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This week’s hurdle proved more resilient, the FTSE100 index struggling to gain traction above 6,700, but we have made much progress. The move up from 6,600 was faster than expected, however, limited gains above 6710/15 for much of the week, all the while with support just 45pts below, suggests we may have had the sideways pause for breath called for and needed to digest the near 8% gains of the last month. Bullish appetite still strong to keep the uptrend intact, evident via the higher-beta risk and growth-focused names (rather than steady-eddy defensives) benefiting the index most today as it moves to close up another 100pts for the week. That’s 200pts in 2 weeks and 500pts since last month! Stock-wise let’s look at the week’s helpers and hinderers (perf. from late afternoon).
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Doing the index proud again this week were the banks with Lloyds Banking Grp (LLOY) the biggest helper (11.1pts). Gains of 6.8% came via optimism on the bank’s return to profitability and proximity of a resumption of dividends and the share price getting back above the Government’s (now adjusted) breakeven bailout price of 61p for the first time in 2 years. While this might spook some that a government stake (39%) sale is on the cards, it may make the most of current momentum to try and book a profit for taxpayers exiting nearer the official bailout price of 73.6p.
Taking the silver medal was fellow bailout (81%) Royal Bank of Scotland (RBS), +11.7% offering help of 8.6pts. Although it too started the week on the back foot, it benefited from general market buoyancy, the milestone gains by peer Lloyds and its own news of more jobs cuts and focus on IT amidst an extensive restructuring to clean itself up before being returned to the markets. Heavyweight GlaxoSmithKline’s (GSK; +8.2pts) rise of 2.68% was on little more than the general market rise. Heavyweight bank HSBC (HSBA) rose 1.5% added 7.8pts on to the index on gains in broker upgrades stemming from cost savings and job cuts (‘demised’ positions as they like to say!). Telecoms giant Vodafone (VOD; +6.2pts) flirted with multi-year highs after gains of 1.8% ahead of its next week’s FY results and a possible announcement on what it places to do with its stake in Verizon wireless.
At the other end of the index spectrum we had mega miner Rio Tinto (RIO; -4.4%, -6.5pts) hindered by USD strength (on the prospect of the US Fed tapering its QE programme) denting commodity prices and some concerns of global growth (ex-US) and big name brokers downgrading the mining sector. Food and clothes retailer Associated British Foods (ABF; -2.7pts) fell 5% from all-time highs on profit taking. The FTSE’s biggest name, oil & gas company Royal Dutch Shell (RDSb) may only have fallen 0.5% but it’s index impact was still -2.5pts. Drivers were both technical with resistance level approached, the stock also went ex-dividend and there was news the company was cooperating with an EU investigation into price fixing with peers. Metals miner Fresnillo (FRES; -2.2pts) gave up -7.6% on the strong dollar and depressed precious metals prices, as was Anglo American (AAL; -1.0pt) which fell -1.3%.
Macro-wise, the big news of the week was China data coming up short, seeing the week start on the back foot. Thereafter, we had a slump in Eurozone Construction Output and GDP miss, emphasising the costs of austerity and adding weight to the argument of more stimulus. US Consumer Sentiment (Uni of Michigan) climbed to the highest since last Autumn. Japan’s GDP surprised to the upside in Q1, suggesting the new PM’s massive stimulus intervention programme was paying off. Eurozone inflation remained benign, which is not good for growth but could allow the ECB to make another rate cut. US Jobless, Inflation, Industrial Production, Manufacturing and Housing starts all disappointed, negating expectation of the Fed tapering its asset purchase, as well as the need for the inflation hedge Gold which took another battering.
Next week look out for companies reporting including Vodafone (VOD), Burberry (BRBY), Marks & Spencer (MKS), Smiths Group (SMIN), SAB Miller (SAB) and United Utilities (UU). Economic data of note also includes UK Inflation, a BoJ rate decision, BoE minutes, UK public finances, Bernanke testifying and Fed minutes, PMI Manufacturing from China and Europe, UK Retail Sales, UK GDP, Eurozone Consumer Confidence, Chinese Business sentiment, German IFO surveys, US housing and US Durable Goods Orders. Another very busy week, with plenty to move all the asset classes (equities, indices, commodities and FX).
As always, have a great weekend.
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