Brooks-Johnson will remain CEO until Rightmove posts its full-year figures in February 2023. The company has said the outgoing chief will help find a replacement to ensure a smooth handover.
Brooks-Johnson joined Rightmove in 2006. He became its COO in 2013, then its CEO in 2017. Previously, he worked as a management consultanr with Accenture and the Berkeley Partnership.
Following the news of Brooks-Johnson’s resignation, shares in the FTSE 100 were down as much as 7.1%.
In a statement, the resigning CEO said, “With Rightmove progressing well on its mission to make home moving easier and our strong trading from 2021 continuing into 2022, I have decided it is an appropriate time to seek a new challenge.”
The FTSE 100 dropped 0.3%, while France’s CAC was down 1.1%. In Germany, the DAX fell 1%. Across the pond, US benchmarks closed lower on Monday. Wall Street’s S&P 500 dropped around 0.1%, as did Nasdaq and Dow Jones.
World Bank Chief Economist Carmen Reinhart has warned that the global economy is experiencing a period of “exceptional uncertainty.” Reinhart cited an “array of disruptions”, including lockdowns in China, soaring food prices, and the conflict in Ukraine. She said she would not rule out further downgrades to the growth outlook.
On Monday, the World Bank slashed its global growth forecast for the year by almost a full percentage point, to 3.2% from 4.1% because of the added economic pressures of the war in Ukraine.
"Unsurprisingly the weak economic outlook, uncertain geopolitical situation and rising inflationary environment has prompted the World Bank to cut its 2022 global growth outlook," said Michael Hewson, chief market analyst at CMC Markets. "This move is likely to be followed by the IMF later this week as it gets set to meet in Washington."
The FTSE 100 and CAC both rose 0.2% after opening, while the DAX was treading water.
Amid rising Omicron cases, UK prime minister Boris Johnson said in an announcement last night that face masks would become a legal requirement in most public indoor areas and that people should work from home wherever possible. From next week, vaccine passports will also be required to attend large and potentially crowded venues such as nightclubs.
The news hit leisure stocks, including bars, restaurants, and hotels, particularly hard.
Ruby McGregor-Smith, president of the British Chambers of Commerce, said, “We have been calling on the UK government for several months to set out what contingency plans for business would look like if further restrictions were needed this winter.”
“Yet again, firms are now being asked to make changes at the very last minute. Restrictions will also impact on consumer behaviour with knock-on effects which could risk the fragile recovery, order books and revenues.”
HSBC’s profits fell to $4.3 billion for the first half of 2020, dropping from $12.4 billion during the same period last year.
The British multinational bank also confirmed on Monday that provisions set aside for potential loan losses rose to $3.8 billion during the second quarter – about $1 billion higher than analysts predicted – and revised its forecast for loan loss provisions for the full year, raising the likely figure to between $8 billion and $13 billion.
Following the announcement, HSBC’s shares fell 4.3%, reaching the bottom of the FTSE 100 and dragging the index down to its lower level since mid-May. The bank also confirmed that it would accelerate its February-announced plans to cut 35,000 jobs worldwide in an effort to save costs.
The news comes as HSBC grapples with a major restructuring of its international banking operations, while also coming under fire for its support of China’s new national security law in Hong Kong.
In a statement on Monday, HSBC’s group chief executive Noel Quinn acknowledged the bank’s precarious political situation in a statement on Monday.
“Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC's footprint,” he said. “However, the need for a bank capable of bridging the economies of east and west is acute, and we are well placed to fulfil this role."
Quinn noted the continuing threat posed by the COVID-19 pandemic: “We are also looking at what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business.”
Early trading on Thursday morning saw global share prices go into free-fall as the continued spread of coronavirus threatens to greatly impact international trade. The crash also followed a Wednesday-night speech by President Donald Trump announcing that “all travel from Europe to the United States” would be suspended for 30 days.
