Week in Review: FTSE 100 sinks lower as investors tread carefully
FTSE news
The FTSE 100 edged lower on Thursday (26 August) as investors trod carefully ahead of the US Federal Reserve’s annual symposium in Jackson Hole on Friday (27 August). Investors will be keen to hear what Fed chairman Jerome Powell and his team are planning for US monetary policy. The FTSE 100 ended Thursday down 0.35% at 7,124.98.
- Monday (30 August) is a bank holiday, so financial markets are closed in the UK.
- The Bank of England reveals its latest borrowing and saving data in its Money & Credit release on Tuesday (31 August). The data is used as a proxy for the health of both the banking sector and the wider economy.
- FTSE Russell reveals which firms will enter and leave the FTSE 100 when it announces the results of its quarterly reshuffle (See Sector in Focus below) after markets close on Wednesday (1 September).
- UK Finance will provide further insight into household borrowing and savings in its latest household finance review on Thursday (2 September).
- IHS/Markit release their latest temperature check of conditions in the UK’s services sector on Friday (3 September).
Sector in focus
Broadcaster ITV plc (ITV) and engineering firm Weir Group plc (WEIR) look set to lose their place in the FTSE 100 index when FTSE Russell carries out its latest quarterly reshuffle on Wednesday (1 September).
ITV plc’s (ITV) shares have tread water over the past six months, despite hit show Love Island and Euro 2020 helping it rake in record advertising revenue in June.
Weir Group plc (WEIR) shares have lost nearly a fifth of their value this year, despite receiving backing from broker Credit Suisse to “outperform”.
The reshuffle will also see Just Eat Takeaway.com NV (JET) leave London’s blue-chip index. However, rather than being relegated for poor performance, the takeaway delivery firm is being kicked out after FTSE Russell decided it was a Dutch firm rather than a British firm.
Based on current prices, they are likely to be replaced by WM Morrison Supermarkets plc (MRW) and defence firm Meggit plc (MGGT), both of which are subjects of ongoing bidding wars, as well as veterinary drug firm Dechra Pharamceuticals plc (DPH).
The reshuffle announcement will be made after markets close on Wednesday (1 September) and will be based on Tuesday’s closing prices.
Economic update
Supply problems are threatening to derail the UK’s economic recovery from coronavirus, experts believe.
The IHS Markit index tracking the output of UK companies fell to a six-month low of 55.3 in August.
This was a sharp fall from the 59.2 reading in July, indicating that the recovery is beginning to stall.
The reading comes as firms such Greggs, Nando’s and McDonald’s report supply shortages that have forced them to close stores or remove items from their menus.
Firms are reportedly struggling to recruit labour too, which is having a drag effect on output levels.
However, while growth is slowing, IHS Markit’s index is still showing a reading above 50, which means output is growing. Anything lower than 50 indicates a contraction.
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Company announcements
2 September – Housebuilders are on a roll of late, thanks to a strong housing market and rapidly rising prices. As a result, Barratt Developments plc (BDEV) expects to announce forecast-topping figures when it reports its full-year results on Thursday (2 September). The builder revealed in July that completions had nearly reached pre-pandemic levels, while its forward sales book had hit nearly £3.5bn.
2 September – While Superdry plc (SDRY) shares are more than 80% off their peak, they have recovered strongly over the past 12 months. According to broker Liberum, the recent recovery is just the start for Superdry, which it says has “very exciting growth prospects”.