The FTSE 100 fell flat on Thursday amid news that US tariffs will be applied on aluminium and steel imports from the European Union, Canada and Mexico. The index was more or less unchanged at 7,678.20 by the close.
Next Monday (4 June) purchasing managers’ index (PMI) data for the UK construction sector is published. The market will be looking to see if the reading can build on the better than expected 52.5 posted for April. Any number above 50 implies growth while anything below this threshold suggests contraction. On Tuesday (5 June) the PMI number for the UK services sector is out. Next Wednesday (6 June) weekly US crude oil inventories figures are released. Oil has given back some of its recent gains amid speculation Russia and Saudi Arabia are poised to lift their production. Next Thursday (7 June) Italian retail sales data will offer some insight into a troubled economy (see Economic update).
The transportation sector was under the spotlight this week. FTSE 250 buses and trains operator FirstGroup (FGP) was the biggest faller on the FTSE All-Share index on Thursday (31 May). The share price crashed more than 14% lower to 95.15p after it revealed a swing to a full year loss, prompts its chief executive officer (CEO) to resign. CEO Tim O’Toole had run the operator of the Great Western and South Western railway franchises for the past seven and a half years. But his position appears to have become untenable after FirstGroup reported pre-tax losses of £326.9 million for the year to 31 March 2018. The group had posted a £152.6 million pre-tax profit in the 12 months previously.
Current chairman Wolfhart Hauser has become executive chairman until a successor is found. The weak performance is likely to have many investors wondering why FirstGroup was so quick to rebuff takeover interest last month. In April the company rejected an approach from US private equity firm Apollo. Earlier this week Stobart (STOB), which operates Southend airport, saw its stockbroker Cenkos resign due to a long-standing relationship with former chief executive Andrew Tinkler. Tinkler, with the support of investors whose number reportedly includes Neil Woodford, is aiming to oust chairman Iain Ferguson.
The market may have felt it had cleared the major political threats facing Europe in 2017 when the result of German and, in particular, French elections helped restore some confidence to the European project. However, the issue of Italy has returned to haunt investors and with it the renewed threat of a break-up of the eurozone. The turmoil in Italy, where efforts by populist parties to form a coalition government have collapsed, raises the spectre of a repeat election which could be fought on an anti-EU, anti-EU platform and ultimately become a referendum on membership of the euro. Italian retail sales out next Thursday (7 June) will be released against this backdrop.
You can gain exposure to mid-cap stocks on the FTSE 250 through exchange-traded funds. One such product is Vanguard UK FTSE 250 (VMID) which has an ongoing charge of 0.1%.
5 June – Online white goods retailer AO World (AO.) will reveal the impact of a pressured consumer market when it posts its results for the year to 31 March. The company faces strong competition in the electricals space. In April the company said its results would fall ‘within the range of current market forecasts’. Such coded language can often imply a performance towards the lower end of a forecast range.
7 June – Vehicle listings website Auto Trader (AUTO) is likely to provide guidance on performance in the 2019 financial year when it posts its numbers for the 12 months to 31 March. The company revealed in March that used car stock for the current financial year could be flat or even down. Auto Trader is reliant on the used car market (around 85% of the stock on its website).
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