Though the Trump administration quickly clarified that only “human travel” from Europe would be restricted, and not trade, Thursday morning’s share price downturn indicated a lack of investor confidence in the new measures’ effectiveness.
The Dow Jones Industrial Average fell by around 8.2 %, driving US indexes further into bear market territory, while Nasdaq fell by 6.5% and the S&P 500 by 7%.
The widespread losses triggered the market’s “circuit breaker”, automatically halting trade for 15 minutes to interrupt the steep decline in prices. Once trading resumed, however, stocks continued to plummet.
Every share in the FTSE 100 was trading lower before markets closed, with the UK’s main share index having suffered a fall of more than 9% in value.
Indexes in Frankfurt and Paris also fell, as did Asian markets, as Japan’s Nikkei 225 index closed 4.4% lower than previously.
While companies have suffered worldwide, travel companies saw some of the worst blows to share prices, with airline conglomerate IAG facing a 10% drop.
The FTSE 100 has continued its rebound as European markets shook the fear of a coronavirus spread. On the other hand, oil prices have been dropping therefore prompting a sell-off as traders see demand slump.
Yahoo Finance reported the FTSE 100 was optimistic on the spread of the virus after the WHO held out on declaring the outbreak a global emergency. for now, the situation is under wraps and European markets are unshaken.
Connor Campbell, financial analyst at Spreadex, had this to say: “Europe’s major rebound continued unabated on Friday, even if the Dow Jones wasn’t anywhere near as enthusiastic.
“The European indices seemed to shake off the coronavirus concerns that had plagued them for much of the week.”
However, on the oil front prices have been dropping and shares in oil and mining firms have slipped. Brent crude dropped below $58, the lowest price since October 2019.
On close last Friday, Mihir Kapadia, the CEO of Sun Global Investments said: “Oil prices ... look likely to end the week down as growing concerns over the Chinese coronavirus will spread, disrupting supply, demand and affecting economic impact...The reason for the rally is as a result of news from the US revealed a drawdown in crude stocks.
"WTI also enjoyed a reprieve by going up 0.5% to $55.86 a barrel, however both could likely end up 4% and 4.6% lower for the week respectively. Oil sell-offs will likely continue as the virus outbreak in China has now killed 25 people and cases are being reported across the globe. As we have seen recently, investors will react quickly to any sign of negativity and this is no exception as China announces that the issue has become an emergency. This could keep oil prices fragile until the coronavirus shows signs of slowing down, and so far that reassurance has not been provided by Beijing.”
With the 10th anniversary of the Lehman Brothers’ shocking and unprecedented bankruptcy this month, Katina Hristova looks back at the impact the collapse has had and the things that have changed over the last decade.
Saturday 15 September 2018 marked ten years since the US investment bank Lehman Brothers collapsed, sending shockwaves across the financial world, prompting a fall in the Dow Jones and FTSE 100 of 4% and sending global markets into meltdown. It still ranks as the largest bankruptcy in US history. Economists compare the stock market crash to the dotcom bubble and the shock of Black Friday 1987. The fall of Lehman Brothers was a pivotal moment in the global financial crisis that followed. And even though it’s been an entire decade since that dark day when it looked like the whole financial system was at risk, the aftershocks of the financial crisis of 2008 are still rumbling ten years later - economic activity in most of the 24 countries that ended up falling victim to banking crises has still not returned to trend. The 10th anniversary of the Wall Street titan’s collapse provides us with an opportunity to summarise the response to the crisis over the past decade and delve into what has changed and what still needs to.
As we all remember, Lehman Brothers’ fall triggered a broader run on the financial system, leading to a systematic crisis. A study from the Federal Reserve Bank of San Francisco has estimated that the average American will lose $70,000 in lifetime income due to the crisis. Christine Lagarde writes on the IMF blog that to this day, governments continue to ‘feel the pinch’, as public debt in advanced economies has risen by more than 30 percentage points of GDP – ‘partly due to economic weakness, partly due to efforts to stimulate the economy, and partly due to bailing out failing banks’.
