FTSE 100 rises as Fed eases investor concerns – Friday’s market close report

12th July 2013

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The FTSE 100 racked up another week of gains as the US Federal Reserve further eased investor fears over the reduction of its economic stimulus measures writes Philip Scott.

The top flight index closed on Friday just 1.53 points ahead on the day at 6,544.94 but was 3 per cent better over the week.  Recent weeks have witnessed the leader-board clawing back some of its losses – it is now up 17 per cent over 12 months – since Fed boss Ben Bernanke sent shock waves through markets in May when he mooted the potential tapering back of quantitative easing.

Stocks surged after the minutes of the Fed’s latest monetary policy meeting showed it was committed to keeping its $85bn-a-month bond buying programme in place for the time being, as it wants more evidence of a stronger recovery in job numbers.

After a period of heavy falls, miners enjoyed a boost over the week, with Fresnillo and Vendanta Resources leading the way, each up 11 per cent to 981p and 1,097p respectively, while Rangold Resources firmed 8 per cent to 4,393p.

Also enjoying a better week was Royal Bank of Scotland, up 10 per cent to 304.4p following positive upgrades from brokers Investec and Goldman Sachs. Lloyds Banking Group, earmarked for a sell-off which could begin as early as September rose 5 per cent to 67.73p while HSBC added 1 per cent to 723.1p. Standard Chartered firmed 4 per cent at 1,529.5p and Barclays managed a 5 per cent gain to 306.15p.

Security giants G4S and Serco were the FTSE 100’s main fallers over the week, following a highly-critical review which revealed they had overcharged the Government by millions for electronic criminal tags. Serco lost 8 per cent to 620.5p while G4S shed 7 per cent to close at 209.5p.

Next week sees market updates from mining giants BHP Billiton and Rio Tinto while all eyes will be on the minutes of the Monetary Policy Committee Meeting held on 3 and 4 July,  which should shed more light on the approach of new Bank of England boss Mark Carney.

18 thoughts on “FTSE 100 rises as Fed eases investor concerns – Friday’s market close report”

  1. Anonymous says:

    Shaun,
    Wouldn’t it make much more sense if the key indicators were (mean) income per capita and public debt per capita? Changes in both figures, and in the ratio between them, would be a much better guide to success/failure and sustainability of policies than focusing on GDP.

    1. Anonymous says:

      Hi Ian

      I agree with the added nuance that I think median income (50%) would be a better guide than the mean. I am beginning to make some inroads as the ONS implemented some of my suggestions for the Public Finances release but there is much still to do.

      The catch of course with your suggestions will be the establishment who will not want such numbers disseminated for obvious reasons!

  2. JW says:

    Hi Shaun
    Using the same sort of (il)logic of R&D , a way of solving the GDP/capita numbers is to add to the GDP number the anticipated lifetime consumer expenditure of each child as its born and each immigrant as they land.
    Just think how much more efficient it would be to just set up a new Ministry to invent the numbers as required. Oh sorry, I’m a bit late, they’ve already done that one.

    1. Anonymous says:

      Hi JW

      I remember a decade or two ago when the computer company Atlantic Leasing went bust because it counted any likely future income as a present guaranteed one. They were ahead of their time weren’t they?

  3. arrbee says:

    Does this mean that the Serious Crimes Squad et al are now enemies of economic growth ?

    1. forbin says:

      perhaps it will give a new direction to the Vice Squad ….

      Forbin

    2. Anonymous says:

      Hi Arrbee

      I guess that they now are. But should the Balance of Payments deteriorate will they be sent into action to stop the flow of illegal drugs imports? The mind boggles somewhat…

      1. Anonymous says:

        Alternately, the SCS could ask for a percentage of revenue as protection money which can also be added into the “grey economy” projections yet again boosting GDP.

        That’s how politicians who are paid under 1000 euro per month drive new V8 mercs, X5s etc.

  4. zummerzetman says:

    I simply don’t understand how you can start including criminal activity that can’t be accounted for or taxed. Where do you draw the line?
    You may as well start including extortion, contract killing, theft, the list is endless. My suggestion for today’s song – Gangsters by The Specials

    1. Anonymous says:

      Hi Zummerzetman

      Actually the thing that swung the inclusion of these activities in Europe overall is that they are legal in some countries (for example the Netherlands). However such countries could have produced numbers with and without them. So we had better hope that contract killing does not become legal somewhere..

      As to your point below the new cannabis plantation would also improve the Balance of Payments. Would the Chancellor pay it a visit like he did to Jaguar yesterday?

  5. zummerzetman says:

    Presumably, in future on the news when they break down the GDP per sector the economics editor will be saying things like ‘the decline in manufacturing and the service sector last month was partly offset by an improvement in the vice sector, it being rumoured that there has been a recent surge in the number of new brothels in the south east and there’s talk of an alleged huge cannabis plantation that might have opened in a remote part of Scotland……or somewhere………possibly’.
    I’m beginning to think this must be a virtual world we live in- and someone is having a really good laugh at us.

