20 August 2021
The FTSE 100 index was sent lower on Thursday (19 August) amid a wider global sell off of stocks. Markets around the world are roiling from renewed fears over the coronavirus delta variant, the Taliban takeover of Afghanistan and commodity price falls. The UK’s index of largest companies ended the day down 1.54% on 7,058.86.
Sector in focus
The FTSE 100 received a blow this week as miner BHP (BHP) announced its intention to leave the index.
The major mining firm is the largest company in the FTSE 100 index of companies, but has been dual listed in the UK and Australia since 2001.
The announcement means it will depart the UK’s major stock index, which will have significant implications for holders of the stock or any investor who owns a FTSE 100 tracking fund.
Investors interested in commodities and mining more generally still have options in the FTSE 100 though, with major firms such as Anglo American (AAL), Antofagasta (ANTO) and Glencore (GLEN) are still constituents of the index.
The announcement comes at a time when commodity prices are slumping. The asset class has been in a bull market for some time as reopening economies send demand soaring.
But that demand is now waining, while major economies such as China are releasing strategic stocks to help ease the pressure on manufacturing companies.
Inflation has taken a turn down, but most economists believe it is just a blip on its upward trajectory.
The measure of rising prices has become perhaps the economic story of 2021, as Western economies reopen and the cost of goods and services is squeezed thanks to surging demand.
The latest data from the Office for National Statistics (ONS) however suggested that inflation was dropping. But this appears a temporary blip caused by retailers discounting clothing, rather than a trend reversal.
Leading economists predict inflation will still peak between 4-5% this year, with the rising cost of second hand cars one of the main drivers. Second hand cars are soaring in price thanks to shortages in the semiconductor industry, which in turn is forcing car manufacturers to slash new car production.
Semiconductors are made by only a few major firms in the world, and with shortages of materials and production under pressure, those firms are opting to fulfil orders for more lucrative microchips for computers and smartphones.
With inflation a cause for concern among consumers and investors alike, and income fund such as Baillie Gifford High Yield Bond B Inc (GB0030816713) could be an option. The actively managed fund invests in a range of high-yield company bonds and currently has an annualised yield of 4.2%. The fund has returned 28.7% in five years and charges an OCF of 0.37%.
26 August – Recruitment firm Hays plc (HAS) reports its full-year results on Thursday (26 August) in a slow week for company results announcements. While the recruiter’s share price is barely above where it was at the start of the year, the firm should benefit from the reopening of the economy. Official figures showed this week that job vacancies had hit a record high of 953,000, with the UK’s jobs market showing signs of a strong recovery.
26 August – Rising metal prices helped Polymetal International plc (POLY) to revenue growth in the second quarter, despite a decline in production. However, in its Q2 July update, the miner reiterated its 2021 gold production guidance. It reports its interim results on Thursday (26 August).