Thursday, 14th April: The FTSE remained relatively flat despite losses from housebuilders and Burberry. Persimmon released their latest results, with strong sales rates once again reported. However they fell to the bottom of the blue-chip index as concerns surrounding the longer term stability of the favourable market conditions the sector are currently benefiting from. Persimmon dragged their peers lower as Barratt Developments and Berkeley Group joined them to make up the bottom three of the index in afternoon trading. The stocks ended the day lower by 5.99%, 3.78% and 3.72% respectively.
Burberry, the luxury fashion brand reported falling sales (1% lower in the first 6 months of the year) and warned of tough trading conditions as a drop in tourist spending in continental Europe and weak demand in Hong Kong hampered sales. The group didn’t give the most optimistic of views for the forthcoming year, warning profits would coming towards the bottom end of forecasts. Chinese customers account for 40% of Burberry’s retail sales and we all know what’s being said about China in recent months… The fashion label ended the day -3.64%.
Minutes from the most recent Bank of England meeting were released today (rates have been held on hold at 0.5%), with all nine members of the Bank’s Monetary Policy Committee (MPC) voting to keep rates on hold. The minutes showed that the Bank warned of uncertainty over the June 23rd EU referendum vote, leading to cause some softening to growth during the first half of 2016. The BoE officially have a neutral stance on the referendum vote, but today’s warning that a “Brexit” would probably hurt the economy and cause the pound to slide comes in the same week that the International monetary Fund (IMF) said the world economy would suffer should Britain leave the EU. The uncertainty surrounding the vote has led to official sending a clear signal that they are unlikely to make any significant policy shifts until after the vote, i.e. the 0.5% interest rate looks set to stay till the summer at least. The pound initially rose against the euro and dollar but gains were limited as uncertainty weighed on investors’ minds. The pound trades at $1.41 and €1.26 at the time of writing.
To say the FTSE had a quiet day would be an understatement: it “peaked” at more than 0.15%, whilst not dropping more than 0.5% early morning. It ended the day flat….+0.03%. Elsewhere in Europe the CAC and DAX also had a relatively quiet day, ending the day +0.46% and +0.67% higher.