  6. dannyboy says:

    Hi Shaun,

    I always laugh when I read your blogs on changes to statistical methods. Better than crying, I guess.

    Are you (or your readers) aware of any attempts, government sponsored or otherwise, to measure GDP on a (relatively) consistent basis that is at least largely devoid of political manipulation? (I accept that GDP is inherently political, so being completely devoid of interference is unlikely).

    Another question (sorry): I have no idea why ‘GDP’ as a measure was first developed, but does it still fulfill it’s original purpose?

    Danny

    1. Anonymous says:

      Hi Danny

      There are two types of changes today which are ordinary updating and then the ESA 10 “improvements”. I would regard the ordinary updating as being good procedure and the lack of it is a major reason why Kenya (and Ghana) has had surges in recorded GDP.

      The US Bureau of Economic Analysis tells the story of GDP.

      “Early in 1942, annual estimates of gross national product were introduced to complement the estimates of national income and to facilitate war time planning. Wartime planning needs also helped to stimulate the development of input-output accounts. Nobel laureate Wassily Leontief developed the U.S. input-output accounts that subsequently became an integral part of the NIPA’s. In commenting on the usefulness of the national accounts, Wesley C. Mitchell, Director, National Bureau of Economic Research, said: “Only those who had a personal share in the economic mobilization for World War I could realize in how many ways and how much estimates of national income covering 20 years and classified in several ways facilitated the World War II effort.”

      It was not until later that GDP replaced GNP but my suggestion would be that whilst the Great Depression was an influence it was no more powerful than World War II.

      I hope that it does not get the opportunity to be useful in World War III

  7. Andy Zarse says:

    All this fiddlin’ puts me in a musical frame of mind, specifically the Charlie Daniels Band…

    The Devil went down to Georgia. He was lookin’ for a soul to steal.
    He was in a bind ’cause he was way behind. He was willing to make a deal
    When he came across this young man sawin’ on a fiddle and playin’ it hot.
    And the Devil jumped upon a hickory stump and said “Boy, let me tell you what.”

    “I guess you didn’t know it, but I’m a fiddle player, too.
    And if you’d care to take a dare I’ll make a bet with you.
    Now you play a pretty good fiddle, boy, but give the Devil his due.
    I’ll bet a fiddle of gold against your soul ’cause I think I’m better than you.”

  8. baldand says:

    Shaun, as I remember the September 2014 revisions were also to boost own-account construction considerably, including both estimates of self-built homes and estimates of renovation expenditures on owner-occupied homes. Hopefully these revised estimates will be used in compiling the quarterly owner-occupied housing series based on net acquisitions. The considerable upward revision to the renovations expenditures underlines the need for a proper consumer price series for renovations, rather than proxying such expenditures using an index for repairs.

  9. baldand says:

    Great column, Shaun. Often a national statistical institute is forced to recognize illegal activity in its National Accounts because of balance of payments concerns. The Canadian System of National Accounts started including estimates of tobacco smuggling in the 1990s when high federal and provincial taxes on cigarettes encouraged cigarettes to be exported to the United States and smuggled back illegally. By contrast, the ONS assumes that: “There are no imports of prostitution services. All prostitutes in the UK are UK residents; British residents do not consume prostitution services abroad.” The second assumption it admits is far-fetched itself. It is far more likely that a UK visitor to Thailand than a Thai visitor to the UK will be a sex tourist. The first assumption it defends, but quite weakly. There are probably more young women residing in the European transition economies studying in the UK than young women residing in the UK studying in the European transition economies, and for economic reasons it seems more likely that a woman in the first group would be a part-time prostitute in her country of study. Even people who absolutely reject the idea of including illegal activities in GDP will admit there is some value in monitoring the impact of expenditures on illegal activities on the balance of payments. However, it seems that the ONS has arbitrarily assumed that there is never a trade deficit because there are neither exports nor imports, when it seems much more likely that there is a substantial deficit that would respond in a normal way to changes in the exchange rate and so forth.

  10. forbin says:

    House price rises caused inflation to fall , so think of it as a “stiffener” to the CPI ,

    you just need to ” mellow” out more when looking at the figures

    Strawberry Fields – by the Beatles

    or 49 cigars by Nick Nicely ?

    Forbin

  11. Anonymous says:

    Hi Londoner

    Yes it does make our Balance of Payments worse. From the ONS on the subject of drugs and GDP.

    “Half of cannabis sales are set aside as domestic production. The remainder (i.e. 50% of cannabis sales plus all sales of other drugs) leaves the sales of imported drugs. Dividing this value by retail drug prices sourced from the United Nations’ World Drugs Report– remembering that the UN prices are in $ and so must be converted to £ – gives us a quantity of drugs sold in kilograms. Adjusting this for purity using data from police and border seizures and multiplying by the UN wholesale drug prices gives us imports. We now have
    sales and imports, and the margin is simply the difference between the two”

    Actually there were various issues with our Balance of Payments in today’s data releases….

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