Equity prices in the US rose during October, with those increases broadly in line with that of the MSCI World index. The S&P 500 index rose by 3.7% and the Dow Jones Industrial Average index by 3.1% while the technology-heavy Nasdaq index posted an increase of 5.9%.
Investors were distracted by the approaching mid-term elections, while sentiment was unsettled by mounting– and ultimately well-founded – speculation the US Federal Reserve would opt to boost the US’s flagging economic recovery by introducing another round of quantitative easing. Demand for US equity funds has picked up, and the IMA’s North America sector experienced strong net retail sales compared with many other IMA equity sectors.
According to Standard & Poor’s, during the first nine months of 2010, 117 US companies cut their dividend payments, compared with 730 companies during the same period in 2009. Meanwhile, 1,033 companies opted to increase their payout during the first nine months of 2010 – 46% higher than the same period last year.
Microsoft reported a 51% rise in first-quarter earnings that were boosted by stronger corporate purchases of PCs. Meanwhile, Intel reported better-than-expected profits for its third quarter and “continues to see healthy worldwide demand for computing products”.
Elsewhere, the banking sector garnered attention with some strong results. JP Morgan reported a 23% increase in profits for the third quarter, although revenues at its investment banking division fell. For its part, Citigroup reported better-than-expected profits amid a decline in losses from bad loans.
The US economy posted annualised growth of 2% during the third quarter, stoking speculation the Fed would expand its programme of monetary stimulus. Calls for additional quantitative easing received additional fuel from the news inflation had risen more slowly than expected during September.
According to the Treasury Department, the US registered its second consecutive annual budget deficit above the $1 trillion (£620bn) level. Tax receipts were held back by the continued high rate of unemployment, which is running at 9.6%.
Speculation over the probability of further quantitative easing helped the US dollar to fall to a 15-year low against the yen. Meanwhile, the US remained preoccupied by China’s currency policy – it believes the yuan remains significantly undervalued, providing China with an unfair advantage in its global trade activities. According to figures released during October, the US trade deficit widened during August compared with July – China’s exports to the US rose to $35.3bn, while US imports fell to $7.3bn.
Sterling financial services
Friday, 12 November 2010
UK equities reach a six month high
October saw share prices in the UK reach their highest levels since April. By the end of the month, the FTSE 100 index had risen by 2.3% although returns from the blue-chip index were outstripped by the performance of the FTSE 250 and FTSE SmallCap indices.
Which posted gains of 2.5% and 2.9% respectively during October, suggesting investors are becoming more sanguine about prospects for medium-sized and smaller companies.
Investors were distracted by ongoing speculation about the likelihood of further quantitative easing measures on both sides of the Atlantic and strengthening expectations the Federal Reserve was poised to inject more cash into the US economy in particular provided a reassuring boost for share prices.
According to the Office for National Statistics, retail sales growth continues to slow. Sales declined by 0.2% month on month during September, fuelling concerns that economic recovery is starting to lose momentum just as the coalition Government seeks to implement harsh cuts in public spending.
In a trading statement, high-street retailer Marks & Spencer warned trading conditions are likely to become “more challenging” in the light of Government spending cuts, a scheduled rise in VAT in January and higher commodity prices. Meanwhile, the Nationwide Building Society reported its measure of consumer confidence had moved back towards its historical low, and warned consumers were showing signs of becoming increasingly pessimistic about their own spending power.
Standard Chartered announced a £3.3bn rights issue, in which investors will be offered one new share at 1280p for every eight shares they already own. The bank is seeking to raise capital in order to increase its financial strength. Under new regulations, banks must have a Core Tier 1 capital ratio of at least 7%, and the rights issue will increase Standard Chartered’s ratio to more than 10%. The move triggered speculation other big banks will follow suit in due course.
According to recent figures published by the Investment Management Association (IMA), net retail sales of funds during the first nine months of 2010 are only just behind the record levels experienced over the same period in 2009.
Investors continued to add to their holdings during September, and bonds remained the most popular asset class, followed by equities. However, the UK All Companies sector was the worst-selling IMA sector during September for both retail and institutional investors, although the UK Smaller Companies sector experienced positive net inflows.
www.sterlingfs.co.uk
Which posted gains of 2.5% and 2.9% respectively during October, suggesting investors are becoming more sanguine about prospects for medium-sized and smaller companies.
Investors were distracted by ongoing speculation about the likelihood of further quantitative easing measures on both sides of the Atlantic and strengthening expectations the Federal Reserve was poised to inject more cash into the US economy in particular provided a reassuring boost for share prices.
According to the Office for National Statistics, retail sales growth continues to slow. Sales declined by 0.2% month on month during September, fuelling concerns that economic recovery is starting to lose momentum just as the coalition Government seeks to implement harsh cuts in public spending.
In a trading statement, high-street retailer Marks & Spencer warned trading conditions are likely to become “more challenging” in the light of Government spending cuts, a scheduled rise in VAT in January and higher commodity prices. Meanwhile, the Nationwide Building Society reported its measure of consumer confidence had moved back towards its historical low, and warned consumers were showing signs of becoming increasingly pessimistic about their own spending power.
Standard Chartered announced a £3.3bn rights issue, in which investors will be offered one new share at 1280p for every eight shares they already own. The bank is seeking to raise capital in order to increase its financial strength. Under new regulations, banks must have a Core Tier 1 capital ratio of at least 7%, and the rights issue will increase Standard Chartered’s ratio to more than 10%. The move triggered speculation other big banks will follow suit in due course.
According to recent figures published by the Investment Management Association (IMA), net retail sales of funds during the first nine months of 2010 are only just behind the record levels experienced over the same period in 2009.
Investors continued to add to their holdings during September, and bonds remained the most popular asset class, followed by equities. However, the UK All Companies sector was the worst-selling IMA sector during September for both retail and institutional investors, although the UK Smaller Companies sector experienced positive net inflows.
www.sterlingfs.co.uk