It’s been a long time coming, but the FTSE 100 could finally break through 7,000 points next week. Many other indices around the world have already made new record highs, but the Footsie has yet to surpass the 6,930 points at which it closed on 31 December 1999.
However, we’ve seen the UK’s elite index above 6,900 several times during trading in the last few days, so it would only take a 1.5% rise to breach 7,000.
Results season for companies with a December year end gets into full swing next week, and a number of the FTSE 100’s big hitters will be reporting.
HSBC (LSE: HSBA), Lloyds (LSE: LLOY), Royal Bank of Scotland (LSE: RBS), British American Tobacco (LSE: BATS) and BHP Billiton (LSE: BLT) together represent around 15% of the index. So, these five companies alone have clout to shift the dial.
HSBC kicks off proceedings on Monday. The company was fairly upbeat in its Q3 statement, talking of “continued progress” and confidence in delivering “further value for our shareholders”. Nevertheless, market sentiment isn’t currently in HSBC’s favour, as indicated by a lowly forward P/E of 10.2 and dividend yield of 6%. There’s plenty of scope there for an upward re-rating of the shares, if the market likes what it hears on Monday.
BHP Billiton has a June year end, but reports half-year results on Tuesday. The mining giant, which also has significant petroleum interests, has been hit both by weak metals prices and the collapse in the oil price over the past six months. The shares are some 25% lower than last summer. With analysts expecting full-year earnings to be down 40%, Tuesday’s half-year results won’t be pretty, but a less-bad-than-feared performance could be enough to give the shares a lift.
British American Tobacco (BAT) and Royal Bank of Scotland (RBS) both have full-year results scheduled for Thursday. The shares of BAT aren’t prone to big swings, but the company’s forward P/E of 16.5 is currently lower than some other companies in the steady consumer goods sector — Diageo and Unilever, for example — so there’s some scope for a rise from the tobacco group on a decent set of results.
RBS’s shares can make big leaps on occasions, and did so last July when the company’s performance was so far ahead of market expectations that management was obliged to release a preliminary statement ahead of its official half-year results. A forecast-beating second half could see another top-of-the-share-risers day for RBS.
The market has been waiting with bated breath for months to learn whether Lloyds will get permission from the regulator to resume paying dividends. City experts are divided on whether the company will be able to announce a (token) dividend with its results on Friday. Good news on this front, and the announcement of a formal dividend policy going forward, could see a decent uplift in the share price.
So, with plenty of potential for these five heavyweight companies to shift the Footsie dial upwards — and a host of other blue chips also reporting results (including Persimmon, Old Mutual and Reed Elsevier) — I reckon there’s a fair chance we could see the index finally break through 7,000.