Markets: The week that was (16-20/11/09)

Markets hit a cold spell last week as profit-taking and lower commodity prices spelled the end of the recent rally.

London markets were on a downhill slope after a sparkling start to the week failed to stick. The FTSE 100 (UKX) closed the week around 40 points amid a trickle of corporate results.

Supermarket chain Morrisons (MRW) put in a decent performance in the third quarter, news which was overshadowed by the departure of chief executive Marc Bolland to head up Marks & Spencer (MKS). Meanwhile, there were more signs of stability coming out of the housebuilding and real estate sectors.

Lloyds Banking Group's (LLOY) restructuring was also given the go-ahead from the European Commission.

Things remained strained on the economic front with the future of quantitative easing splitting the Monetary Policy Committee while inflation lifted for the first time in eight months.

The industrial metals and mining sector was the strongest performer during the week, piling on almost 5%. Utilities were also pushing forward with gains of around 3%.

However, most sectors lost ground over the last five sessions with the automobile and parts and forestry and paper sectors plunging by around 6%.

Wall Street was touching new 13-month highs at the start of the week before plunging heavily into the red amid weak third quarter housing data and a stronger US dollar. The latest jobless benefits data fuelled uncertainty over the state of the economy despite coming broadly in line with expectations. The Dow Jones dropped back below the 10,300 mark before gradually recovering some of the ground lost with the Nasdaq and the S&P 500 also faring badly.

A large fundraising from banking heavyweight Mitsubishi UFJ and a stronger yen combined to drag Japan's benchmark index down to a four-month closing low. The Nikkei slumped 127 points to 9549, with banks and exporters leading the falls. Japan Airlines also plunged after the country's transport minister refused to allay fears a court-led bankruptcy was awaiting the firm.

The news from Monday

** Housebuilder Persimmon (PSN) stoked hopes of recovery in the housing market with an improvement in third-quarter trading activity.

The UK's largest housebuilder by volume said activity levels have continued ahead of last year since reporting its first-half results at the end of August. Prices have also held firm while cancellation rates have dropped to around 16%.

** Solo Oil's (SOLO) share price plummeted by almost a quarter after the company announced a placing to raise �6.4 million to buy a 12.5% stake in Tanzanian oil well Likonde-1.

The AIM-listed company is placing a total of 128 million ordinary shares of 0.01p each at a placing price of 0.5p after it struck a farm-out deal with London-listed Aminex (AEX) for a share in the well.

** Plunging platinum prices and South African mining inflation have taken a hefty chunk out of full-year profits at mining powerhouse Lonmin (LMI).

The platinum miner posted a pre-tax loss of $272 million for the year to 30 September, compared with profit of $779 million in 2008. South Africa-focused Lonmin saw its revenue halve to $1,062 million for the year.

The action from Tuesday

** Interest rates are likely to remain on hold throughout 2010 despite the fact that inflation increased in October for the first time in eight months - and is expected to continue to rise in the month ahead.

The Consumer Prices Index - the official measure of inflation - rose to 1.5% in October from 1.1% the previous month. The Office for National Statistics, which publishes the monthly inflation figure, says the main upward drivers have been transport and food costs. Overall transport costs have risen by 3.5% year-on-year.

** Budget airline easyJet's (EZJ) full-year profits took a nosedive as soaring fuel costs rocked the aviation industry.

The airline's pre-tax profits plunged over 64% to �43.7 million in the 12 months ended 30 September. The �79.4 million reduction was driven by a substantial �86 million increase in fuel costs, the airline said.

** Barratt Developments (BDEV) reinforced the cautiously optimistic mood in the housebuilding sector as it reported higher reservations and a stronger order book.

The FTSE 250 group, which announced a �720.5 million rights issue and placing in September, said its private reservations since July were up 34% on the same period the previous year with the average selling price climbing by between 8% and 10%.

The action from Wednesday

** The multi-billion pound question on the future of quantitative easing heavily split opinion on the Monetary Policy Committee in its November meeting, according to minutes released today.

Although seven of the nine members voted for a �25 billion extension from the initial �175 billion level, David Miles wanted a �40 billion rise to "provide greater insurance to the downside risks to growth and inflation".

Meanwhile, Spencer Dale, the Bank's chief economist, believed there should be no increase at all. He claimed that more money pumped into the economy might fuel "unwarranted increases in some asset prices that could prove costly to rectify".

** High Street mecca Marks & Spencer (MKS) gave its investors a reason to celebrate after unveiling Marc Bolland as its new chief executive.

Bolland, the chief executive of supermarket chain Morrisons (MRW), will take up the position in the new year following Sir Stuart Rose's decision to step down.

However, Sir Stuart will continue as part-time chairman of the retail chain to ensure a smooth transition, before handing over the reins completely in July 2011.

** Lloyds Banking Group (LLOY) can press ahead with plans for the UK's largest ever rights issue after its radical restructuring plans were formally given the go-ahead by the European Commission.

The beleaguered bank, which is 43% owned by the taxpayer, is planning to sell off a fifth of its UK branch network in return for the state aid it has so far received following competition concerns in Brussels.

Competition commissioner Neelie Kroes said the divestments will create an entity with a market share of around 5% in the retail banking market, and a solid footing in mortgage and small and medium-sized enterprise markets.

The action from Thursday

** Perseverance paid off for supermarket chain Morrisons (MRW) after it welcomed a record number of customers into its stores in the three months to November.

A record 10.8 million customers walked through its doors each week during the period, up over 1.6 million since Morrisons first launched its Food Specialist for Everyone strategy in 2007.

As a result, the supermarket's total sales for the 13-week period rose by 9.1%, while like-for-likes sales grew 4.3% - although the latter figure was marginally below analysts' predictions of 4.6% growth and failed to match the 7.8% recorded in the first half of the year.

** Oil explorer Dana Petroleum (DNX) has ramped up output to 42,000 barrels of oil per day in the last three weeks, putting it firmly on track to hit its yearly production targets.

The FTSE 250 group said it expects to reach a 2009 level of around 39,000 barrels of oil per day (boepd) after pushing ahead with an ambitious exploration programme. Dana has averaged approximately 38,200 boepd so far this year.

** Shoppers were starting to loosen their purse strings in October with retail sales growing at their fastest rate for 17 months, official figures have shown.

Last month saw a 0.4% rise on an upwardly revised September figure from the Office for National Statistics - slightly weaker than suggested by surveys from the Confederation of British Industry and the British Retail Consortium.

The action from Friday

** Fund management group Gartmore has confirmed plans to float on the London Stock Exchange at the end of the year in what will be the biggest initial public offering this year.

It is intending to float between 30% and 50% of new and existing shares which will value the company at around �1 billion.

The asset manager, which had �21.8 billion of funds under management in September, will use the money raised - around �300 million - to cut its net debt to �150 million.

** Nationwide has seen an exodus of savers over much of 2009 as low interest rates take their toll.

The UK's biggest building society results saw �5.6 billion of retail deposits withdrawn in the six months to September.

Its financial results for the period show a profit of �143 million � down 62% drop from the �274 million profit it reported a year earlier.

** Car production fell 6.7% in October - its slowest monthly drop so far this year, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

On the year, car production stood 38.1% lower than this time 12 months ago.

Paul Everitt, SMMT chief executive, said: "The scrappage scheme and early signs of recovery in global markets offer some encouragement to UK vehicle producers, but 2010 is expected to be another difficult year for the industry."

Markets: The week that was (16-20/11/09)

More Articles