Economic and Investment Market Update
Regular readers of the Financial Press will have noted that in April, there was an increase in economic activity focused in the FTSE 100. Indeed, large
companies outperformed medium sized companies during April with the FTSE 100 Index rising by some 6.4%, in contrast to the FTSE 250 Index which increased
Following shareholder pressure, Whitbread finally announced plans to spin of its Costa Coffee business in a bid to release value, whilst US cable Company
Comcast triggered a battle with 21st Century Fox for Sky. Japan’s Takeda Pharmaceuticals also made a £49-per-share offer for Shire Pharmaceuticals
worth some £46 Billion.
Perhaps the biggest surprise, was the news that supermarket retailers Sainsbury’s and Asda intended to merge in a move that would result in a network of 2,800 stores and a combined market share that would exceed that of Tesco. Asda is currently owned by US retailer Walmart, which bought the chain in 1999 and would retain 42% of the combined entity. Inevitably the Competition & Markets Authority (CMA) confirmed it was likely to review the merger and if the deal was to be approved it looks likely that the companies will be required to sell off a number of their existing stores. It also emerged in the spate of takeover rumours that John Lewis appear to have declined Amazon’s potential interest in Waitrose.
Overall Retail sales volumes fell at a quarter-on-quarter rate of 0.5% during the first three months of 2018. Activity in March was dampened by unusually
wintry weather a factor referred to in a number of company results. Having issued a profit warning in January, department store chain Debenhams issued
another warning in April following another decline in sales and earnings. Nevertheless, retailers Primark – owned by Associated British Foods – and
JD Sports bucked the trend in the retail sector, posting relatively encouraging like-for-like sales.
The UK economy posted its slowest quarterly growth since the fourth quarter of 2012 during the first three months of 2018, growing by 0.1%. Over the final
quarter of 2017, the economy expanded by 0.4%. In a speech delivered to the financial sector during the month, International Trade Secretary Dr Liam
Fox suggested that the UK is well placed to enjoy a “new degree of economic agility” after Brexit, regardless of one’s view of the decision to leave
the European Union.However, neither Cabinet nor Parliament seem unified in terms of the exact terms of Brexit.
Highlighting that discussions on trade and exports often tend to focus on physical goods, Dr Liam Fox pledged to liberalise trade in services. At present,
services comprise about 45% of gross UK exports; they make up less than 40% with the EU, whilst with the US – the UK’s single largest trading partner
– they make up 55%. Overall, the UK’s trade in services accounts for around 20% of UK GDP, which is higher than any other country in the G7.
Whilst 2018 has witnessed the return of volatility within Stock Markets currently markets have recovered their poise and have continued to rise in value
as investor confidence has returned.
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By Sabre Financial | Monday, July 16, 2018