The FTSE 100 had a sterling week, rising 2.6% and significantly outperforming the S&P 500, which finished up just 0.3% for the week. The FTSE 100 has risen almost 7% from the lows at the start of the February. I have pointed out in the past how geared the FTSE 100 is to the performance of the resource sector, as it makes up such a large part of the overall index. This has been born out over the past few weeks, as Rio Tinto, Anglo American and Fresnillo have been amongst some of the best performing stocks. House builders and related stocks also continue to perform well. Vodafone posted the biggest rise on the week: up over 8% ahead of the imminent cash distribution.
Equity markets last week seemed to shrug off the disappointing Chinese manufacturing data, possibly helped by better than expected US manufacturing activity report. The release of the Federal Reserve and MPC minutes, reiterating they are in no hurry to raise rates, also helped sentiment. The FTSE 100 is now once again back to the top end of its trading range. Similarly, the S&P 500 remains close to its all-time highs. The question once again will be whether both these indices can push on from here or will these levels once again prove a barrier?
The events in the Ukraine, has so far had no real impact on investor sentiment. If the troubles continue, leading to rising tensions between East and West, then that may be the time equity investors have a little fright. In another sign that emerging market sentiment is improving, Saturday’s FT reported that emerging market money outflows slowed again this week. The Vix rose during the week and finished at 14.68, having risen above 15 points at times. The oil price again traded higher last week, which is the sixth positive week on a trot. The recent rise could well be another sign of an improving economic outlook. Should the rise continue, it may cause market jitters at some stage.
For the week ahead, tomorrow morning may well be dominated by the comments from the G20 meeting that took place over the weekend. In the communiqué at the conclusion of the meeting, the G20 announced they aim to increase global growth by 2% over the next 5 years. They added that all central banks “maintain their commitment that monetary policy settings will continue to be carefully calibrated and clearly communicated”. I assume that means if anyone is considering raising interest rates, think hard, and make sure everyone knows about it well in advance.
As the week progresses, as usual, there are plenty of economic events for analysts to comment on. At the end of the week the focus will be on the eurozone: business and consumer confidence data will be released on Thursday and we receive inflation and employment data on Friday. The estimate for inflation is 0.7%, but some papers are speculating that this number could fall short of estimates. Inflation reports continue to come in below estimates; it would not surprise me in the least if the eurozone number undershoots as well.