The leading UK stock market has declined this morning by around 25 points after the pop higher on Tuesday’s open following upbeat Chinese data proved to be short-lived. The pound is rising against the US dollar by approximately 0.2% but this can largely be explained by a fall in the buck as uncertainty around the outcome of next week’s election continues to rise.
Second successive rise for UK construction sector
Britain’s construction sector expanded for a second month in a row in October, according to a release this morning from IHS Markit. The reading of 52.6 was slightly higher than the 52.3 figure in September and considerably above the 51.8 expected by economists polled before the release. Today’s number supports yesterday’s manufacturing equivalent in signalling a continued sector expansion and a positive outcome from tomorrow’s services PMI would complete a hat-trick of solid data points for last month. The downturn seen in July now seems almost a distant memory but before we get too carried away we should wait for the findings in tomorrow’s inflation report with some market chatter suggesting that a rise in prices could make Governor Carney and the rest of the MPC think twice about further expansionary measures to monetary policy which has unquestionably soothed the initial pain of the fallout from the EU referendum.
Standard Chartered (LON:STAN) continues to decline
A bad week for shareholders in Standard Chartered shows little sign of easing up with the Asia-focused bank falling once more and remaining on course for a second consecutive day of 5% plus drop. A disappointing third quarter update yesterday preceded the move lower and the poor performance has weighed on other banking shares with Barclays (LON:BARC) and RBS (LON:RBS) both firmly in the red. The fall has seen the UK blue chip index move back below the 6900 level and currently trades close to its lowest levels in over a month.
Next rises after reporting increase in turnover
At the other end of the benchmark is retailer Next after releasing its latest trading update which showed a 0.4% rise on last year’s comparable total sales figures. The stock has risen by more than 4% since last night’s closing level with the increase in revenue coming largely due to a much bigger end-of-season sale in July with full price sales actually declining by 1.5% compared to the same period in 2015. Following this, in August the firm warned that the third quarter may be challenging and September - which is traditionally the busiest month of the year with kids going back to school - disappointed with a 5.1% decline in full price sales.
This underperformance has seen the retailer narrow its sales guidance for the year to -1.75% to +1.25% from a broader range of plus or minus 2.5% as more accurate estimates can be given with a slight skew to the downside when compared to previous guidance. However, in a classic case of lowering market expectation the stock has popped despite the release containing little by the way of highlights. The Christmas period as always will prove pivotal and a strong performance throughout the festive season could well make up for a lacklustre summer. With the stock struggling and off by more approximately 40% over the past 12 months, investors will hope for a rebound in sales volumes going forward and target a better set of earnings next time they're updated in the New Year.