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Mike van Dulken, Head of Research at Accendo Markets, commented in his Weekly Roundup to clients,
It’s been a cracking week for the UK’s FTSE 100, finally breaking-out above those 6775 bugbear festive highs to revisit October highs of 6820 and 6840 levels last seen in late May. helped by a largely positive and taper-supportive US macro data, some hawkish Fed commentary, the word bank upgrading global growth forecasts and plenty of interesting corporate updates delivering chunky share price moves. It wasn’t all good news though with some fears about US corporate earnings and US equities being overvalued which resulted in an early setback. We now sit in another tight range 6810-6840, but the index is at least holding up and thus gaining ground (albeit slowly) on the US rivals which outperformed it so strongly in 2013.
Many of the biggest UK blue-chip winners this week come from the battered mining sector which benefited from global growth optimism, reduced Fed taper fears and multiple broker upgrades. Anglo American (AAL) put on an impressive 12.2% (all prices intraday) this week on hopes that its recent underperformance versus other diversified miners would reverse on the basis of a rotation into more attractive valuations as well as the prospect of more aggressive medium-term structuring.
Anglo-Aussie peer Rio Tinto (RIO) gained 7.8% after Q4 results were well received down-under thanks to record iron ore and copper output beating guidance and helping revive hopes in Chinese growth and the global recovery. Antofagasta (ANTO) and Fresnillo (FRES) both put on around 8.0%, the former benefiting from optimism on Copper supply/demand and the latter despite precious metals remaining under the cosh from a stronger USD and lack of safehaven demand. BHP Billiton (BLT) and Glencore Xstrata (GLEN) added 6.0% on general mining sector buoyancy.
Grocer Morrison (MRW) added 7.2% with bargain-hunters stepping in following the awful Christmas trading statement last week and speculation of activist investors forcing a property sell off and cash to return to investors. Sainsbury (SBRY) rose 6.9%, helped by market share data suggesting it has held ground while big rivals lose and the smaller competition at both ends of the pricing spectrum gain, more or less in-line with the mixed Christmas trading updates of last week. Drugmaker AstraZeneca (AZN) staged a major breakout from the 3650p highs of 2000 to test 3900p on FDA approval of a new diabetes drug, a well-received strategy update and some subsequent broker upgrades on the premise that its pipeline could distract from slower profits growth. The share put on 6.1% this week.
At the sour end of the scale this week, inspection company Intertek (ITRK) fell 4.7% this week maintaining its 2014 downtrend (-7.9%) and after a broker downgrade resulted in a test of 2900p support. Can it close the week above? Discount retailer Sports Direct (SPD) was very active this week, announcing a 4.6% stake in Debenhams (DEB) on Monday and then its disposal on Thursday with a simultaneous sale of a put option on a 6.6% stake which could see SPD forced to take the bigger stake next year. Markets don’t like being messed about and while Mike Ashley is sure to know exactly what he is doing many are sceptical of the financial complexity/gamble and the tie-up options between the two companies. SPD shares lost 4.6% this week, while FTSE250 component DEB gained 1.3%.
The Q4 update from bookie William Hill (WMH), while financially decent, saw its shares fall 5.6% over the week to near 1yr lows after highlighting a weak start to 2014 on unfavourable UK football results. Oil services name AMEC (AMEC) suffered by 4.4% from continued uncertainty about its $3.2bn cash and share offer for US peer Foster Wheeler (FW), whose shares were also under pressure, as well as the profits warning from Oil major Royal Dutch Shell (RDSb; -1.8%) today. Asset managers Schroders (SDR) and Aberdeen Asset Management (ADN) fell 2-3% due to continued capital outflows from emerging markets since the US Fed announced it was confident enough in the US recovery to begin tapering it QE3 monetary stimulus. Defensive Utility names Centrica (CNA) and SSE (SSE) were dented 2-3% by rotation into riskier high-beta names and broker downgrades.
Trading updates and results are set to continue flowing through next week from names including Unilever, Carphone Warehouse, SAB Miller, Cairn Energy, WH Smith, Land Securities, Sage Group, and easyJet and after the US Banks reported this week (mixed bag), focus will start to shift to how their counterparts, the UK investor’s favourite – the UK banks – fared at the end of 2013 and more importantly what the outlook is for 2014. Lastly, and having uncharacteristically avoided mentioning macro data for a whole 7 paragraphs, may I point to China’s GDP being released before Monday’s open (expected slower, but how slow?) which is more than likely to dictate the tone of the week in terms of global growth sentiment.
As always, enjoy your weekend. Have fun and rest up before another exciting week.
