The Week Ahead (21-25 July): FTSE 100, Alphabet, Tesla, Lloyds, ME Group

The FTSE 100 touched an all-time record intraday high of 9,016 on Tuesday, although it didn’t manage to stay above 9,000 and looks likely to end the week broadly unchanged. The UK’s big cap index is now up by nearly 10% so far this year:

This strength suggests that the animal spirits I highlighted in the last Week Ahead may still be at work in some parts of the market. Unfortunately, evidence from the real-world economy to support this seems a little more mixed, especially in the UK.

This week’s UK economic data has included a rise in both inflation (to 3.6%) and unemployment (to 4.7%), in addition to commentary from housebuilder Barratt Redrow (LON:BTRW) suggesting market conditions remain sluggish.

A big profit warning from small cap Churchill China (LON:CHH) also highlighted the despondent state of affairs in the hospitality industry, which is particularly struggling under the weight of higher employment costs.

The picture looks a little more benign in the US. Initial jobless claims were slightly lower than forecast on Thursday, while retail sales rose by 0.6%, beating forecasts for an increase of 0.1%.

All of this said, perhaps it’s worth remembering that bull markets are said to climb a wall of worry. The real economy and the stock market don’t necessarily move hand in hand. Good businesses adapt to changing circumstances and at any time, there are usually some sectors of the market doing well.

What’s in store next week?

US earnings season continues next week. Following this week’s deluge of bank results, the week ahead will see numbers from Google owner Alphabet, Tesla, ExxonMobil, Coca-Cola, McDonald’s and Mastercard, among others.

Here in the UK, FTSE 100 names including Lloyds Banking Group, quality favourite Relx and consumer goods firm Reckitt Benckiser are due to report. We should also have updates from a raft of smaller companies.

Reporting from many of these companies is likely to highlight macroeconomic conditions in the UK and further afield. Updated Purchasing Manager Indices (PMI) in the UK, EU and US are also likely to shed light on the health of the manufacturing and service sectors in western markets and perhaps some initial impact from US tariffs.

We also have an interest rate decision due next week from the European Central Bank, whose key rate has already fallen from 3.15% to 2.15% this year. That’s a sharp contrast to the Bank of England and US Fed, whose main rates remain at 4.25%.

Finally, there should be a statement from embattled Fed Chairman Jerome Powell, ahead of an auction for long-dated US government debt. Watch out for any volatility in bond yields if investor appetite disappoints – or if President Trump attempts to follow through on his threats to remove Powell.

That’s all to come – but first, I hope you have a great weekend!

Economic Calendar

Companies Reporting

Disclosure: at the time of publication, Roland owned shares in Churchill China.