Afraid of the increase in systemic risk, policymakers responded to the crisis through quantitative easing and lowering interest rates. On the one hand, quantitative easing’s impact has seen an increase in asset prices, which has ultimately resulted in the continuation of the old adage, the rich get richer and the poor get poorer. The result of Lehman’s shocking failure was the establishment of a pattern of bailouts for the wealthy propped up by austerity for the masses, leading to socio-economic upheavals on a scale not seen for decades. As Ghulam Sorwar, Professor in Finance at the University of Salford Business School points out, growth has been modest and salaries have not kept with inflation, so put simply, despite almost full employment, the majority of us, the ordinary people, are worse off ten years after the fall of Lehman Brothers.
Lowering interest rates on loans on the other hand meant that borrowing money became cheaper for both individuals and nations, with Argentina and Turkey’s struggles being the brightest examples of this move’s consequences. Turkey’s Lira has recently collapsed by almost 50%, which has resulted in currency outflow and a number of cancelled projects, whilst Argentina keeps returning for more and more loans from IMF.
Discussing the things that we still struggle with, Christine Lagarde continues: “Too many banks, especially in Europe, remain weak. Bank capital should probably go up further. 'Too-big-to-fail' remains a problem as banks grow in size and complexity. There has still not been enough progress on how to resolve failing banks, especially across borders. A lot of the murkier activities are moving toward the shadow banking sector. On top of this, continued financial innovation—including from high frequency trading and FinTech—adds to financial stability challenges. In addition, and perhaps most worryingly of all, policymakers are facing substantial pressure from industry to roll back post-crisis regulations.”
The Keynesian renaissance following that fateful September day, often credited for stabilising a fractured global economy on its knees, appears to have slowly ebbed away leaving a financial system that remains vulnerable: an entrenched battalion shoring up its position, waiting for the same directional waves of attack from a dormant enemy, all the while ignoring the movements on its flanks.
If you look more closely, the regulations that politicians and regulators have been working on since the crash are missing one important lesson that Lehman Brothers’ fall and the financial crisis should have taught us. Coming up with 50,000 new regulations to strengthen the financial services market and make banks safer is great, however, it seems that policymakers are still too consumed by the previous crash that they’re not doing anything to prepare for softening the blow of a potential new one. They have been spending a lot of time dealing with higher bank capital requirements instead of looking into protecting the financial services sector from the failure of an individual bank. Banks and businesses will always fail – this is how capitalism works and no one knows if there’ll come a time when we’ll manage to resolve this. Thus, we need to ensure that when another bank collapses, we’ll be more prepared for it. As Mark Littlewood, Director General of the Institute of Economic Affairs, suggests: “policymakers need to be putting in place a regulatory environment that means that when these inevitable bank failures occur, they can fail safely”.
In the future, we may witness the bankruptcy of another major financial institution, we may even witness another financial crisis – perhaps in a different form. However, we need to take as much as we can from Lehman Brothers’ collapse and not limit our actions to coming up with tens of thousands of new regulations targeted at the same problem. We shouldn’t allow for a single bank’s failure to lead us into another global crisis ever again.
Despite a swift comeback from the global stocks chaos last week markets have been shaken up.
Dow Jones closed at 24,601 yesterday, up from the 23,860 low of last Thursday. The plunge happened on the 1st of the month, across the weekend, recovered, and dropped further. Dow Jones is now on a recuperating trajectory. The same drop, recovery and further fall also happened within the same time frame for the S&P 500, NASDAQ and the FTSE 100.
All are on their way back up but fears of increased volatility are floating around. Finance Monthly has collated a number of comments and market responses from experts and economists worldwide in this week’s Your Thoughts.
