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.
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