Week in Review: FTSE 100 off as rate expectations cause uncertainty

FTSE news

The FTSE 100 index of companies was down slightly on Thursday (21 October) on the back of interest rate worries in markets. London’s blue-chip index fell 0.45% to 7,190.30.

• On Monday (25 October), Link releases its quarterly Dividend Monitor, providing data, trends and analysis of dividend payouts by firms listed on the UK’s main market.
• Zoopla publishes the latest iteration of its widely-watched house price index on Tuesday (26 October).
• Chancellor Rishi Sunak delivers his latest Budget on Wednesday (27 October).
• On Thursday (28 October), the Society of Motor Manufacturers and Traders (SMMT) publishes data on UK vehicle production.
• The Bank of England’s latest Money & Credit data, pubished on Friday (29 October), will give investors a snapshot of conditions in the UK’s banking sector.

Sector in focus

Consumer goods giant Unilver plc (ULVR) hit the headlines after it revealed it has had to hike its prices to offset the surging cost of distribution and production.

The maker of Marmite and PG Tips tea revealed this week it had hiked its prices by 4.1% over the past year after facing “unprecedented cost inflation”.

Speaking after the firm announced its third-quarter results, Graeme Pitkethly, Unilever’s chief financial officer said he could not rule out further price increases in the coming months.

Pitkethly added: “We expect inflation to be higher next year than this year.”

It comes after official data revealing that inflation hit 3.1% in the year to September (see Economic Update).

Unilever said it expects full-year sales to increase by 3-5% but that its profit margins will be flat.

Economic update

Inflation slowed in September despite a significant hike in the cost of transport, food and household goods.

According to the Office for National Statistics (ONS), prices rose 3.1% in the 12 months to September. It means prices are rising much faster than the 2% target the Bank of England (BoE) has set itself.

However, while prices are rising, they rose less quickly last month than they did in August, when inflation was 3.2%. The data comes shortly after the BoE warned that it might have to raise rates soon in order to curb price inflation.

Speaking on a panel organised by the Group of 30, Bailey said: “Monetary policy cannot solve supply-side problems – but it will have to act and must do if we see risk, particularly to medium-term inflation and to medium-term inflation expectations. And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act.”

Markets are predicting a rate hike could come as early as next month, with further increases expected next year.

ETF watch

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FUND WATCH

If you’re after a cheap fund that invests in the world’s largest companies, you might want to consider L&G Global 100 Index I Acc (GB00B0CNH056). This passive fund tracks the performance of the S&P Global 100 index, which is made up of the world’s 100 largest firms. It has an ongoing charge of 0.14% and has returned more than 96.8% in five years.

Company announcements

25/28/29 October – HSBC Holdings plc (HSBA) kicks off a week of quarterly UK bank earnings on Monday (25 October), with Lloyds Banking Group plc (LLOY) and Natwest Group plc (NWG) following on Thursday (28 October) and Friday (29 October), respectively. While banking margins have been thin for some time, a series of expected rate rises would help bolster the sector’s profits.

28 October – A sharp increase in the price of oil has delivered Royal Dutch Shell plc (RDSA) shareholders gains of 29% in the past six months. Earlier this month the oil giant said that it was earning billions more in revenue due to the sharp rise in the price of oil, which has increased by around $20 a barrel in the past six months. Investors will be expecting another positive update when it reports its third-quarter earnings on Thursday (28 October).