Phil McHugh, Senior Market Analyst, Currencies Direct:
The switch to risk off in the markets was markedly sharp and severe against an air of positive momentum which ran ahead of the fundamentals. The S&P index fell by more than 4% which was the steepest single day drop since August 2011. The rout continued into Asia markets and the spark was growing concerns that inflation will force borrowing costs higher.
The momentum since the start of the year has been bullish with equities pushing higher and the USD selling off. The honeymoon period for equities has now hit a question mark over potential rising borrowing costs. It can be argued that the bull run had ran somewhat ahead of sentiment with overconfidence creeping in. The higher wage inflation from US payroll data on Friday was the beginning of the doubts and this was enough to encourage some profit taking that has now spilled into a wider sell off.
We have not seen a big correction since Brexit and although we could see further selling pressure it should find support soon on the underlying improved global economic optimism and growth.
In the currency markets the reaction was more balanced but we have seen a defined swing into the classic risk off currencies with the Japanese Yen and Greenback gaining ground.
The pound lost ground after a strong start to the year. The pound tends to suffer in a risk off market and the weaker services data yesterday and concerns over the latest Brexit talks have helped it on its way lower. The next focus for the pound will be the Bank of England meeting on Thursday.
Lee Wild, Head of Equity Strategy, interactive investor:
Just as markets cannot keep rising forever, they must also stop falling at some point, but it’s still unclear whether we’ve reached a level where buyers see value again.
Futures prices had indicated a much brighter start for global markets, but early gains were wiped out in Asia and Europe looks vulnerable. Volatility is back, and investors had better get used to it.
While there’s certainly a case to be made against high valuations, especially in the US, there are lots of decent cheap stocks around. Plenty of investors are itching to bet that concerns about inflation and bond yields are overdone and that any increase in either will be much slower than expected. If that’s the case, a 10% correction in the US looks more like a healthy retracement rather than reason to hit the panic button. Long term investors will be amused by it all and are either choosing to ignore the noise or pick up stock at prices not seen for two months in the US and over a year in London.
There are stark similarities between this sell-off and crashes both in August 2015 and in early 2016 when market volatility reached similarly extreme levels. It took several trading sessions played out over weeks to find a bottom, and it’s likely the same will happen here. Only difference this time is that it’s the tune of US economic data, not China’s currency devaluation that markets are dancing to.
Kasim Zafar, Portfolio Manager, EQ Investors:
Pullbacks in markets are (usually) quite normal and healthy, giving moments of pause where everyone pats themselves over, does a quick sense check and then carries on. In the case of the US equity market it hadn’t fallen more than 5% in 404 trading days (back to June 2016). That’s the longest stretch of ‘uninterrupted’ gains in history, with data back to 1928!
There weren’t enough signs of investor heebie-jeebies around, especially not in January when the US index was up over 7% for the month at one point. That’s pretty extreme and entirely unsustainable.
The equity market has finally taken notice that over the last several weeks bond markets have been reflecting a higher inflation and interest rate environment, so it’s not at all surprising to see some adjustment and a return of some much needed investor fear!
We are going through the quarterly reporting season for US companies currently, which is a good test of what’s happening on the ground. With 264 out of 500 US companies having reported so far, most are reporting positive results for both top line revenue growth and bottom line earnings.
So, as things stand, we see this as a long overdue market correction and if it falls much further we would be looking to increase our equity weightings. Increased volatility is a healthy sign of investors becoming more conscious of the risks inherent in markets.
Ray Downer, Trader, Learn to Trade:
Though you may not knowingly own any shares, there is a high chance that you are paying into a pension scheme which invests in shares and bonds. This means the value of your pension pots is dependent on the value of the investments in it and while investment values increase and decrease all the time and this will have very little noticeable difference to your savings, financially turbulent times like this will impact you in some way, particularly if you’re looking to retire this year.
