Weakness in the pound and a strong US open helped the FTSE 100 consolidate above the 7,500 mark on Thursday (27 September). The index of leading UK shares is now back roughly where it was at the end of August.
The Conservative Party conference, running from the 30 September to 3 October, may impact the market mood at the beginning of next week with Brexit likely to be a touchstone issue (see Economic update). Purchasing managers’ index data covering manufacturing on Monday (1 October), construction on Tuesday (2 October) and services on Wednesday (3 October) are also likely to draw focus for the insight they offer on the health of the UK economy. Next Friday (5 October) the US non-farm payrolls data is out. The earliest release based on hard data to offer a snapshot of how the world’s largest economy is faring.
The travel space hit the headlines this week as both Thomas Cook (TCG) and TUI (TUI) updated on trading with vastly differing outlooks. On Monday (24 September) Thomas Cook saw a fifth of its market value wiped off as it cuts earnings expectations following the summer heat wave. The company also announced that chief financial officer Bill Scot had resigned and would be replaced by Sten Daugaard on an interim basis.
People enjoyed the recent spell of hot weather at home instead of jetting off to get the perfect tan. With destinations including Turkey, Egypt, Tunisia and Greece becoming popular, overall bookings rose 12%, but average selling prices declined 5% thanks to strong competition, particularly in the late booking market. The hot weather deterred people from taking holidays later in the year with Thomas Cook warning of tougher competition and higher levels of discounting in August and September. On Thursday (27 September) TUI delivered its own trading statement with a very different tone, less reliant on late bookings and buttressed by growing cruise and hotel arms, it reiterated its guidance for 10% underlying earnings growth.
Any market reaction to the Conservative Party conference which kicks off on Sunday (30 September) is likely to be linked to machinations over Europe with sterling enduring a large drop against the dollar on 21 September amid the fall-out from the contentious EU summit in Salzburg. A key focus will be whether or not Theresa May’s Chequers plan will emerge intact, after heavy criticism for the proposals from all quarters of her own party and the EU itself.
Exchange-traded funds can be used to gain focused exposure to different sectors and industries. iShares US Consumer Discretionary (ICDU), for example, tracks a basket of US stocks in the consumer discretionary space, including sellers of clothing products and entertainment and leisure providers, for an ongoing charge of 0.15%.
3 October – The launch of its new discount chain Jack’s on 19 September was an apparent sign that supermarket Tesco (TSCO) was moving from recovery to expansion mode but a roll-out of 15 stores may not have much of an impact on the 13% market share enjoyed by German discounters Aldi and Lidl. Investors will hope first half results reflect Tesco’s growing confidence and the impact of its £3.7bn acquisition of wholesaler Booker.
4 October – Investors will be hoping for signs of a rebound at British fashion brand Ted Baker (TED) when it posts its numbers for the six months to August 2018. A June trading update revealed sales growth had slowed to 4.2% in the 19 weeks to 9 June blaming the poor weather across Europe and the Eastern seaboard of the US for the soft trading.
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