Week in Review: FTSE 100 hesitant as sterling rises on rate decision
FTSE news
The FTSE 100 was off by a fractional 0.048% on Thursday as investors absorbed the latest interest rate decision from the Bank of England. Sterling rose 0.4% on the news that the BoE would hold rates at 0.1% for now. The FTSE 100 index ended the day on 7,120.43.
It soared higher on Thursday (29 July) following a number of strong earnings updates and dividend announcements from the likes of Royal Dutch Shell plc (RDSA) and Anglo American plc (AAL). The index ended the day 0.88% higher at 7,078.42.
- On Monday (9 August) CD&R will have to decide whether it plans to make a takeover bid for Morrisons (MRW).
- New investor protections come into force for special purpose acquisition vehicles on Tuesday (10 August). The FCA will no longer require special purpose acquisition companies (SPACs), to suspend their listing when they reveal their deal plans
- The Office for National Statistics (ONS) publishes UK manufacturers’ sales by product (2020) on Wednesday (11 August).
- On Thursday (12 August) the ONS publishes its business investment in the UK, provisional results, Q2 report.
- Finally, on Friday (13 August) the latest Help to Buy equity loan scheme stats are announced.
Sector in focus
Motor vehicles have been on something of a journey in recent times. Manufacturers in Europe have been rocked by a host of emissions scandals while others have merged and demerged in what has been a tough sector to gain any dominance in.
In July carmakers VW (VOW3) and BMW (BMW) were fined a combined €875 million for colluding to prevent the deployment of clean emissions technology.
Major technological change is afoot too with the advent of mass-production electric cars. In the UK the Society of Motor Manufacturers and Traders (SMMT) on Thursday announced that more electric cars than diesel were registered in the UK for the second month in a row – the first time this has ever happened.
Petrol vehicles still far outweigh either but the message is clear that in the wake of the diesel emissions scandals the public is voting with its feet on EVs. In the US too major changes are underway with President Joe Biden setting the US car industry the goal of making 50% of all new car sales zero-emissions vehicles.
While Tesla (TSLA) chief executive Elon Musk announced his displeasure over Twitter at not being invited to the meeting of major car making executives at the White House, the evidence of change is clear. The UK could be set to benefit from such changes too, as US EV makers such as Rivian considering Bristol for their new factory.
Economic update
The Bank of England has admitted that inflation could soar to 4% by the end of the year – double the central bank’s target.
Despite this, the Monetary Policy Committee (MPC) – the BoE’s rate-setting committee – voted overwhelmingly to keep rates at a historic low of 0.1%.
Prior to the announcement, on Thursday (8 August), experts had suggested that the BoE might be forced to hike rates to keep a lid on rising prices.
However, the fact all nine members of the MPC voted to keep rates where they are suggests they are prepared to stomach rising inflation – for now.
That said, the committee did suggest that “some modest tightening of monetary policy is likely to be necessary” in the next two years.
This week Ewen Stevenson, CFO at global bank HSBC, predicted that rates would rise by as early as mid-2022. This would seem to chime with the MPC’s change of tone over rates in this week’s meeting.
Fund watch
If you’d like to earn an income on your investments and take an ethical spin to it, the Liontrust Sustainable Future Corporate Bond 2 Grs Inc (GB0030029069) could be an interesting option. The fund aims to invest for income in a range of corporate bonds, with a selection process that picks for companies’ debt that it sees as being future leaders of a more sustainable world. The fund charges an OCF of 0.59% and has returned 25% over five years.
Company announcements
11 August – Takeaway delivery firm Deliveroo (ROO) reports its interim results on Wednesday. The firms IPO in May flopped, although its share price has recovered somewhat since. It is still early days for Deliveroo as a public company but already has some positive developments in its favour. In July it said it expects the value of transactions through its platform to increase between 50-60% compared to 2020, which would be a boom for its bottom line. Analysts are watching however to see if the reopening of pubs and restaurants has had a negative impact in its more recent flow of trade.
12 August – Travel firm TUI Group (TUI) posts its Q3 results on Thursday. The holiday booking firm has been amongst the hardest hit firms during the pandemic, posting dismal Q2 losses. The firm has however been kept propped up with some €5 billion in bailouts from the German government alone during the pandemic. With travel reopened to an extent over summer things could be turning for the company. This has been reflected in a decision by majority stakeholder Alexey Mordashov, the worlds’ 51st richest person, buying 72.5 million worth of TUI shares, upping his stake to around 33% of the company.