For now, at Learn to Trade we are looking at this in the context of a correction rather than a reversal. Following this week’s FTSE 100 fall, investors should keep a close eye on the stock markets in the months ahead as the value of the pound has gotten weaker with the sell-off. The Bank of England will announce whether or not it plans to raise interest rates because of this ‘bloodbath’ later this week when it publishes its quarterly inflation report. Should the Bank of England announce a rise in inflation rates, British consumers will have less spending power and will start to feel the pinch of higher costs on imported necessities. The inflation report will give us a clearer picture of how this will impact our everyday spending.
Bodhi Ganguli, Lead Economist, Dun & Bradstreet:
It’s a common misconception that stock market activity is linked to the economy. However, an unexpected and ferocious swing in the stock market is disruptive and can wipe out a significant chunk of wealth from the markets – resulting in economic implications. This week’s activity could mean retail investors could see a significant erosion in their nest egg, which would be bad for future consumer spending.
The latest crash was caused by technical or algorithmic trading, most likely computer-generated as at times the stock market was dropping faster than that can be explained by human intervention. These changes were exacerbated by macro-economic triggers such as the recent US jobs report, which was a strong signal of wage inflation returning. This caused market participants to upgrade their inflation outlook with more Feb rate hikes expected. Bond yields also crept up, setting off a bearish shift in the stock market.
We expect the stock market to stabilise in the near future, but the longer term outlook will be determined by how these fundamental macro-economic triggers interact with each other going forward.
Ken Wong, Client Portfolio Manager, Eastspring Investments:
Currently, the market is going through a much-needed correction as valuations were approaching expensive levels for most markets. In particular, China’s equity markets were up 70% over the past 13 months, and this recent 10% correction from its high is actually not that steep.
Despite the recent market correction, investors in Asian equity markets still seem to be in a better position at a time when corporate America seems more hard pressed to deliver elevated profit expectations while also trading at very expensive valuations. Asian equity markets are trading at a P/B ratio of around 1.7x while US equity markets are still trading at 3.2x P/B after this recent price correction.
Asian corporates in general are still expected to deliver strong corporate earnings and most are in good shape as a result of previous cost cutting and balance sheet restructuring that we have seen over the past few years. Despite the recent market volatility, things are still quite sound in this part of the world, Asian corporates are still expecting to see their earnings grow by around 13% in 2018, with China leading the way with earnings growth expectations of over 20% this year.
For investors concerned about the recent market volatility, they should look at investing in a low volatility equity strategy as we have seen these types of strategies outperform the broader benchmark indices by over 2% over the past few days. The benefits of these low volatility equity strategies is the fact that they have bond like risk / volatility characteristics while providing investors with an enhanced dividend yield and market returns which are more in-line with equity returns.
As long as there is still enough cheap liquidity out in the market place, we could start to see some bottom fishing over the coming days as investors start to look for cheap / undervalued stocks. In particular, investors could look toward those sectors that underperformed in 2017, such as financials, energy and consumer staples.
Richard Perry, Market Analyst, Hantec Markets:
Equity markets remain highly attuned to the threat of the increase in volatility across financial markets at the moment. Equities are considered to be a relatively higher risk asset class, so with a huge sell-off on bond markets, equity markets have also come under threat. The concern comes in the wake of the jump in US earnings growth to 2.9%, a level not seen since 2009. A leap in earnings growth has investors spooked that this will lead to a jump in inflation which could force the Federal Reserve to accelerate its tightening cycle. Markets can cope with gradual inflation but inflation running out of control can lead to significant volatility, such as what we have seen recently. The high and stretched valuation of equities markets meant that was the prime excuse to take profits.
