Pegler’s market report – 09.08.16: UK market hits new highs for the year

As published in the Brighton Argus (09.08.16) Business on page 21 under the title Pegler’s Market Report:

UK market hits new highs for the year

London’s FTSE 100 charged to a fresh 2016 high as investors continued to cheer the Bank of England’s larger-than-expected post-Brexit stimulus package.

The measures that were announced last week were designed to boost the economy and prevent a recession following the vote to leave the European Union. Policymakers voted unanimously to cut rates to 0.25pc, from a previous record low of 0.5pc. The central bank also announced £70bn of asset purchases, comprising £60bn of government bonds and £10bn of corporate bonds, and a low-rate funding scheme for banks.

In the US, data from the Labour Department showed that non-farm payrolls increased by 255,000 last month – compared to consensus forecasts of a rise of 180,000. It also revised June’s figure upwards to 292,000. The better-than-expected jobs report helped to boost consumer confidence across the globe although also increases the chances of a Fed rate hike later this year.

On the company front: House builder Bellway expects to report a 27pc rise in sales when it publishes its full year results in October. The FTSE 250-listed company’s operating margin will be close to 22pc – a record high – while housing completions will rise 12.5pc. Consumer confidence remains strong and Bellway’s forward order book has increased in both value and volume.

William Hill, the bookmaker at the target of a takeover bid by gambling groups Rank and 888 Holdings, posted flat sales after a disappointing Cheltenham festival.

It wasn’t all bad news for the banks, whose margins generally get squeezed on news of interest rate reductions; Barclays, HSBC and Royal Bank of Scotland were boosted by the introduction of a 2019 deadline to settle PPI claims. This was seen as a positive because it may draw a line under the banks’ liabilities.

The worldwide hotel group, InterContinental, said it remained “confident” about the outlook for the rest of the year, despite the “uncertain environment in some markets”. InterContinental Hotels, which owns brands including Crowne Plaza and Holiday Inn, recently reported that in the first half of 2016 underlying revenue rose 5pc with operating profit up 10pc.

By David Pegler, Brighton Capital Management