Week in Review: Soaring sterling acts as a drag on FTSE 100
FTSE NEWS
The Bank of England (BoE) predicted on Thursday (4 February) that the UK economy would recover strongly this year, which caused sterling to soar. However, when the pound becomes more valuable, it tends to act as a drag on the FTSE 100 as its constituents earn the bulk of their revenues in other currencies. The UK’s blue-chip index ended the day down 0.06% at 6,503.72.
- IHS Markit publishes its monthly regional PMI update on Monday (8 February), which measures economic activity in the nine English regions, Scotland, Wales and Northern Ireland.
- On Tuesday (9 February), the Society of Motor Manufacturers & Traders releases used car sales figures for the fourth-quarter of 2020.
- The City of London Corporation and PwC releases their annual Total Tax report on Wednesday (10 February), showing the financial services sector’s contribution to the UK tax take.
- The Royal Institution of Chartered Surveyors gives its updated take on the health of the housing market on Thursday (11 February).
- On Friday (12 February), the ONS publishes data on the UK’s economic performance in December and the final three months of last year.
SECTOR IN FOCUS
A sudden burst of interest from amateur day traders caused the price of silver to rally at the start of the week – a rally that unwound nearly as quickly as it started.
The white metal surged 10% to an eight-year high of $30 an ounce on Monday, before losing all of its gains the next day.
The sudden surge in silver’s popularity has been traced back to a highly popular forum on internet discussion site Reddit, on which a small band of traders were encouraging others to snap up the metal.
Monday’s rally lifted the share prices of UK-listed precious metal miners Fresnillo plc (FRES) and Polymetal International plc (POLY) by 8.95% and 5.12%, respectively. However, the share prices of both firms have since retreated.
ECONOMIC UPDATE
The Bank of England has ruled out the introduction of negative interest rates – for at least the next six months, anyway.
The central bank has been reviewing whether negative rates would stimulate the economy and if there would be any nasty side-effects.
It is a controversial policy measure introduced in countries such as Japan, Sweden and Switzerland to prop up their flagging economies.
In theory, pushing rates below zero encourages people to borrow and spend, which in turn boosts the economy.
However, it also means that savers are forced to pay banks to hold onto their cash, dealing a blow to household finances.
On Thursday, the BoE implied it would give banks at least six months to prepare for negative rates – if indeed it introduces them at all.
No doubt both banks and savers are breathing a big sigh of relief right now.
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COMPANY ANNOUNCEMENTS
9 February – Ocado Group plc (OCDO) was the UK’s fastest-growing supermarket in the 12 weeks to 24 January, with sales up nearly 37% year-on-year, according to data provider Kantar. Investors will hope that has translated into profits when the online supermarket reports its full-year results on Tuesday (9 February).
11 February – AstraZeneca plc (AZN) found itself in the middle of a highly-charged political row between the UK and European Union last month over the delivery of coronavirus vaccines. However, the issue looks to be over now the UK-Swedish drugs maker has promised to deliver an extra nine million doses to the EU. The firm reports its full-year results on Thursday (11 February).