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Newsround: Trade war fears spark market rout

23 March 2018

Tags: Macro Economics


Global stock markets came under big pressure on Thursday afternoon ahead of the official imposition of tariffs on imports of steel and aluminium into the US. By the close the FTSE 100 was down 1.2% at 6952.59.

The coming seven days are quiet for economic announcements heading into the Easter break. Tuesday (27 March) sees the release of the Conference Board’s reading of US consumer confidence, based on a survey of around 5,000 households. On Wednesday (28 March) the final estimate of US GDP for the final three months of 2017 is announced; the previous estimate saw annualised growth for the period revised down to 2.5%. Next Thursday’s (29 March) current account data will offer an insight into demand for the UK pound and the balance between imports and exports (see Economic update).

 Sector in focus

Shares in gambling companies recovered some ground this week after the outcome from the Gambling Commission’s review into fixed-odd betting terminals (FOBTs) was not as bad as expected. William Hill (WMH) and Ladbrokes Coral (LCL) were among the companies which saw their share prices rise on the news. FOBTs are a key source of income for bookmakers. They allow people to play computer simulated races and casino games but have recently come under scrutiny. Critics argue these games can lead to potentially dangerous losses for problem gamblers. Players can currently bet up to £100 every 20 seconds on these machines. The commission now says stakes for FOBTs should be cut to £30 or below. That’s a better result for the industry which had been braced for a worst-case scenario of £2 maximum bet. Analysts had previously speculated that a maximum £2 stake could have reduced earnings for William Hill and Ladbrokes by as much as 28%.

 Economic Update

Sterling has endured a volatile spell heading into the monthly current account release next Thursday (29 March) which will help reveal demand for the currency. The pound went up after the European Union and UK agreed terms for a Brexit transition period (19 March), before falling after inflation numbers came in lower than expected (20 March) and rising again on strong hints from the Bank of England (22 March) that it would hike rates at its meeting in May. The agreed transition phase for Brexit will last for 21 months through to December 2020. However, the deal is contingent on remaining areas of contention around issues like Northern Ireland being resolved by the time the final withdrawal agreement goes to the UK and EU parliaments for approval in the autumn. It is therefore debatable whether the corporate world will have genuine certainty until then.

 ETF Watch

Investors on the hunt for value could consider an exchange-traded fund which screens stocks to identify those which are looking cheap. One example is iShares MSCI World Value (IWFV) which is has an ongoing charge of 0.3%.

Company Announcements 

26 March - Mobile advertising platform Taptica (TAP:AIM) is scheduled to report its 2017 full year results. Expectations for these results have steadily built over the course of the last 12 months. Investors will be watching closely for an update on how the company plans to deploy its $50m acquisition war chest in the coming months.

29 March – All eyes will be on the impact of regulation when trading platform CMC Markets (CMCX) updates the market. In January the FCA sent out letters to companies such as CMC warning them to act on concerns it had raised regarding retail customers trading in complex financial instruments such as derivatives. The letter sparked share price drops in CMC and its peers, so investors will be keen to know the extent of any potential earnings damage.

Writer: Tom Sieber Tags: Macro Economics

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