Sterling held above $1.30 against the dollar on Thursday (24 January) amid hopes a no-deal exit from the EU can be avoided. This contributed to a 0.25% decline in the FTSE 100 to 6,825.98 thanks to the negative impact on the relative value of its overseas earnings.
The beginning of next week may feel like Groundhog Day with Brexit again on the agenda as MPs get ready to vote on Tuesday (29 January). The same day in the US sees the release of a reading of consumer sentiment – significant given consumer spending accounts for the majority of all economic activity across the Atlantic. Next Wednesday (30 January) the US Federal Reserve is due to make its latest decision on interest rates. A rate hike is not expected and if it transpired, would likely act as a jolt to financial markets. A first estimate of Eurozone GDP for the fourth quarter of 2018 is released on Thursday (31 January) amid slowing growth in the currency bloc’s largest member Germany. Finally, on Friday (1 February) US non-farm payrolls data is released. It may be affected by the current government shutdown in Washington.
The airlines sector, where a conglomerate led by Virgin Atlantic and Southend Airport owner Stobart Group (STOB) is looking to buy regional carrier Flybe (FLYB) for a cut price £2.2m, was in focus over the last week as both Ryanair (RYA) and EasyJet (EZJ) updated the market. Flybe’s rescue takeover reflected the challenges facing the industry and these were reflected in the announcements from Ryanair and EasyJet. On 18 January Ryanair warned on profit again, lowering guidance from a range of €1.1 billion to €1.2 billion down to €1 billion to €1.1 billion in the 12 months to 31 March 2019. It pinned the blame on lower winter fares, although chief executive Michael O’Leary expressed his hope the pressures on the industry as a whole would shake out some of the competition.
An update from EasyJet on Tuesday (22 January) was better received despite flagging a £15 million hit from the drone disruption at Gatwick in December. The company unveiled 13.7% revenue growth in the last three months of 2018 compared with the same period in 2017. It also said headline pre-tax profit expectations would be ‘broadly’ in line with expectations at £580 million in the year to 30 September 2019 thanks to the airline selling more tickets albeit at lower prices.
A House of Commons vote on Brexit next Tuesday (29 January) will not be on a revised version of Theresa May’s deal, which suffered a heavy defeat on 15 January. This has led to accusations in some quarters that May is running down the clock to hold MPs feet to the fire and get them to approve her plan to avoid a no-deal outcome. Instead it will be a ‘neutral’ motion to which backbenchers from across the House of Commons are already busily adding their own amendments. Most notably MPs are looking to rule out a no-deal outcome. Should they succeed sterling could strengthen.
For an ongoing charge of 0.3% investors can gain exposure to exchange-traded fund SPDR S&P UK Dividend Aristocrats (UKDV) which tracks a portfolio of companies listed within the UK with a track record of dividend growth.
31 January – Investors will be watching 2018 financial numbers from Royal Dutch Shell (RDSB) closely to see the impact from the big decline in oil prices which began in October last year. The company had recently got back to a position where it could fund its generous dividend payments out of internal cash flow and its ability to do so in a lower oil price environment is likely to be under scrutiny.
31 January – Consumer goods firm Unilever (ULVR) has some making up to do to investors when it announces its 2018 results after a botched plan to move its HQ to the Netherlands. This might have cost the company its FTSE 100 status and came in for bitter opposition from shareholders, chief executive Paul Polman announced his retirement in the aftermath of the company abandoning the move.
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