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The FTSE 100 index of shares is edging higher at the start of the month. Simmering trade tensions, rising uncertainty over interest rates, and conflict in the Middle East are all weighing on investor sentiment.
In this climate, could these UK blue-chip shares rise or fall this July?
BP
Fresh military action in the Middle East this month could lift BP (LSE:BP.) shares sharply higher. The threat of supply constaints from this key producing region are a classic catalyst for oil prices.
Yet there are also considerable dangers to oil stocks like this. US output is at record highs, and OPEC+ — responsible for 40% of global production — is aggressively unwinding production curbs. This comes at a time of prolonged demand weakness, illustrated by US inventories reporting a surprise rise last week.
Sentiment towards BP is already weak amid concerns over its rising debts, evolving energy-mix strategy and the profitability of its operations. Its shares fell following a bleak first-quarter update in late April. I think markets could start getting nervy again in the run-up to second-quarter numbers on 5 August.
Lloyds
Banking giant Lloyds (LSE:LLOY) faces a ‘make or break’ month as the Supreme Court prepares to rule on whether secret commissions from lenders to car retailers are legal.
If it rules ‘no,’ motor finance providers — of which, Lloyds is one of the country’s largest — could face tens of billions of pounds in fines. On such a ruling, the bank’s share price could plummet on fears over future profits and dividends.
The Black Horse Bank has set aside £1.15bn to cover possible costs. Depending on the Supreme Court’s timings, Lloyds could bump this up by a considerable sum when it makes its half-year trading update on 15 August.
Of course, a favourable legal decision could have the opposite effect and drive the bank share skywards.
On the whole, I think Lloyds shares, like BP, are far too risky today.
Airtel Africa
Airtel Africa (LSE:AAF) is one of the continent’s largest providers of telecoms and mobile money services. While this gives it enormous growth potential, it reports trading numbers in US dollars and not in local currencies, leaving it mightily exposed to volatility on forex markets.
This remains a threat, but currency pressures have eased considerably of late, according to May’s latest trading statement. I think now could be a good time to consider buying, before first-quarter numbers come out on 24 July.
Thanks to rapid population growth and soaring disposable incomes, Airtel’s revenues (at stable exchange rates) keep on booming. At the same time, market penetration rates remain extremely low, giving the FTSE 100 company ample scope for long-term growth.
In the 12 months to March, the firm’s customer base swelled 8.7% year on year to 166.1m. This in turn pushed revenues and underlying EBITDA at constant currencies 21.1% and 18.1% higher respectively.
Airtel is expanding rapidly to maintan this momentum, from rolling out fibre and building new cell towers, to growing the number of mobile money agents on its books. It’s not without risks, but I believe this is a top long-term stock to consider in July.
