Sterling eased back despite MPs voting against a no-deal Brexit on Wednesday evening, helping the FTSE 100 advance 0.4% to 7,185.43 on Thursday.
Next week will likely feel like Groundhog Day for investors with a further ‘meaningful vote’ on Brexit expected (see Economic update). In terms of scheduled announcements, UK earnings data is released on Tuesday (19 March), followed by inflation figures on Wednesday (20 March). Later the same day, the US will announce its latest decision on interest rates. Next Thursday (21 March), the Bank of England will make its own call on rates, with no movement expected given the current uncertainty over Brexit. Retail sales data for the UK is also out. Friday sees the release of PMI data from the Eurozone.
There was M&A activity in the challenger bank space this week as OneSavings (OSB) and Charter Court Financial (CCFS) announced plans to merge. The two parties are targeting synergy savings totalling £22m by year three of the combination. As already flagged, OneSavings Bank shareholders will own 55% of the combined entity while chief executive Andy Golding and chief finance officer April Talintyre will take over the same roles at the new group. The aim is to create a specialist lender with greater clout in what management openly admits is ‘an increasingly mature and competitive’ market while tapping into Charter Court’s automation-enabled underwriting tools to improve efficiency. Despite the commitment to maintain two separate distribution platforms ‘to create an enhanced proposition to the broker community’, management have identified pre-tax cost synergies amounting to £22m on an annual run-rate by the third anniversary of the merger. A third of the savings are expected to be delivered in the first year and three quarters by the end of the second year. Results from OneSavings, announced on Thursday (14 March) revealed a 23% increase in loan growth to £9bn and a net interest margin (a key measure of a bank’s profitability) of 3.04%.
Despite two heavy defeats, Theresa May is expected to bring her Brexit deal back before the House of Commons, likely on Tuesday (19 March) or Wednesday (20 March) with a short extension on the current March 29 deadline then requested from the EU to pass the necessary legislation. If the agreement is rejected for a third time, then May has suggested there might be a longer extension. An extension requires unanimous support from all EU members and the default position remains that the UK exits the EU in a fortnight, something most observers believe is still not being priced in by the market.
Investors looking for exposure to stocks in Asia Pacific, excluding Japan, could consider exchange-traded fund Vanguard FTSE Developed Asia Pacific ex-Japan (VAPX). For an ongoing charge of 0.22% it offers exposure to a basket of stocks in Australia, Hong Kong, New Zealand, Singapore, and South Korea.
21 March – Full year results from high street retailer Next (NXT) will give investors a chance to see how the company, headed up by Simon Wolfson, is weathering the current storm on the high street. In January, the company revealed a surprise increase in Christmas sales. As ever, Wolfson’s comments on the outlook for the consumer economy will be closely followed.
22 March – Investors will be looking for an update from engineering conglomerate Smiths Group (SMIN) on the progress of plans to separate its medical division from the rest of the group when it announces first half numbers. The medical unit is struggling and has never really sat comfortably alongside Smiths’ other divisions, which supply airport scanners and components and equipment to the energy and construction’ industries.
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