Investors are set for a trading day lacking any clear direction as most financial places around the world will be closed for Labour Day. However, there remains considerable volatility on UK stocks, which have had many drivers to shake their prices recently. From the reassuring news on the virus front to the mixed picture provided by corporate results, investors have had a lot to digest in the last 24 hours. Nonetheless, UK stocks traders have been surprised after Shell, in whom two thirds of UK equity income funds have a holding, decided to cut its dividend for the first time since WW2. Even though the collapse in the oil price and the bleak demand outlook posed by the coronavirus outbreak are well-known, this decision has sparked fresh concerns to income investors. BP on the other hand chose to maintain its dividends payment, a move that raises concerns that by focusing on the short-term need to repay investors, the company may weaken its position to tackle the long-term challenge posed by historically low oil prices and this could significantly impact its results on the long run. Income investors’ concerns would not be as acute if dividends cuts were only related to the energy sector but even companies posting profits like supermarkets (Sainsbury, Tesco, Waitrose etc..) are reducing pay-outs. In these uncertain times, where it is hard to get a clear picture of the economic outlook, companies are choosing to hold as much cash as possible to be able to face any potential further downturn.
The FTSE-100 Index is trading lower today with the price falling through its bullish dynamic support. This break-out is confirmed by the Stochastic indicator and this could lead prices back to the 5,670pts support zone on a short-term basis. A return above 5,875pts would invalidate the current bearish break-out.
