Week in Review: FTSE 100 hits 13-month high on recovery hopes

FTSE NEWS

The FTSE 100 hit its highest level in more than a year on Thursday (8 April) as signs of a quicker-than-expected economic recovery from the pandemic continue to boost investor sentiment. The blue-chip index hopped 0.83% higher to 6,942.22.

• On Monday (12 April) non-essential shops, hairdressers and outdoor hospitality open in England for the first time since the beginning of January.
• Monthly UK GDP figures from the Office for National Statistics (ONS) are released on Tuesday (13 April).
• This is followed on Wednesday (14 April) by the latest ONS UK productivity stats.
• Thursday (15 April) is the self-imposed deadline for the government aim to have all over-50s vaccinated.
• Finally, China releases its first-quarter economic growth figures on Friday (16 April).

SECTOR IN FOCUS

Bank shares have underperformed the wider market in recent years, with the UK banks no exception.

But bank stocks have staged something of a revival, with investors likely betting that their services will be more in need once the economy returns to something resembling normality.

Lloyds Banking Group (LLOY) for example is well below historic share price values but has recovered strongly since late September 2020, rising from just over 25p a share to now trading around 43p.

Barclays Bank (BARC) has fared even better – since reaching a low of 80p in April 2020 it has since more than doubled in price – now trading around 180p.

Even beleaguered bank NatWest Group (NWG) – formerly known as Royal Bank of Scotland – is on a run, with the price double what it was at the end of September 2020. The banking group, which is still majority owned by the state, trades around 198p now, up from a low of 90p.

The revival in fortunes of the UK banking sector underlines changing economic conditions as the UK recovers from coronavirus.

Many households have stored up savings during the pandemic and as the economy recovers this should lead to more spending once confidence is restored. This is good news for banks as households typically take on more borrowing to fund their new-found financial confidence.

ECONOMIC UPDATE

The UK’s latest monthly GDP figures are set to be released on 13 April by the ONS. The update comes in the wake of a fresh prediction from the International Monetary Fund (IMF) that the UK is set to outperform its developed-world peers in economic recovery terms.

The IMF’s latest World Economic Outlook predicts the UK will outperform the US and EU in growth terms over 2021 and 2022, largely thanks to a successful vaccine program which has helped its economy reopen faster.

The IMF says the UK economy will grow by 5.3% in 2021 and 5.1% in 2022. This would make 2021 the highest growth year for the UK economy since 1988, but the size of the economy won’t reach pre-coronavirus levels until next year.

Overall, the IMF expects global economic ‘scarring’ to be less than initially feared thanks to widespread fiscal and monetary interventions from national governments.

FUND WATCH

With the UK expected to rebound strongly from the pandemic you may want to consider it as an investment destination. Liontrust Special Situations I Inc (GB00B57H4F11) invests in a concentrated portfolio of UK shares with an eye to long-term capital growth. It has returned 71% over five years and charges an OCF of 0.82%.

ETF WATCH

If you’d like to invest in the UK but at a cheaper cost, SPDR® FTSE UK All Share ETF Acc (FTAL) offers the chance to follow the FTSE All-share index. It has returned 39% over five years and charges a fee of just 0.2%.

COMPANY ANNOUNCEMENTS

14 April – The UK’s largest supermarket Tesco plc (TSCO) reports its full-year results on Wednesday giving a picture of how it has fared during the past year’s pandemic. The firm’s share price hasn’t fared well in the last 12 months compared to the rest of the FTSE, but with the firm now trading at relatively low price to earnings it could yet benefit from positive results as its pandemic-caused costs recede.

16 April – Estate agents Foxtons Group plc (FOXT) gives a trading update on Friday (16 April) during what has been a surprisingly good period for the firm. With the UK government’s generous Stamp Duty holiday the property market has been doing swift business which will have had a positive impact on the firm’s bottom line. But the company has drawn criticism since its last update as politicians have called upon the company to repay furlough money it took during the height of uncertainty in 2020.