The FTSE 100 closed lower on Thursday as returning tensions over trade between the US and China hit risk appetite. By the close the index of leading UK shares was down 0.54% at 7,502.69.
There is likely to be a quiet start to next week thanks to the early May bank holiday. Most of the action is centred around next Thursday (10 May) when the Bank of England will deliver its latest decision on interest rates and give its view on the prospects for inflation and the UK economy (see Economic update). Later that same day the latest US inflation figures are released. Before that on Wednesday (9 May) weekly US crude oil inventories are reported. Oil prices have recently hit $75 per barrel amid global geo-political tensions and speculation over future output cuts from producers’ cartel OPEC.
There was huge news in the groceries sector this week. The merger of Sainsbury’s (SBRY) and Asda will see US retail giant Walmart become the biggest shareholder in the business, initially at 42% with scope to sell down to a minimum of 29.9% in the two to four years post completion. The business combination will also see the group overtake Tesco (TSCO) in UK market share terms. Latest figures show that Tesco has a 25% share of the grocery market, while Sainsbury’s has 13.8% and Asda has 12.9%; so the combined share of the latter two is 26.7%. Sainsbury’s believes the deal will be all wrapped up in the second half of 2019.
That all depends on the Competition and Markets Authority approving the transaction, which could be tricky given the dominance of the proposed enlarged business. Suppliers on the stock market who serve either Sainsbury’s and/or Asda include fresh prepared foods group Bakkavor (BAKK), meat supplier Cranswick (CWK), sandwiches specialist Greencore (GNC) and cosmetic business Warpaint (W7L:AIM) who supply Sainsbury’s.
A weak first quarter UK GDP number is seen as reducing the prospects of an interest rate hike when the Bank of England meets next Thursday (10 May). Earlier in the year there had been strong hints that the Bank’s chief Mark Carney and his colleagues might increase rates for just the second time in more than a decade but a string of negative economic news culminating in growth of just 0.1% recorded for the first three months of 2018 against expectations for 0.3% is seen as potentially prompting a rethink.
The UK’s oldest exchange-traded fund has just come of age having turned 18 in April. iShares Core FTSE 100 (ISF) continues to offer low-cost exposure to the UK stock market’s flagship index. Its ongoing charge is 0.07%.
9 May – Tour operator TUI (TUI) in February reported a good start to its new financial year with notable growth in its ‘Holiday Experiences’, which refers to its hotels and cruise business. It also guided for at least 10% underlying EBITA (earnings before interest, tax and amortisation) growth in the current financial year on a group basis. Investors will get an update on whether TUI is still on track to hit this target when it reports half year results.
10 May – No prizes for guessing that BT’s (BT.A) dividend plans will have a large bearing on how full year results go down with investors. Growth and the triennial pension fund assessment will also be in focus. Some analysts reckon a shock payout cap or cut could be on the cards as BT looks for pension funding and fibre rollout flexibility.
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