Political uncertainty returns to the fore as Queen’s speech vote looms

It’s the final week of June, with the UK facing the potential conclusion to, or latest twist in, the political uncertainty unleashed by the general election at the start of the month.

UK
Though the date of the Queen’s speech vote hasn’t been confirmed, Thursday is likely D-day for Theresa May. Even if all of her Tory MPs back the legislative program outlined by Her Majesty last Wednesday the PM won’t have enough support to form a government, hence the importance of the DUP. The unionist party – who have accused the Conservatives of disrespecting them during their post-election courting period – could help May to inch over the line if they gift her 10 votes. If not, then the current Prime Minister is in (even more) trouble.

Sterling is going to be watching all this with bated breath, desperate for the UK to gets its political house in order to avoid the present uncertainty from interfering too much in Brexit negotiations (though, to be honest, that ship may have already sailed). The pound will also be eyeing the final first quarter GDP reading on Friday; Q1 growth currently stands at a meagre 0.2%, so any upwards revision will be more than welcome.

While the FTSE will be interested in the political drama, especially since anything good for the pound tends to be bad for the UK index and vice-versa, its main focus is going to be on oil. Stuck at its worst price since November 2016 Brent Crude is in a seriously stick patch at the moment, something that has begun to weigh heavy on the FTSE due to the prominence of BP and Shell. Any shift in the black stuff’s fortunes this week, then, is going to be felt by the UK index.

US
There is a lot of US data to wade through this week. The durable goods orders on Monday are followed by the CB consumer confidence reading on Tuesday and the goods trade balance figure on Wednesday. Thursday sees the most important item, the final Q1 GDP reading, with the dollar hoping for another upwards revision to rescue the US from its own dismal growth. Finally Friday goes into data-overload, with the core PCE price index, personal spending, Chicago PMI and revised UoM consumer sentiment figures all rolling out across the afternoon.

Eurozone
The euro will be keen to see the state of the Eurozone’s inflation this week, after last month gifted ECB doves some more coverage by dipping from 1.9% to 1.4%. The region-wide figure is released on Friday, and is preceded by the German and Spanish readings on Thursday. The start of the week is pretty boring in comparison, with just the German Ifo business climate and M3 money supply numbers on Monday and Wednesday respectively.

Stock of the week: Debenhams PLC – Q3 Trading Statement
For half year to the start of March Debenhams saw a meagre 0.5% increase in like-for-like sales and, more concerning, a 6.4% plunge in pre-tax profit to £88 million. These figures overshadowed CEO Sergio Bucher’s strategy review, in which he stated he wants the shop to become a destination for ‘Social Shopping’ with mobile the ‘unifying platform’ for interacting with its customers.

Despite Bucher’s best efforts investors weren’t receptive to the review, the stock falling 4.6% after the announcement. This slide continued across May and sped up in June, with the UK’s rapidly rising inflation, shrinking wages and falling retail sales, a DFS profit-warning AND a reiterated ‘Sell’ rating from Goldman Sachs leaving Debenhams at an 8 year nadir.

Considering the state of the wider retail sector, a third quarter recovery from Debenhams may be unlikely. Investors will instead be looking for further details on Bucher’s turnaround plan, including, ideally, some firm profit and revenue targets.

• UK 100
• Wall Street
• Cable
• Gold

Open (Monday)

7495.2

Close (Thursday)

7429.8

Change

-0.87%

High

7559.3

Low

7397.5

Open (Monday)

21396.5

Close (Thursday)

21407.5

Change

+0.05%

High

21519.5

Low

21389.5

Open (Monday)

1.2775

Close (Thursday)

1.26797

Change

-0.75%

High

1.28147

Low

1.2674

Open (Monday)

1256.6

Close (Thursday)

1253.2

Change

-0.27%

High

1257.2

Low

1241.8