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UK markets fall in June

June 2017

UK equity markets fell during June, undermined by renewed political uncertainties. The snap General Election culminated in a hung Parliament that forced the Conservative Party to seek support from the Democratic Unionist Party. The weakened UK government raised fresh questions about the UK’s Brexit prospects as negotiations with the EU kicked off.

  • The yield on the FTSE 100 Index rose by almost 20 basis points to 3.84%
  • Dividends posted underlying growth of 7.1% during Q1, according to Janus Henderson’s Global Dividend Index
  • Dividend growth was strong in every part of the world during Q1, apart from Europe where few companies pay a dividend in Q1

UK equity markets fell during June, undermined by renewed political uncertainties. The snap General Election culminated in a hung Parliament that raised fresh questions about the UK’s Brexit prospects. Over June, the FTSE 100 Index fell by 2.8% while the FTSE 250 Index declined by 3.2%.

“The pound’s weakness since the Brexit referendum has distorted the dividend backdrop for the UK”

The yield on the FTSE 100 Index rose during June from 3.67% to 3.84% , while the FTSE 250 Index’s yield climbed from 2.64% to 2.71% . The yield on the ten-year gilt rose from 1.13% to 1.33% over the month.

Over the first half of the year, the best-performing FTSE industry sectors were personal goods, forestry & paper, electronic & electrical equipment, and household goods. In contrast, the worst-performing sectors were oil equipment & services, fixed-line telecoms, oil & gas producers, and food & drug retailers.

During June, UK share indices underwent their quarterly reshuffle . Security services company G4S returned to the FTSE 100 Index alongside property company Segro, while Intu Properties and Hikma Pharmaceuticals were relegated to the FTSE 250 Index. Elsewhere, threadmaker Coats Group, turnaround investor Melrose Industries, hedge fund Pershing Square, IT services firm FDM Group, TBC Bank, and Sirius Minerals all joined the FTSE 250 Index. Meanwhile, department store Debenhams and online electrical retailer AO World left the FTSE 250 Index, alongside engineer Keller, investment company BH Macro, intellectual property specialists Allied Minds, and private equity company SVG Capital.

A strengthening global economy provided a boost for global dividend growth during the first three months of 2017, according to Janus Henderson’s Global Dividend Index . Dividends grew at an underlying rate of 5.4%, and growth was strong in every region apart from Europe, where few companies pay dividends in the first quarter.

In the UK, dividends fell at a headline rate of 5.3% during the first quarter of 2017, but posted underlying growth of 7.1% that was boosted by a substantial increase in BHP Billiton’s dividend payout. The pound’s weakness since the Brexit referendum has distorted the dividend backdrop for the UK, as more than half of the UK companies that pay a dividend in the first quarter of the year declare their payment in US dollars.

Looking ahead, Janus Henderson believes that improving prospects for global economic growth bode well for corporate profits and dividend payouts, although special dividends are likely to be somewhat lower than previously expected.


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