For months, analysts have been talking about the potential for a 10% correction and at its recent nadir, the S&P 500 had corrected 9.7%. So is this just another chance to buy, or the beginning of a bigger correction? The key will be the next series of inflation numbers, with CPI on the 14th February and core PCE at the end of the month. If inflation starts to increase appreciably, longer dated bond yields could take another sharp leg higher, perhaps with the 10 year breaking through 3.0%. Subsequently, equities would come under sustained selling pressure with volatility spiking higher once more. However, if there can be a degree of stabilisation in the bond markets, then equity investors can begin to look past immediate inflation fears and then focus back on the positives of economic growth in the US, Eurozone and China.
Alistair Ryan, Senior Dealer, Frontierpay:
This afternoon’s hawkish approach from the Bank of England came as a surprise; I personally – along with many others – didn’t expect there to be any talk of a rate rise in the UK until at least the end of 2018. The services sector, which makes up around 80% of UK GDP, faltered this month and wage growth is slowly increasing but remains low at 2.4%. Both of these factors suggest a slack economy, so I expect we will see many questioning whether this is the right time for a rate rise.
If we were to see some further improvement in the economy over the coming months, then a rate rise would of course be a possibility, but whilst wage growth and inflation slowly start to correlate, I don’t think we will see any movement on the base rate.
We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!
Last week, the FTSE 100 saw a late upward rush as it closed at a new record high of 7,724.22 points. This was after a fresh record high at the end of the year, spurred by a rally in mining stocks and a healthcare burst. But how will FTSE kick off the year and will it sustain its consistency in record highs throughout 2018?
According to some sources, the success of FTSE in 2018 will largely depend on the outcome of Brexit negotiations, although a rise in the pound may make it a mixed blessing. Below Finance Monthly has heard Your Thoughts, and listed several comments from top industry experts on this matter.
Jordan Hiscott, Chief Trader, ayondo markets:
I believe the FTSE 100 will go above 8,000 in 2018. In part, this is due to the current political turmoil we are experiencing, with the incumbent UK government looking increasingly unstable as each week passes, an economy that seems to be lagging behind Europe on a relative basis, and the ongoing turbulence from Brexit.
However, all these factors are already known to investors and traders and so far, the FTSE has performed well despite these fears. For 2018, I believe the Brexit turmoil will increase dramatically as negotiations with Europe continue down an incredibly fractious route.
Craig Erlam, Senior Market Analyst, OANDA:
Two key factors contributing to the performance of the FTSE this year will be the global economy and movements in the pound. The improving global economic environment was an important driver of equity market performance in 2017 and many expect that to continue in 2018, with some potential headwinds having subsided over the last year. The FTSE 100 contains a large number of stocks that are global facing, rather than domestically reliant, and so the global economy is an important factor in its performance. Stronger economic performance is also typically associated with stronger commodity prices and with the FTSE having large exposure to these stocks, I would expect this to benefit the index.
The global exposure of the index also makes the FTSE sensitive to movements in the pound. After the Brexit vote, the FTSE continued to perform well as a weaker pound was favourable for earnings generated in other currencies. The pound has since gradually recovered in line with positive progress in Brexit negotiations and a more resilient UK economy. Should negotiations continue to make positive progress this may create a headwind for the index and offset some of the gains mentioned above. A negative turn for the negotiations though would likely weaken sterling and provide an additional positive for the index.
While many people are confident about the economy, Brexit negotiations are more uncertain and will have a significant impact on the index’s performance, as we have seen over the last 18 months.
Sophie Kennedy, Head of Research, EQ Investors:
We believe that the synchronised global growth and continued easy monetary policy should support global risk assets going forward. As such, equities should deliver a reasonable return over the next year, which will be the starting point for FTSE performance.
The deviation of FTSE performance around global equity performance will likely be a function of a few factors:
- The level of sterling is extremely important. Many FTSE companies have very global revenue streams. As such, when sterling falls, foreign earnings are inflated. The level of sterling over the next year is likely to be a function of Brexit-negotiations, the result of which we are not attempting to forecast.
- There are a number of large commodity producers in the FTSE. Their profits and share prices tend to rise and fall with the price of commodities. The oil market looks more balanced than it has previously and strong global growth should boost global commodity demand. However, we have already had a large rally since the middle of 2017, so upside is likely to be more muted.
