The FTSE 100 fell to its lowest level in six months after China accused the US of ‘seriously’ violating the countries’ trade relations by announcing new tariffs. The index closed down 1.1% at 7,067.01 on Thursday.
There’s a quiet start to next week in terms of scheduled economic announcements and investors might be relieved to have some respite after recession warnings dominated the headlines this week. The first announcement of any real note comes on Wednesday (21 August) with the minutes from the latest rate-setting meeting of the US Federal Reserve which might offer some insight into the central bank’s future intentions. Next Thursday (22 August) there is purchasing managers’ index data from the Eurozone amid signs of considerable strain on the economy of the bloc’s largest constituent Germany. The end of next week also sees the start of the Jackson Hole symposium (see Economic update).
As the traditional summer holiday gets into full swing there has been mixed news from the travel sector this week. On 9 August beach vacation specialist On The Beach (OTB) warned on profit. The company explained that, unlike its competitors, it constantly adjusts its prices to account for currency fluctuations rather than hedging against big foreign exchange movements. Because sterling has significantly devalued against the euro from the start of May, with a sharp decline at the end of July and start of August, this has resulted in a marked increase in On The Beach’s prices compared to its rivals. That has meant, despite growth in demand, the firm has struggled to gain market share while maintaining margins. On 12 August troubled Thomas Cook (TCG) revealed it would need to raise £150 million alongside the £750 million already agreed with creditors to get through winter trading. While on 13 August TUI (TUI) maintained full year guidance despite plunging third quarter profits. The all-inclusive holidays firm reported a near-60% fall in pre-tax profit for the three months and an underlying €200 million loss for the first nine months of the year. The plunging pound keeping UK holidaymakers at home, ongoing Brexit uncertainty and the grounding of its fleet of Boeing 737 planes have all dragged on the company’s performance.
Held in Wyoming the annual Jackson Hole summit of central bankers which commences next Thursday (22 August) is closely monitored by traders and investors for clues on the future direction of monetary policy. And with inverted yield curves, trade wars, currency devaluations all in focus, there should be plenty for attendees to talk about.
The First State Global Listed Infrastructure (GB00B24HJL45) fund invests in the shares of companies involved in the sector. This is a different approach to many infrastructure investment funds, which often directly own the assets themselves, and may mean it is more diversified and potentially less volatile than other offerings in the sector.
Exposure to gold is possible through exchange-traded product iShares Physical Gold (SGLN) which has an ongoing charge of 0.25%.
19 August – Mining firm BHP’s (BHP) results for the 12 months to 30 June are likely to see the focus fall on the toll recent commodity price volatility has had on performance. The market has already been briefed to expect a significant impact from unplanned production outages during the first half of the financial year.
20 August – First half results from housebuilder Persimmon (PSN) are more about the outlook for the business than anything else. On 4 July the company announced a 4% decline in first half revenue as the company slowed its sales ambitions under new CEO Dave Jenkinson in order to get its house in order. This should have come as little surprise as a series of issues around executive pay and customer care put its right to sell homes under the Help to Buy scheme under scrutiny.
2019 has been difficult for those who invest for income, with much publicised dividend cuts at Vodafone and Royal Mail. Now Centrica has followed suit, slashing its dividend from 3.6p in 2018 to 1.5p this year.
The cuts are a timely reminder that investors should always be cautious, particularly when enjoying a high yield. So, what can what should income investors do in this climate of dividend cuts? These are Richard’s tips.
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