Unlike many other major equity markets, the FTSE 100 Index ended September in negative territory. Ongoing disquiet over Brexit dampened investor sentiment; moreover, confidence was further thrown off balance by concerns over an escalating battle of words between North Korea and the US. Over September as a whole, the FTSE 100 Index fell by 0.8%. In comparison, the FTSE 250 Index – whose medium-sized constituents tend to be less exposed to the global economy – ended the month in positive territory, rising by 0.4%.
In a speech delivered in Italy, Prime Minister Theresa May called for a transition period of “around two years” following Brexit in March 2019. In response, Michel Barnier – the EU’s principal Brexit negotiator – welcomed Mrs May’s “willingness to move forward”, while European President Donald Tusk described himself as “cautiously optimistic” about Mrs May’s “constructive and more realistic tone”. Despite this, Mr Tusk warned that Brexit talks were not yet progressing quickly enough, although he conceded that UK’s “philosophy of having a cake and eating it is finally coming to an end”.
During the month, UK MPs voted in favour of the EU Withdrawal Bill (previously known as the Great Repeal Bill) by 326 votes to 290. The bill repeals the 1972 European Communities Act, and will also transfer existing EU laws onto the UK’s statute books. The bill will now progress to the Committee stage, but is likely to find itself the subject of some controversy and many proposed amendments.
Retail sales picked up in the UK during August, rising at an annualised rate of 1.3%. Nevertheless, the British Retail Consortium (BRC) remains concerned by the prospect of a slowdown in household spending caused by a combination of rising inflationary pressures and weak wage growth. Warning of “stark challenges (lurking) around the corner for the retail industry”, the BRC highlighted the potential impact of statutory increases in pension contributions that are due to take effect next year.
A declining number of UK companies is issuing quarterly earnings releases, according to the Investment Association (IA). The IA found that the number of FTSE 100 companies and FTSE 250 companies that issue quarterly earnings reports has declined by 19% and 25% respectively since October 2016. This suggests that managements have made a proactive decision to concentrate on the long term, rather than focusing on meeting short-term quarterly targets.