UK equity market review: A Brexit deal remains elusive

October 2018

UK share prices fell sharply during October as investors became increasingly rattled by a combination of factors, including concerns over global growth and worries over Brexit. Chancellor of the Exchequer Philip Hammond presented his Budget during October and hailed an end to the "era of austerity"

  • UK share indices fell over the month and YTD
  • The EU may consider an extension to the post-Brexit transition period
  • UK-listed companies issued 68 profit warnings during Q3

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UK share prices fell sharply during October as investors became increasingly rattled by a combination of factors, including concerns over global growth and worries over Brexit. The FTSE 100 Index fell by 5.1% during the month, reaching its lowest level since the end of March. Meanwhile, the FTSE 250 Index dropped by 6.8% in October. Over the year to date, the FTSE 100 Index has declined by 7.3% and the FTSE 250 Index has fallen by 8.7%.

“The UK and EU remained at loggerheads over the issue of the Irish border”

As the Brexit deadline of 29 March 2019 moved closer, Prime Minister Theresa May claimed that "95% of the Withdrawal Agreement and its protocols are now settled", but the UK and EU remained at loggerheads over the issue of the Irish border. Brexit Secretary Dominic Raab warned: "Creating any form of customs border between Northern Ireland and the rest of the UK... is unacceptable", but acknowledged that negotiations were always likely to be "tough" towards the end of the process. European Council President Donald Tusk said that the EU would be prepared to consider an extension to the post-Brexit transition perioud if necessary.

Chancellor of the Exchequer Philip Hammond presented his Budget during October and hailed an end to the "era of austerity" alongside a rise in Government spending and better-than-expected predictions for economic growth and borrowing.

Although UK-listed companies issued 68 profit warnins during the third quarter of 2018 - 9% lower than in the same period of 2017 - share prices fell at an average daily rate of 21%. According to a study by EY, this was "comparable to figures seen ten years ago at the height of the financial crisis". Unsurprisingly, companies in the general retailing sector issued the most warnings during the period - a total of eight - and EY found that one-third of sector constituents have issued a profit warning over the year to date.

During October, department store Debenhams unveiled heavy losses and announced plans to close up to 50 underperforming stores. Furniture retailer DFS revealed a 49% drop in full-year profits, and expects the market will "remain subdued into 2019, constrained by political risk and weak consumer sentiment". High-street fashion retailer Coast went into administration and Superdry issued a profit warning, citing "inseasonably hot weather conditions" in the UK, Europe and the US east coast. Elsewhere, Royal Mail and Airline flybe issued profit warnings during the month.


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