UK investors’ attention was largely absorbed by Brexit during September. As the clock counted down towards the 31 October deadline, speculation over the likelihood of a no-deal Brexit was partially allayed by the passing of the “Benn Act”.
- Brexit uncertainties continue to dampen confidence
- Parliament was suspended and then recalled
- Despite the uncertainties, UK share prices generally rose in September
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UK investors’ attention was largely absorbed by Brexit during September. As the clock counted down towards the 31 October deadline, speculation over the likelihood of a no-deal Brexit was partially allayed by the passing of the “Benn Act”, which will force the Prime Minister to seek an extension to Article 50 or to gain MPs’ agreement to no deal, by 19 October. However, investor sentiment was subsequently shaken by Parliament’s prorogation and its later recall, following the Supreme Court’s ruling that its suspension had been unlawful. Despite the continued uncertainty surrounding Brexit, the FTSE 100 Index and the FTSE 250 Index both rose by 2.8% over September.
“UK equity funds remained firmly out of favour”
Motor retailer Pendragon cancelled its dividend during September and issued a profit warning, citing “challenging” economic and market conditions, and warning that Brexit-related uncertainties were undermining consumer confidence. Over September, the yield on the FTSE 100 Index rose from 4.54% to 4.42%, compared with the yield of 4.68% with which it began 2019. The FTSE 250 Index’s yield climbed from 3.23% to 3.25% during the month, having begun the year at 3.39%. In comparison, the yield on the benchmark UK government bond rose from 0.32% to 0.39% during September, having begun 2019 at 1.26%.
Since the start of the year, the best-performing FTSE industry sectors include leisure goods, technology hardware & equipment, and financial services. At the other end of the performance spectrum, the worst-performing sectors include automobiles & parts, fixed-line telecommunications, and oil equipment & services.
Equities suffered a third consecutive month of outflows in August, according to the latest data from the Investment Association (IA). Although UK equity funds remained firmly out of favour, outflows moderated slightly for the UK Equity Income sector and the mainstream UK All Companies sector, whereas outflows from the UK Smaller Companies sector increased over the month.
According to Janus Henderson’s Global Dividend Monitor, almost three-quarters of the companies in its UK index increased their dividend payouts year on year during the second quarter of 2019. In particular, strengthening profits and robust capital ratios have helped the banks to return more cash to shareholders. Nevertheless, the second quarter saw some dividend cuts and cancellations, including cuts from Anglo-American, Antofagasta, and Smith & Nephew. Looking ahead, Janus Henderson expects headline dividend growth of 4.2% and underlying growth of 5.5% for full-year 2019.
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