Positions closed ahead of North Korea celebration

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Positions closed ahead of North Korea celebration

London's blue-chips continue to ride the summer rollercoaster, largely powered by North Korean sabre-rattling. And this is a down week, with three-quarters of the main index in the red.

Kim Jong-un is hogging the headlines, and it'll be worth keeping a very close eye on the Richter scale as the rogue state could celebrate its birth on Saturday with another bomb test, or missile launch.

If it does, expect another knee-jerk reaction Monday as investors digest the latest rhetoric out of Washington, and whether we're another step closer to a catastrophic conflict. It's why investors are closing positions ahead of the weekend.

However, it's not just the Far East that's a problem right now.

Hurricanes, weak Chinese data, ongoing concerns about Donald Trump's policy failures, and deep discussion about QE tapering both in the US and Europe have temporarily pushed fears about Brexit to one side. And talks with the EU are not going well, it seems.

For the past month, the FTSE 100 has traded largely within a 150-point range between 7,300 and 7,450. That's not unusual in itself, markets rarely move up in a straight line for very long, but strong buying support through August at 7,300 makes it the significant level right now.

It may well be tested again Monday morning, if not before.

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In the meantime, there's been further pain at Provident Financial (PFG), the troubled doorstep lender that's seen the bounce back following last month's profits warning unwind.

Carnival (CCL) has also had a stinker as Hurricane Irma forces the cruises colossus to cancel voyages. Royal Mail's (RMG) imminent demotion from the FTSE 100 (UKX) has put investors off, too, and many of the asset managers like Schroders (SDR) and Standard Life Aberdeen (SLA) are unloved.

Limiting losses are Micro Focus (MCRO) – up 8% after better-than-expected results from newly acquire HPE software business – gold play Randgold Resources (RRS), and retailer Next (NXT), up 4% ahead of half-year results next week.

"NEXT is a well-invested business that in our view has the operational flexibility to deal with structural challenges posed by the sector's shift online," says Investec Securities.

The shares trade on a price/earnings (PE) ratio of just 10 times, which reflects worries about whether profits can stabilise. The broker thinks they can, which explains its price target of 4,750p, implying at least 10% upside.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.