FTSE 100 dives following US rate hike talk
FTSE NEWS
The FTSE 100 slumped on Thursday (6 January) as investors reacted to speculation that the US Federal Reserve was considering an imminent rate rise, which would have a potentially global knock-on effect. The FTSE 100 ended the day 0.88% lower at 7,450.37.
- On Monday (10 January), trade body Make UK and PricewaterhouseCoopers release their annual survey looking at the opportunities and risks facing the manufacturing sector.
- Nielsen publishes the latest UK supermarket market share statistics on Tuesday (11 January).
- Markit releases data revealing trends in UK household spending on Wednesday (12 January).
- The Bank of England releases its latest Credit Conditions survey, a key barometer of the health of the banking sector, on Thursday (13 January).
- The Office for National Statistics gives an estimate of UK GDP for November on Friday (14 January).
SECTOR IN FOCUS
Tesla Inc’s (NASDAQ: TSLA) Model 3 became the second-best selling new car in the UK last year as sales of electric vehicles rocketed, new industry data reveals.
There were 190,000 electric vehicles sold in the UK in 2021, up from 108,000 the year before, according to the Society of Motor Manufacturers and Traders (SMMT).
It means that electric vehicles now account for 11.6% of all new sales. If you add in hybrid and plug-in hybrid cars, cars powered at least partially by electricity accounted for 27.5% of new cars sold last year in the UK.
The soaring popularity of electric vehicles comes as governments try to ween drivers off polluting diesel and petrol cars and incentivise them to buy greener options.
In the UK, the Government has committed to banning the sale of new petrol and diesel cars by 2030 and hybrids by 2035, meaning drivers will be forced to buy an electric vehicle after that point.
While electric vehicle sales are booming, the wider industry is struggling due to Covid and a global shortage of the microchips that modern vehicles rely on to function, according to the SMMT.
Last year a little over 1.6m new cars were sold in the UK, making it the second worst year for sales since 1992, according to the SMMT. Sales are currently running more than 28% below pre-pandemic levels.
ECONOMIC UPDATE
The Bank of England caught markets off guard by hiking rates for the first time in three years in a bid to put a cap on rapidly rising inflation.
Clearly not wanting to be caught off-guard again, now traders are pricing in another rate rise as early as next month.
The BoE hiked rates by 0.15 percentage points from 0.1% to 0.25% in December and the expectation is that it will increase rates to around 0.4-0.5% if it does decide to move again next month.
According to the Telegraph, money markets also expect rates to be a whole percentage point higher by the end of the year.
Should the BoE follow that course, it would still leave rates much lower than their historical average. Regardless, though, the move would have clear implications for borrowers and savers.
In theory, rising rates see savers get better returns on their cash and borrowers paying higher rates on personal loans and mortgages.
However, a rising rate environment can also be harmful for company earnings and therefore share prices, which can have a negative knock-on effect for investors.
FUND WATCH
The start of the year has seen investors rotate out of growth stocks, such as technology firms, and into those that are considered undervalued by investors. This typically happens when rates are rising, as they are in the UK at present. Fidelity Special Situations W Acc (GB00B88V3X40) is well regarded fund that looks for mainly UK firms that have more potential than their share price suggests. It has an ongoing fee of 0.9% and has returned nearly 33% in five years.
COMPANY ANNOUNCEMENTS
11 January: Until the middle of last year, Games Workshop Group (GAW), which makes highly popular miniature war-themed board games, seemed liked it was on an unstoppable run. However, its shares are down nearly 17% over the past 12 months and they took hammering in December following a disappointing trading update. That said, analysts are still overwhelmingly positive on the company, which has returned 1,132% to investors over the past five years. The FTSE 250-listed firm reports its interim results on Tuesday (11 January).
12 & 13 January: The UK’s two biggest supermarkets release their Christmas period trading updates this week. J Sainsbury plc (SBRY) is up first on Wednesday (12 January) with Tesco plc (TSCO) following the day after (13 January). According to data firm Kantar, industry sales over Christmas did not match the record-breaking 2020 festive season but remain above pre-pandemic levels.