20th September 2013
The US Federal Reserve sent markets into a spin this week when announced it was to maintain its $85bn-a-month quantitative easing programme for the time being instead of reducing it, which had been widely anticipated.
The Fed is not yet confident that the US economy is adequately robust for the stimulus to be removed. The extension of easy money was welcomed by traders and markets went north.
However many were unimpressed and Old Mutual Strategic Bond fund manager Stewart Cowley believes despite the market exuberance this was ultimately nothing to get excited about. He said: “I suspect the euphoria won’t last long; we are now engaged in the biggest game of ‘Chicken’ the world has ever seen – investing in US government bonds has become the equivalent of running into the middle of the motorway to pick up pennies.”
While the FTSE 100 made gains following the news, it only managed to muster up a mere 0.19% over the trading week. The UK’s benchmark index closed on Friday at 6,596.43, 28.96 points down on the day.
This week the government raised £3.2bn by offloading 6% of its stake in Lloyds Banking Group to institutional investors as plans to return the bank to private hands commenced. Over the week Lloyds loosened, albeit by just 0.47% to close at 76.25p. Elsewhere among the banks, Barclays and HSBC slipped 2% apiece to close at 689.2p and 273.45p respectively. But Royal Bank of Scotland managed a 1% per cent rise to 364.4p while Standard Chartered also finished higher, after gaining 2% to 1,535.5p
Asset management group Schroders, which just launched a fund backing India, is the week’s top riser on the leader-board, after jumping 6% to 2,631p.
Also enjoying gains, up 5% to 2,585p was consumer products giant Unilever – reports show that it is ploughing more than $100m into its operations at a US factory.
Miner Fresnillo slipped a massive 14% to close at 1,033p, the steepest fall among the top 100, after reports emerged that Mexico was to hit the firm’s profits with heavier taxes. Fellow miner Vedanta Resources was also lighter after shedding 4% to close the week at 1,116p while The London Stock Exchange was also off 4% at 1,558p.
Next week sees results arrive from Carnival, Compass and Icap.