23 November 2018
The FTSE 100 plummeted against a stronger pound after reports emerged that the EU and UK agreed a Brexit draft text, pushing the blue-chip index 1.3% lower to 6,960.32.
European equities were also in the red while US stock markets were closed to celebrate Thanksgiving.
On Monday (26 November) the German Ifo Business Climate survey – which has a good track record of predicting the country’s future economic trajectory – is published. It may reveal if the ongoing Brexit uncertainty is having any impact on the other side of the Channel. Tuesday (27 November) sees the release of a reading of US consumer confidence. Investors face a busy day on Wednesday (28 November) with the results of the Bank Stress Test results and Financial Stability Report (see Economic update) from the Bank of England, followed by a second estimate of US GDP growth for the third quarter. Late next Thursday (29 November) the minutes of the latest meeting of the Federal Open Market Committee (the US body which sets interest rates) are released.
With the Black Friday sales event now in full swing there is a good opportunity to look back at some mixed updates from the retail sector this week. On Tuesday (20 November) online retailer AO World (AO.), which specialises in so-called ‘major domestic appliances’ or MDAs like fridges and washing machines, reported a first half loss with revenue growth of 9.9% and just 5.7% in the UK where AO says the MDA market is ‘tougher than expected’.
This likely reflects consumer caution amid the uncertainty created by Brexit. As has been consistently been the case with AO its UK operations are profitable but investment in overseas expansion is what tips the company into a loss. The company hopes its European business will make a profit by 2021. On Thursday (22 November) struggling Mothercare (MTC) reported a widened first half loss and like-for-like sales down 11.1%. The company has been fighting to avoid insolvency, closing 50 stores as part of a company voluntary arrangement or CVA – a mechanism which allows a company to reduce its liabilities to creditors.
Next Wednesday (28 November) the Bank of England is set to publish its assessments of potential risks to financial stability. Among the factors which may be considered is house prices. The average UK asking price this month is £5,200 or 1.7% lower than October at £302,000, according to Rightmove. This is the biggest drop in prices for the month of November since 2012. Worse, on a year-on-year basis prices are down 0.2% in November, the first negative annual reading for seven years. The last Halifax house price survey for October showed that annual growth last month was the slowest in five years at 1.5% while the Nationwide survey showed growth at its slowest since May 2013 although in both cases it was still positive. All three surveys point to average house prices peaking in July then falling slowly over the summer.
Investors can gain exposure to UK mid cap companies through Xtrackers FTSE 250 (XMCX) which has an ongoing charge of 0.15%.
29 November – Newspaper publisher Daily Mail & General Trust (DMGT) reports its results for the 12 months to 30 September having sold off its interest in property listings site Zoopla after a £2.2bn takeover deal for the latter’s parent company ZPG. This means the company should have lots of cash on the balance sheet and questions may well focus on how it intends to allocate these funds.
29 November – Travel operator Thomas Cook (TCG) has some making up to do with shareholders after September’s major profit warning, which was blamed on a summer heatwave which led holidaymakers to stay at home. If this truly was a weather-related blip, then investors will be expecting an improved picture alongside its full year results – with guidance on bookings for summer 2019 in focus.
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