak to the Stern School of Business in New York on Tuesday (21 November). On Wednesday (22 November) UK Chancellor Phillip Hammond will deliver his Budget (see Economic update). Later in the day the minutes of the Federal Reserve’s latest meeting are published – this may provide clues on whether the Fed will hike rates at its final meeting of the year on 13 December. Next Thursday (22 November) purchasing managers’ index data for the Eurozone’s manufacturing and services industries is out.
The spotlight fell on the defence sector this week after a damaging profit warning from Ultra Electronics (ULE). lost nearly a quarter of its market value on Monday (13 November) after warning on 2017 profit and announcing the exit of veteran chief executive Rakesh Sharma. Citing ‘difficult’ conditions in the UK defence market and ‘mounting pressures’ in the funding of key programmes, the company says underlying profit will be £120 million against a forecast of £132 million on revenue down 4% year-on-year. The bad news led to share price weakness among other contractors with exposure to Ministry of Defence (MoD) spending.
This included technology focused QinetiQ (QQ.), Babcock (BAB) and the UK’s biggest defence operator BAE Systems (BA.). QinetiQ is the former research arm of the Ministry of Defence and is believed to be the inspiration for James Bond’s gadget-man Q. As a whole the UK aerospace and defence sector is down 8% over the last month and is up just over 4% year-to-date.
Ahead of the Budget on Wednesday (22 November) there has been speculation about possible changes which could affect investors and savers including a reduction in pension tax relief, possible increases in certain ISA limits and changes to stamp duty.
The year-on-year economic growth rate in the Eurozone outstripped that of the US in the third quarter. The reading of 2.5% compared with 2.3% growth in the US economy and puts the economic area on course for its best year since the financial crisis. db X-trackers Europe excluding UK (XD5S) tracks the performance of stock markets in 10 Eurozone countries for an ongoing charge of 0.25%.
21 November – Electrical goods retailer AO World (AO.) will issue half year results, the first time it has commented on trading since July. There are low expectations given how the share price has steadily fallen this year, now down nearly 40% year-to-date amid tough trading conditions in the retail sector and rising competition. Losses from its European arm wiped out profits from its UK business in the financial year ending 31 March 2017.
22 November – Investors should scan travel agent Thomas Cook’s (TCG) full year results to find out the full impact of Hurricane Irma on performance. Earlier this year, the company warned that September was operationally challenging as it helped customers affected by bad weather in the Caribbean and Florida. The market may also be looking for guidance on how bookings over what is traditionally a difficult winter period have fared.
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