The FTSE 100 closed down 1.1% at 7,452.03 on Thursday (13 February) as a stronger pound, several companies trading ex-dividend, some mixed results announcements and a spike in coronavirus cases in China added up to a toxic mix for the index.
Next Tuesday (18 February) the German ZEW Economic Sentiment survey will take views from investors and analysts on the economic prospects for Europe’s largest economy. January’s reading came in ahead of expectations. Wednesday (19 February) sees the release of UK inflation figures, followed later in the day by the latest minutes from the US Federal Reserve (see Economic update). Next Thursday (20 February) UK retail sales are published. The week is rounded off on Friday (21 February) by a string of purchasing managers index data covering manufacturing and services sectors in the Eurozone, UK and US.
A big new climate change plan from BP (BP.) put the spotlight on the oil and gas sector this week. On Wednesday (12 February) new CEO Bernard Looney announced a pledge to achieve net zero status by 2050. Net zero implies that any emissions produced by the company would be offset by removing greenhouse gases from the atmosphere. The proposals focus not only on reducing emissions from BP’s own activities, but to help tackle emissions generated by use of its products, with a target of cutting the carbon intensity of products it sells by 2050 or sooner too. The ‘or sooner’ bit is important as it is open to question whether BP has three decades to achieve this goal in light of the mounting pressure from asset managers, politicians and the public. Other goals include installing methane measurement at all its major processing sites by 2023 and increasing the proportion of investment into non-oil and gas businesses ‘over time’. As Looney notes ‘trillions of dollars will need to be invested in re-plumbing and rewiring the world's energy system’. While the burden of that investment may not all fall on BP alone, there may be questions about its ability to make the necessary changes while keeping up its generous dividend payments.
The minutes from the latest meeting of the US Federal Reserve may reveal how concerned it is about recent shocks to the global economy, including China’s coronavirus, and whether it might consider a near-term cut to interest rates. The next meeting on rates concludes on 18 March.
Managed by Paul Spencer, Franklin UK Mid Cap (GB00B7BXT545) focuses on FTSE 250 companies which Spencer perceives as being well run with robust growth potential. He has a high conviction approach with relatively few stock holdings.
20 February – Full year numbers from BAE Systems (BA.) may be accompanied by more colour on what two recent acquisitions might mean for the business. The $1.9bn purchase of military GPS system – the Military Global Position System – from Collins Aerospace, and the $275m takeover of Raytheon’s Airborne Tactical Radios division. The deals boost US exposure and increase the firm’s footprint in areas of spending priority.
21 February – Publishing group Pearson (PSON) has some making up to do to investors when it announces its 2019 results. Problems in its US higher education business continue to afflict the company, with students increasingly abandoning expensive academic textbooks. The company’s digital business is neither profitable enough nor growing fast enough to make up the shortfall and the company warned on 2020 profit in January.
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