Week in Review: Mining giants drag FTSE 100 into the red
FTSE news
The FTSE 100 was dragged into the red on Thursday (12 August) after London-listed miners Rio Tinto Limited (RIO) and Evraz plc (EVR) went ex-dividend, causing their shares to nosedive 7.6% and 7.1%, respectively. Once a stock goes “ex-dividend”, it means new investors after then are not entitled to the upcoming dividend. The index ended the day 0.45% lower at 7,187.66.
- Rightmove releases asking price data for August on Monday (16 August).
- On Tuesday (17 August), Kantar reveals the latest market shares of all the major UK supermarkets.
- The Office for National Statistics (ONS) publishes inflation data (see Economic Update) for July on Wednesday (18 August)
- The ONS is back on Thursday (19 August) with insight into the state of the economy using real-time data such as debit and credit card transactions.
- On Friday (20 August), the ONS releases collective sales data for the UK’s retail sector.
Sector in focus
Insurers may not be sexy, but they are proving popular with investors after clocking up double-digit profit growth and increasing shareholder payments.
On Thursday (12 August), Aviva announced it would return “at least” £4bn to shareholders by next June through a mixture of dividends and share buybacks. While London-based Aviva’s half-year operating profit came in below estimates, it still registered 17% growth year-on-year. Aviva’s share price ended Wednesday up 3.47% off the back of the announcement.
Just last week FTSE 100 rival Legal & General Group PLC (LGEN) promised to hike its dividend by 5% after clocking up more than £1bn of profit in the first six months of the year.
Economic update
Investors will be eagerly awaiting the ONS’ July inflation announcement on Wednesday (18 August).
The post-lockdown reopening of the economy has led to a surge in household spending, which has pushed up prices.
The ONS revealed last month that annual price growth leapt from 2.1% in May to 2.5% in June.
Inflation is expected to come in even higher in July and, according to the Bank of England (BoE), could hit 4% by the end of the year. That is well above the BoE’s medium-term target of 2%, which may well increase calls for a rate rise soon.
However, the BoE’s rate-setting Monetary Policy Committee (MPC) voted unanimously to keep rates at 0.1% last week. It is thought they did that for two reasons: firstly, to secure the economic recovery and, secondly, because they think the current bout of inflation will be temporary.
That said, if inflation persists, rates may rise quicker than expected. Inflation is often thought to be the worst enemy of savers and investors, as it erodes the real value of their money.
Fund watch
Typically, smaller companies tend to offer greater growth potential than larger firms, although clearly that’s not always the case. If you want to back some of the UK’s fastest-growing firms, you might want to consider Fidelity UK Smaller Companies W Acc (GB00B7VNMB18) . The fund, which has an ongoing charge of 0.93% and has returned 94% in five years, invests mainly in smaller UK firms such as car dealer Inchcape plc (INCH), flooring supplier Headlam Group plc (HEAD) and car part retailer Halfords Group plc (HFD).
Company announcements
18 August – Persimmon plc’s (PSN) last trading update in July was strong, with the housebuilder boasting of a healthy order book and high demand for new homes. The builder also accelerated its plans for a special dividend. The property market remains healthy, so shareholders will be expecting a similarly positive update when the firm reports its interims on Wednesday (18 August).
19 August – Copper mining giant Antofagasta plc (ANTO) warned three weeks ago that full-year production might come in lower than expected unless there is more rainfall at its Los Pelambres mine. The miner reports its interim results on Thursday (19 August).