The stock market enjoyed another good run this week, with its sixth successive day of gains on Thursday providing the longest winning streak in 18 months.
Monday saw the FTSE 100 close above 6,800, its highest level for more than a year, as commodity stocks benefited from a rise in the oil price while post-Brexit fears were calmed by a survey showing consumer spending increased in July.
Barclays was a strong performer after BNP Paribas upgraded the bank to “outperform”, and Meggitt also did well after influential investors Elliott Capital Advisors took a stake in the firm, pushing up shares by 8.8%.
On Tuesday the FTSE 100 was up a further 0.6% despite mixed corporate results and economic data.
The National Institute of Social and Economic Research said GDP grew by just 0.3% in the three months to end-June, adding to fears of economic slowdown. However, the stock market was buoyed by strong performers such as Standard Life reporting an 18% increase in first-half profits.
Barclays and Royal Bank of Scotland also rose as the Competition and Markets Authority (CMA) ordered banks to launch a new digital system enabling customers to access multiple accounts from different providers.
On Wednesday, there was some market concern when the Bank of England ran into trouble trying to buy £1.2bn of gilts, falling short by nearly £50m. However, the FTSE 100 recovered to finish slightly up.
Thursday saw the market advance a further 0.7%, rebounding from an early decline as a number of blue chip stocks including BT, Royal Dutch Shell and Lloyds Banking Group went ex-dividend. Shares were up in early trading Friday ahead of a range of US consumer and business data.
Company focus: G4S
Back in May, G4S said the year had started well, and on Wednesday the group confirmed that it has secured new contract wins worth £1.4bn in the first half of 2016.
G4S, which runs services ranging from prison security to cash transportation, appears to have put behind it a series of scandals that had seriously damaged its reputation. Chief among these was its failure to provide enough guards for the London Olympics in 2012.
Results for the six months to 30 June showed adjusted revenue up 5.1% and earnings per share up 13.8%. Despite concerns that the dividend might be cut to tackle debt, the payout was maintained at 3.59p.
The shares have performed in line with the market since the Brexit vote. More than 80% of revenues are from outside the UK. Underlying profits rose 8% to £199m helped by strong revenue growth in emerging markets.
Reducing debt remains a priority. In the first six months of the year, seven businesses were sold realising proceeds of £32m. Looking forward, G4S said it has a substantial pipeline of contracts, with the UK government remaining its largest customer. The group expects demand for its services to grow by around 4% to 6% a year.
On Monday, a survey by Visa based on credit and debit card usage showed that consumer spending increased 1.6% year-on-year in July, suggesting this key driver of the economy held up relatively well following the Brexit decision. This contrasts with most consumer surveys since the referendum, which have indicated a significant negative impact.
It was followed on Tuesday by a similarly upbeat British Retail Consortium-KPMG survey which showed the value of retail sales rose by 1.1% in the year to July, beating forecasts of a 0.7% fall.
Also released on Tuesday was official data showing that UK industrial production was stable, although this lagging indicator appears to have been superceded by a slew of more negative sector readings since the EU referendum.
The Office of National Statistics (ONS) also said that the UK’s trade deficit widened in June, as the weaker pound following the Brexit vote had yet to filter through to boost exports.
The balance of trade for goods and services increased from a deficit of £4.2billion in May to £5.1billion.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that sterling’s depreciation will take time to filter through as a benefit: “Previous sterling depreciations typically have taken two years to boost net trade, as it takes time for contracts to be renegotiated and exporters to invest in new capacity,” he said.
On Wednesday, a survey of financial jobs in London by recruitment agency Morgan McKinley found that the number of new positions was down 12% in July from June and by 27% compared to July last year.
Meanwhile an Institute of Fiscal Studies (IFS) report put the value of access to the European single market at around 4% of UK GDP, underlining the importance of continuing European trade for UK businesses.
The Bank of England also released data showing that growth in business services and consumer spending slowed in July, adding to the mixed messages coming through in economic surveys since the EU referendum. The BoE data contradicted reports earlier in the week which showed an upbeat mood among consumers.
Half of the companies surveyed by the BoE said they would reduce hiring activity over the next year and 60% said they intended to cut costs in other ways.
The housing market continued to slow down in July, according to the monthly Royal Institution of Chartered Surveyors’ (Rics) residential market survey published on Thursday.
The report, based on surveyors’ views of the housing market, suggested that house price growth is at its lowest in three years. Transaction levels also dropped further, with surveyors citing post-Brexit uncertainty and tax changes as the main reasons for the slowdown.
Meanwhile construction output data released on Friday showed the sector in recession in the first half of this year, as investor nerves about a fall in property prices led to spending decisions being put on hold.
Output fell 2.2 per cent year-on-year in June, according to the official data, following a 1.6 per cent drop the previous month. Annual output has fallen every single month of this year.