28th June 2013
The FTSE 100 managed a gain over the week but continuing fears about the end of the US’s quantitative easing programme, China’s slowing growth rate and a slip in the gold price held progress back writes Philip Scott.
While the blue-chip index shed 27.93 points on Friday to finish at 6,215.47, over the week it managed to rise by 2 per cent. But the topflight has endured heavy volatility over the month, over which it is now down by 6 per cent.
Market reaction has been brutal to Ben Bernanke’s signalling of the end of his monthly bond buying programme. Keith Wade, chief economist at Schroders says: “Bond yields have risen around the world and equities have sold off, as have commodities. Emerging markets have been particularly badly hit with equities, debt and currencies falling.
“Bernanke’s warning that he is thinking about removing the punch bowl has had a damaging effect on global wealth. The broad nature of the sell-off will have meant that few investors will have been spared and is indicative of the liquidity driven nature of the recent rally in assets.”
China also stoked fears that it could suffer a credit crunch of its own having allowed interbank interest rates to reach 13 per cent earlier in the week as the authorities there tried to cool down enthusiasm for lending through what is being termed a shadow banking system.
The price of gold plummeted to its lowest level in three years in overnight trading in Asia on Thursday as concern over the US Federal Reserve tapering back QE deepened. The price of the precious metal fell to $1,180 before making a gentle rebound. At the time of the Footsie’s close on Friday, it was trading at circa $1,217.
Miners suffered most over the week, with Eurasian Natural Resources off 6 per cent at 204p, Vendanta 7 per cent looser at 1,020p and Antofagasta down 5 per cent at 795p.
Vodafone, enjoyed a far better week after announcing to the market it was buying Germany’s main cable firm Kabel Deutschland in a deal worth some £6.6bn. It shares soared by 7 per cent over the week, the highest riser on the leader-board, to close at 187.85p.
Anglo-Dutch firm Unilever which owns popular consumer goods such as Dove soap will post its half-year results next month. According to reports the firm will report six-month sales up 4.2 per cent to £23.1bn and post a £2.3bn net profit, say analysts’ consensus forecasts. Its stock has firmed by 4 per cent over the week to close at 2,662p.
It emerged on Friday that the government had started appointing advisers to help sell its stakes in tax-payer propped up Lloyds Banking Group and Royal Bank of Scotland. The latter suffered a 3 per cent loss over the week to close at 273.5p while Lloyds added 4 per cent to 63.16p showing how the market views the two banks’ relative positions.
Elsewhere Standard Chartered firmed 2 per cent to 1,427p, Barclays lost 1 per cent to 278.45p and HSBC jumped 3 per cent to 682p.
Next week sees Tullow Oil update the market with a trading statement while Mark Carney starts his job as the new Bank of England Governor and will have his first Monetary Policy Committee Meeting and Announcement on Thursday.