Week in Review: Inflation fears push FTSE 100 lower
FTSE news
The FTSE 100 closed lower for the third time this week on Thursday (13 May) as fears over rising inflation continue to spook investors. The blue-chip index fell 0.59% to 6,963.33.
• On Monday (17 May), Rightmove releases its house asking price index, a good indicator of confidence in the property market.
• The Office for National Statistics (ONS) releases labour productivity figures for the first quarter on Tuesday (18 May).
• HM Treasury publishes a round-up of independent forecasts for the UK economy on Wednesday (19 May).
• The Confederation of British Industry (CBI) issues its latest Industrial Trends Survey, a snapshot of conditions in the manufacturing sector, on Thursday (20 May).
• On Friday (21 May), the ONS reveals the latest industry sales data for the retail sector.
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Sector in focus
Electric vehicles are a rapidly-growing part of the wider automobile market, meaning that key battery metals such as cobalt and lithium are in high demand.
This week Ivan Glasenberg, chief executive of London-listed mining giant Glencore plc (GLEN), warned that western carmakers faced being left behind by China unless they secured access to these metals.
Speaking at a Financial Times event, Glasenberg said: “The western companies… either don’t believe this is an issue or they believe they are definitely going to get the betteries from China.
“But what happens if that doesn’t occur and the Chinese say we are not going to export batteries, we are going to export electric vehicles. Where are the batteries going to come from?”
At the moment, California-based Tesla Inc (NASDAQ: TSLA) is the world’s leading manufacturer of electric vehicles, but Chinese rival Nio Inc (NYSE: NIO) is increasingly being seen as a threat to Tesla’s dominance.
European manufacturers are also beginning to focus their attention on electric vehicles, with Volkswagen Group (ETR: VOW3) planning to launch more than 30 models by 2025.
Economic update
The UK economy shrank 1.5% in the first quarter as a result of the third lockdown, figures from the ONS revealed this week.
However, the quarter ended on a positive note, with the economy beating expectations in March with growth of 2.1% – the fastest monthly growth since August 2020.
A survey of economists by Reuters before the data was published revealed that many experts expected growth much lower, at around 1.3%, in March.
Increased consumer spending and construction activity were two of the factors behind the better-than-expected performance.
According to Sky News, experts believe 2021 will see the strongest year for economic growth in the UK since the Second World War.
Fund watch
European equities may be unloved by investors at the moment, but some experts are beginning to talk up their prospects on the basis that they are relatively cheap and the economy is showing signs of recovery. The Threadneedle European Select Z Acc GBP (GB00B8BC5H23) invests mostly in large firms with significant operations on the continent. It has an ongoing charge of 0.8% and has returned more than 82% in five years.
ETF watch
On the other hand, if you’d prefer the greater growth potential that mid-sized firms can offer, then Xtrackers MSCI Europe Mid Cap ETF 1C (XEUM) is worth considering. It has an ongoing charge of 0.25% and has returned more than 72% in five years.
Company announcements
17 May – Swiss Bank Credit Suisse predicted last week that Ryanair Holdings plc’s (RYA) increasing European market share could lead to a surge in profits over the medium-term. It believes the low-cost airline’s market share will rise to nearly 25% by the end of the decade, meaning it will have less need to discount its air fares. It reports its full-year results on Monday (17 May).
20 May – Investment bank JP Morgan believes Royal Mail plc (RMG) will try to lower investor expectations and send out a “cautious message” when it publishes its full-year results on Thursday (20 May), “particularly on the outlook for costs and parcel volume”. The postal firm’s share price has soared more than than 202% over the past year, driven mainly by an increase in home deliveries as a result of lockdown.