Week in Review: FTSE up as US stimulus deal calms markets
FTSE NEWS
Both the FTSE 100 and 250 rose in trading on Thursday as investors continued a markets revival after the US House of Representatives agreed a huge $1.9 trillion stimulus package for the world’s largest economy. The FTSE 100 climbed steadily through the day, albeit modestly, finishing up 0.17% aton 6,736.96. Meanwhile the FTSE 250 had a stronger day, up 0.59% to finish at 21,533.10
- On Monday (15 March) the Office for National Statistics (ONS) releases its CPI basket of goods and services annual review, explaining which items are taken out of inflation measures and why.
- The ONS then publishes its Family Spending in the UK: 2020 - looking at weekly household expenditure on Tuesday (16 March).
- On Wednesday (17 March) the Treasury gives its March forecasts for the UK economy, a statistical release that rounds up independent forecasts.
- The Bank of England gives its latest UK interest rate decision on Thursday (18 March).
- Finally, on Friday (19 March) the FTSE quarterly company reshuffle changes are applied to its indices.
SECTOR IN FOCUS
FTSE-listed miners had a topsy-turvy few days, shedding a significant amount of value before staging a recovery later in the week.
Metals and mining had been one of the worst affected sectors in the FTSE 100 in recent weeks after raw metal prices of copper and iron took a hit in the selloff.
Major mining firms such as Rio Tinto (RIO), Anglo American (AAL) and Glencore (GLEN) were all affected in the falls. But the miners have since staged something of a minor rally in the wake of the US House of Representatives approving massive stimulus programs for the American economy.
Also hit was Antofagasta (ANTO) which reports its finals on Tuesday (16 March). While its previous earnings forecast projected only 1.1% earnings growth for the year ahead, it predicted a bumper 70% growth forecast on the back of long-term rising copper prices.
ECONOMIC UPDATE
Next week is a bumper week for interest rate decisions in developed economies. And with market jitters caused largely by fears of rising inflation (and therefore interest rates) and bond yields it will be incumbent upon central banks to project calm from their soapboxes.
First up is the US interest rate decision on Wednesday (17 March). The Federal Reserve chairman Jerome Powell has consistently said that the bank was okay with rising inflation and unlikely to hike rates to combat this any time soon – but key to the recent market turbulence has been investors’ lack of belief in this message.
The UK’s Bank of England (BofE) interest rate decision is on Thursday (18 March), where Governor Andrew Bailey – now one year into his tenure - will also look to quell fears that rate hikes are coming. Indeed, Friday (19 March) is the first anniversary of the BofE cutting rates to lowest ever level of 0.1%. Japan’s central bank also announces its interest rate decision on the same day.
It is seen as particularly important for the bank BofE to subdue soaring gilt yields – the interest the government pays on its debts. The UK has borrowed an extraordinary amount to combat coronavirus and rising yields, inflation and rate hikes could be devastating for the country’s finances as it is forced to make higher interest payments.
FUND WATCH
With government bonds in mind, Janus Henderson Strategic Bond I Inc (GB0007502080) could be a good option for investors looking to invest their money with a more cautious approach. The fund invests in higher yielding assets including high yield bonds, investment grade bonds, government bonds, preference shares and other bonds. It has returned 17.6% over three years and charges an OCF of 0.69%.
COMPANY ANNOUNCEMENTS
16 March – Fast food retailer Greggs (GRG) reports its full-year results on Tuesday, looking back on what has been a tough year for the chain made famous by its sausage rolls. Before coronavirus, the stock was a darling pick for many UK growth investors as its strong sales and ethical hiring practices shone. But the pandemic reversed its fortunes as it was forced to close during the first UK lockdown. It has fared better since, but watchers will be looking for evidence that it can get back onto the path to ambitious growth it promised before coronavirus took hold.
18 March – Upmarket soft drinks maker Fevertree (FEVR) reports its finals on Thursday at a time when its stock price is still well below pre-pandemic levels. The drinks maker was once a rocketing growth company as its tonics and other drinks expanded globally with strong margins and a positive challenger to big brands narrative. But the shine has come off its share price more recently as this expansion hit the buffers, dampened further by lockdowns which kept sales from one of its key channels, pubs, from flowing. Investors will be looking to see if its bounce back in the second half of 2020 materialised with limited reopenings in the economy.