4th April 2014
Helped by some positive news on US job numbers the FTSE 100 index of the UK’s largest firms managed to edge ahead and make up some further ground over the trading week writes Philip Scott.
March’s US employment report showed a decent 192,000 increase in non-farm payrolls over the month, along with a rebound in average weekly hours, confirming that the recent period of weakness was nearly all a result of the severe winter weather. Notably February’s gain in payrolls was also revised up to 197,000, from 175,000.
Commenting on the numbers Paul Ashworth chief US economist at Capital Economics says: “Now that the weather-related weakness is behind us, we anticipate that the monthly gains in payroll employment will remain close to the 200,000 mark, driving the unemployment rate gradually lower and allowing the Fed to continue winding down its monthly asset purchases.”
The FTSE 100 closed on Friday at 6,695.55, up 46.41 points or 0.7% on the day and more than 1% better over the week.
The week’s strongest performance amongst the blue-chips was delivered by Aberdeen Asset Management, after its shares jumped 12% to 441.6p. Brokers welcomed the news that the fund manager, which has completed its purchase of Scottish Widows Investment partnership (SWIP), is to embark on a series of cost-cutting measures. In its market update this week it revealed assets under its management had plummeted from £193.6bn at the end of 2013, to £186.5bn as at 28 February, due to continuing weakness in emerging markets.
In a statement, the group’s chief executive Martin Gilbert said: “Conditions in emerging markets remain subdued, and we have therefore identified and are implementing some cost savings, over and above the synergies we expect from the SWIP transaction. However, we will not change our long-term approach to investment which has delivered excellent returns to our clients over time and we look forward to building on the additional scale and product diversity that the acquisition of SWIP brings.”
Babcock International bounced back this week, rising 9% to 1,414p, after the London Fire and Emergency Planning Authority (LFEPA) awarded the engineering group a 21-year contract to manage London Fire Brigade’s vehicle fleet of 500 vehicles and 50,000 pieces of specialist equipment across Greater London.
Buoyed by a rise in passengers over March, Easyjet gained 7% to finish at 1,827p. British Airways owner, International Consolidated Airlines Group, soared 6% to 442.9p after analysts at Deutsche repeated their ‘buy’ rating while Tullow Oil, after being upgraded from ‘neutral’ to ‘buy’ by UBS rose 5% to 800p.
Barclays was the strongest moving bank over the trading week accelerating 7% to 248.15p, while both HSBC and Standard Chartered finished flat at 612.5p and 1,264p respectively.
Lloyds Banking Group closed 4% better at 77.46p while Royal Bank of Scotland, which is set to shut 44 branches, also firmed 4% to close at 318.3p.
The insurers have been regaining some ground following a few weeks of turmoil, with Legal & General and Aviva each up 6% closing respectively at 217.7p and 498.2p. For its part Prudential rose 5% to 1,342p as did RSA finishing at 94.15p, while Standard Life was 4% stronger at 396.2p. Closed fund specialist Resolution was flat over the week at 295.1p.
The UK’s biggest supermarkets are continuing to feel the pressure as the popularity of the so-called ‘heavy discounters’ such as Lidl and Aldi, continues to be a thorn in their side. Analysts at HSBC sent the sector tumbling this week after it issued a cautious note, which reiterated ‘underweight’ recommendation on both Tesco and Morrison.
Tesco, which was also bestowed with an ‘underperform’ rating from Bank of America, fell 3% to 287.4p while Morrison endured the steepest drop among the top 100, losing 5% over the week to close at 204.8p. Sainsbury’s also lost further ground, shedding 2% at 311p.
Support services group Intertek, slipped 3% to 2,968p, while despite Goldman Sachs repeating its ‘buy’ recommendation on BSkyB this week, the broadcaster fell back 2% to 901p.
Controversy is still engulfing Royal Mail, down 3% at 549.5p, as Labour leader labels the Prime Minister David Cameron the ‘dunce of Downing Street’ after a report concludes the government dramatically undervalued the business.
A reiterated ‘buy’ recommendation from Citigroup as well as a repeated ‘outperform’ rating from analysts at Credit Suisse could not stop household goods giant Reckitt Benckiser slipping 2% over the week to 4,841p while GlaxoSmithKline lost 3% at 1,577p.
Next week sees updates and results arrive from among others, Marks & Spencer, Mothercare and Ashmore.