August 2017
UK share prices generally rose during August, although gains were relatively muted, hampered by geopolitical tensions relating to North Korea – which fired a missile over Japan – and by concerns over the impact of Tropical Storm Harvey, which hit the US Gulf Coast towards the end of the month.
- Equity yields rose slightly in August
- Sterling’s strength continued to boost UK dividend payouts
- Demand for UK equity funds remained weak
To view the series of market updates looking at the markets through August, click here
UK share prices generally rose during August, although gains were relatively muted, hampered by geopolitical tensions relating to North Korea – which fired a missile over Japan – and by concerns over the impact of Tropical Storm Harvey, which hit the US Gulf Coast towards the end of the month.
“August saw several high-profile profit warnings from UK companies”
Over August as a whole, the FTSE 100 Index rose by 0.8%, and the mid-cap FTSE 250 Index crept up by 0.1%. The yield on the FTSE 100 Index rose from 3.80% to 3.86% over the month, while the FTSE 250 Index’s yield edged up from 2.65% to 2.67% . In comparison, the yield on the ten-year gilt fell from 1.29% to 1.09% .
Since the beginning of the year, the best-performing FTSE industry sectors have been industrial metals & mining, personal goods, leisure goods, and forestry & paper. In contrast, the worst-performing sectors include oil equipment & services, fixed-line telecoms, technology hardware, and electricity. August saw several high-profile profit warnings from UK companies, including WPP , Dixons Carphone, and Provident Financial , which cancelled its dividend and subsequently lost its place in the FTSE 100 Index.
Global dividends achieved a new quarterly record of US$447.5 billion during the second quarter of 2017, rising at an annualised rate of 5.4%. According to Janus Henderson’s Global Dividend Index report, underlying global dividend growth was 7.2%, and every region posted positive underlying growth. In the UK, underlying dividend growth came in at 6.1%, stoked by a strong contribution from the mining sector; this was the only UK sector to increase payouts on an annualised basis in US dollar terms, and growth was underpinned by higher commodity prices and aggressive cost-cutting activity. Headline growth fell by 3.5%, primarily because of sterling’s ongoing weakness. Janus Henderson believes that the pound’s decline has “masked solid progress” in UK dividend payouts.
Equity funds experienced another month of positive inflows in July, according to the most recent data from the Investment Association (IA). However, UK equity funds suffered outflows of £290 million during the month as investors continued to focus on overseas investments and, once again, the mainstream UK All Companies sector was the most unpopular sector during the month. UK Equity Income was the second-worst-selling IA sector, and demand for funds in the Global Equity Income sector also dipped, although they remained in positive territory.
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