- The trajectory of the UK economy is also relevant, particularly for the smaller capitalisation parts of the market and sectors including housebuilders and utilities. We are not hugely positive on this point, on account of the real income squeeze and continued weak investment environment.
We feel that points 1 and 2 are neutral but point 3 is negative. As such, we expect the FTSE to deliver positive returns but likely underperform the MSCI World.
Tim Sambrook, Professor of Finance, Audencia Business School:
2017 ended the year strongly and is now around all-time highs. The 7% return and 4% dividend gain was better than most had hoped. But will this positive trend continue or will investors worry about the price?
The FTSE has performed strongly, because the global economy has done well. The FTSE is largely a collection of international conglomerates who happen to be based in the UK. The political mess has had little effect on the economic environment (fortunately!).
Strangely, a poor negotiation on Brexit will have a positive effect on the FTSE (if not the UK economy) as a large part of the earnings of the larger companies are overseas. Hence a fall in sterling will lead to a boost in earnings and hence push up the price of the FTSE.
Currently there is little reason to believe that the global economy, and hence corporate earnings, will not continue to do well in 2018. The current PE of the FTSE is not cheap at around the 18-20, and is without doubt above the long-term average of around 15-16. However, this is not excessive and could even support some negative surprises this year.
However, the underpinning of the current bull market has been dividend yields. The FTSE is currently offering 4% and is likely to increase over the coming year, with many of the large caps having excess liquidity. This is very attractive compared to other assets, particular as we shall be expecting higher rates in the future. The large number of income seekers are likely to increase the positions in the FTSE this year rather than reduce them.
Ron William, Senior Lecturer, London Academy of Trading:
The UK’s FTSE100 was reaching all-time record highs into the New Year, fuelled by a global wave of investor euphoria. 2018 was the best start to a year for S&P500 since 1999, marked by the Dow’s historic break above the psychological 25K handle.
All these technical new high breakouts are being supported by the highest level of upward earnings revisions since 2011, coupled with extreme levels of market optimism last seen at the peak of Black Monday 1987.
From a behavioural standpoint, it seems that analysts and investors are silencing tail-risk concerns in a precarious trade-off for fear of missing out on the party.
The “January Effect” is part of a tried and tested maxim that states “as the first week in January goes, so does the month”; and even more importantly, “as January goes, so does the year”. So our recommendation would be to see how January plays out as a potential barometer for the next 12 months.
However, keep in mind that we still live in known unknown times; some major markets have not even had a 5% setback in 16 months and the VIX index is at new record lows.
Back to the FTSE100, all eyes remain on the next glass ceiling: 8000. While there is an increasing probability that the market will achieve this historic price target, we must also apply prudent risk management as the asymmetric risk of a violent correction remains.
The long-term 200-day average, currently at 7422, is key. Only a sustained confirmation back under here would signal a major cliff-drop ahead from very high altitudes. Brexit tail risk will more than likely continue to weigh heavily on it.
We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!
Lee Wild, Head of Equity Strategy at Interactive Investor comments for Finance Monthly:
On the FTSE 100 rally:
There have been a number of key drivers behind the FTSE 100’s latest rally, among them a weaker pound, likely increase in UK interest rates, government housing policy and a lack of any viable alternatives for investors.
There’s an inverse relationship between sterling and the FTSE 100. A weak currency is great news for the FTSE 100’s army of overseas earners who receive a windfall when expensive dollars are converted back into sterling. The US economy is thriving too, and many UK companies, like Ferguson (the old Wolseley), InterContinental Hotels and Ashtead, make much of their money there.
A more hawkish Bank of England has been good for banks, which typically generate higher margins when interest rates rise. The government’s promise to extend the Help to Buy scheme is also a massive boost to UK housebuilders Barratt Developments, Persimmon and Taylor Wimpey.
