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“No decisive progress” in Brexit talks

August 2017

UK share price performance was dampened in August by escalating tensions between North Korea and the international community. Meanwhile, EU Brexit negotiator Michel Barnier warned that he was “far from being able to recommend… that there has been sufficient progress in order to start discussions on the future relationship”.

  • Demand for “safe-haven” assets surged during August
  • Inflation continued to outstrip earnings growth
  • The FTSE UK indices underwent their quarterly constituent review

To view the series of market updates looking at the markets through August, click here


Although UK equity indices ended August slightly higher than they began it, share prices were dampened by concerns over escalating tensions between North Korea and the international community. Sabre-rattling between North Korea and the US eventually reached a climax at the end of the month as North Korea fired a missile over Japan, undermining investor sentiment and stoking demand for “safe-haven” assets such as gold . Over August as a whole, the FTSE 100 Index rose by 0.8%, and the mid-cap FTSE 250 Index edged 0.1% higher.

“Household expenditure registered its weakest growth since the end of 2014”

The latest round of Brexit negotiations proved problematic; the European Union’s (EU’s) Brexit negotiator, Michel Barnier, complained that “no decisive progress” had been achieved on the main issues. He warned that he was “far from being able to recommend…that there has been sufficient progress in order to start discussions on the future relationship” between the UK and EU.

Inflation continued to run ahead of wage growth: the UK’s annualised rate of inflation – as measured by the Consumer Prices Index (CPI) – remained unchanged at 2.6% in July. While average earnings (excluding bonuses) rose at an annualised rate of 2.1% during three months to June, real earnings declined by 0.5%, reducing British households’ spending power.

Household expenditure registered its weakest growth since the end of 2014 in the second quarter of 2017, according to the Office for National Statistics (ONS). Spending rose at a quarterly rate of 0.1% during the period, dampened by deteriorating car sales, and the ONS aligned this slowdown with “a wider narrative of a deterioration of the economic position of consumers”. Meanwhile, UK retail sales rose at a monthly rate of 0.3% in July, although the ONS reported that sales volumes fell in every sector apart from food and household goods.

In the quarterly reshuffle of FTSE UK indices , NMC Health and housebuilder Berkeley Group joined the FTSE 100 Index, replacing Royal Mail and personal credit provider Provident Financial. Provident Financial’s share price plummeted during August following a profit warning . With the FTSE 250 Index, construction company Carillion, vehicle leasing business firm Northgate, and miner Petra Diamonds dropped out of the mid-cap index and were replaced by online gaming company 888 Holdings, asset management software supplier Alfa Financial Software Holdings – which floated on the London Stock Exchange earlier this year – and Sequoia Economic Infrastructure Income Fund.


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