Uk Winter Overview
December 15th, 2015
- Alongside speculation over US interest rates and concerns over China’s economic growth, investment-related newsflow during November was dominated by geopolitical developments. Following a terrorist attack in Sharm el-Sheikh in Egypt at the end of October, Paris fell victim to a series of atrocities in the middle of November. These attacks undermined investor confidence and had a negative effect on share prices in the travel and leisure sectors.
- Medium-sized UK companies performed better than their larger and smaller counterparts during November. The FTSE 250 index rose 1.8% over the month, while the FTSE 100 index ended November much as it began it, edging 0.1% lower overall. For its part, the FTSE SmallCap index fell 0.5%.
- Amid ongoing concerns over weak commodity prices and the outlook for China’s faltering economy, the UK’s mining sector remained under pressure during November and share prices experienced sizeable daily swings. The share price of mining company BHP Billiton came under particular pressure during the month following the disastrous collapse of a dam at a mine in Brazil. The Brazilian government announced plans to sue mine operator Samarco, which is jointly owned by BHP and Brazilian miner Vale. BHP’s share price fell by more than 20% over November. Elsewhere, in a bid to raise funds to refinance its debt, beleaguered platinum miner Lonmin offered almost 27 billion shares in a 46-for-one rights issue at 1p per new share – a 94% discount on the prevailing share price.
- Having already issued three profits warnings since the middle of 2014, meanwhile, engineer Rolls-Royce issued yet another warning during November. The company cited headwinds to profitability, including “sharply weaker demand”, and indicated it might find itself obliged to cut its dividend pay-out. The company’s share price plummeted, falling by almost 20% in a single day.
- Following the Chancellor of the Exchequer’s Autumn Statement and Spending Review, UK housebuilders – including Taylor Wimpey, Barratt Developments, and Berkeley – received a boost from the news the Government intends to increase spending on housing. The Chancellor also announced a 3% surcharge to stamp duty on buy-to-let properties and second homes, however, and this led to a dip in the share prices of estate agents such as Foxtons and Countrywide. The UK’s deficit has shrunk from 11.1% of national income in 2011 to 3.9% in 2015/16, and the Government now expects to deliver a budget surplus of £10.1bn by 2019/20.
