Since the beginning of 2015, the FTSE 100 index has risen by a total of 2%, with more recent concerns over the eurozone and China, plus uncertainties over the outlook for US and UK interest rates, seeing it give back much of the gains it made earlier on in the year. Over the year to date, the best-performing UK industry sectors have been forestry & paper, household goods & home construction, software & computer services, and real estate. At the other end of the spectrum, the worst-performing sectors include industrial metals, mining, basic materials, electricity, and oil & gas producers.
Nevertheless, during a busy month for corporate news, including some high-profile merger and acquisition activity, the FTSE 100 rose 2.7% over July, while the FTSE 250 index climbed by 0.8% and the FTSE SmallCap index rose 0.7%. Publisher Pearson announced the sale of the Financial Times to Japan’s Nikkei for £844m as part of its strategy to focus on its educational services operations. Pearson subsequently revealed it was also in discussions to dispose of its 50% share in the Economist Group. Betting and gaming company Ladbrokes meanwhile announced an agreed merger with Gala Coral that will be financed through an issue of new shares.
July also saw investor sentiment receive a lift from a series of robust corporate earnings announcements. In particular, positive reports from BAE Systems, Royal Dutch Shell, AB Foods, and Supergroup provided a boost for confidence. Elsewhere, housebuilder Barratt Developments revealed strong results while its competitor Bovis Homes notched up record volumes of new home completions during the first half of the year.
It was far from plain sailing for UK equity markets, however, and the engineering sector experienced a particularly challenging month. Rolls-Royce issued yet another profits warning – its third since mid-2014 – citing a difficult trading environment, while Aggreko and Balfour Beatty also unveiled profits warnings.
The banking sector also continued to come under pressure during the month. Although the Chancellor of the Exchequer announced in his Budget that the levy on banks’ balance sheets will gradually fall from 0.21% to 0.1% by 2021, the Treasury is also set to impose an 8% tax on profits from 1 January 2016. In response, the British Bankers’ Association warned that the move could stoke international concerns that the UK is becoming a “less attractive” business environment for banks