While it’s true there are fewer bargains around, investors can still find plenty of companies trading on reasonable valuation multiples paying a generous and affordable dividend. And it’s much harder to find the level of returns on offer from equities in other liquid investments.
This should underpin confidence in the stockmarket and possibly steer the FTSE 100 to an all-time high at 7,600, especially if Brexit talks go badly or a threat to Theresa May’s leadership puts pressure on sterling.
On Bitcoin:
The value of bitcoin has almost doubled in less than a month which is clearly attracting further interest from speculators. There’s evidence of growing institutional activity, too, and if China reopens cryptocurrency exchanges after the Communist Party Congress which starts next week, some believe the price could reach $10,000 by the end of the year.
However, there could be near-term turbulence around changes to the code the bitcoin network runs on, due to be implemented in mid-November.
It is crucial that retail investors understand the many risks involved in cryptocurrency trading, not least the volatility - bitcoin has lost more than a third of its value on two occasions since June. It is clearly not for the faint-hearted.
Following a 66% share drop, hundreds of thousands of families that lend off Provident Financial have been placed in limbo, as the firm collapses due to a glitch.
According to reports, a software bug made it impossible for Provident Financial, a blue-chip FTSE 100 company, to collect debts from clients. This resulted in a 66% drop in shares within a day, bleeding £1.7 billion out of the Bradford based company’s gross value.
It’s now considered to be the biggest ever one-day stock price fall for such a firm. The company CEO, Peter crook, immediately resigned. The whole ordeal has also resulted in several investigations and the axing of its dividends.
On top of this, the 137-year-old company’s customers, mostly vulnerable low class families with very little income, will be affected.
The software that created the bug was introduced following a £21.6 million overhaul of the firm’s doorstep collection business, which collects customer debts on loans with up to 535% annual interest. A rehiring of staff fell flat and failed the firm, then an appointment system software that was introduced also failed to improve efficiency, all in all letting the company down when it came to meetings with clients, and therefore slumping profits.
According to the Daily Mail, Chairman Manjit Wolstenholme, who has taken over the daily responsibility of the company after Crook resigned, said: “We’ve got people on the ground, but we have issues with the software being used by them. Agents are turning up at the wrong time when customers aren’t there.
“It’s not behaving because the data that’s in there isn’t good enough for what we need to do. This is something we should be able to do something about.”
Just eight of the publicly listed companies cite the technology in recent annual reports.
Despite robotics and automation being at the forefront of many business conversations over the last 12 months, research announced by Redwood Software suggests that companies are not yet willing to reveal their plans.
Of the listed organisations, eight of them mention robotics in their most recent annual report, with just two including detailed references to both robotics and artificial intelligence (AI). Only insurance company Aviva, and support services company, Capita, outline automation to be a focus for them, despite many others also implementing the technologies across their business.
As large organisations look to streamline complex processes and develop a technology-driven enterprise model to keep up with more agile start-ups, robotics have the ability to assist them, improving both productivity and efficiency of operations. Neil Kinson, chief of staff at Redwood Software commented: “We know there are a lot of high-level organisations and brands across a variety of industries that are doing some sort of work with robotics and automation, so it’s surprising to not see this reflected in their annual reports. However, with business competition continuing to rise, everyone is working to gain the strategic upper hand and not give too much away.”
“Every business is undergoing some form of digital transformation, and many are using robotics as a means of achieving success when doing so. The problem, however, is that as the business case for automation continues to grow, the desire for organisations to establish themselves as innovators in robotics will only become more prominent. As companies seek to increase value by strategically streamlining core operations, we’re bound to see competing services and a variety of offers. ”
Both robotics and automation have been at their technological tipping point for the last few years, and are estimated to have contributed to around 10 per cent of GDP per capita growth in OECD countries between 1993 and 2016.
(Source: Redwood Software)
