Weekly Financial Market Updates UK – January 14 – 18

While US continues to post positive economic data, there are still concerns on the European economic data, including the UK. Key market movers this week included the S&P500 reaching a 5 year high, positive GDP data from China and the weakening of the Yen via the BoJ.

Market rally in the New year appeared to have stalled on concerns of mixed news. While retail sales data from the US came out positive the overall sentiment was leaning towards risk. The German economy contracted by 0.5% during the fourth quarter of 2012. The FTSE closed at 6117.31 on Tuesday.

The FTSE closed lower at 6103.98 on Wednesday on renewed concerns on the state of the global economy with the World Bank cutting growth forecasts. It was positive reports from JP Morgan and Goldman Sachs along with a fairly upbeat US inflation data which managed to help the markets recover.

The other important shake up for the day happened with the ‘Horse meat’ scandal which wiped off £300 million off Tesco’s market value. The supermarket’s shares were down 1% as the Food Safety Authority of Ireland found low levels of horse in beef products sold in Tesco, Aldi and Iceland. The burgers were made at two plants, in Ireland and the UK.

Thursday saw the FTSE100 open positive boosted by the Airlines sector, IAG on news that the airline and its unions would agree to a restructuring plan for the Spanish fleet. The FTSE 100 closed Thursday at 6132.36.

The week concluded with the S&P500 reaching a 5 year high, touching 1480 before slipping back on Friday. Stocks were boosted with the 12% jump in the housing starts in December which boosted investor confidence. The positive data managed to rub off onto the FTSE which hit a four and half a year high. The FTSE100 finished at 6154 on Friday, marking the highest level since May 2008.

Bad economic data continued to plague the UK as fears that Britain might be heading for triple dip recession looms large. Key retail sales figures for December 2012 pointed to a lackluster figure as the official data showed retails sales dropping by 0.1% between November and December and 0.6% between the third and fourth quarters.

Indices at a glance
FTSE 100 Index 6154.41 (0.36%)
German DAX 7702.23 (-0.43%)
CAC 40 3741.58 (-0.07%)
Dutch AEX 350.89 (-0.09%)
NIKKEI 225 10913.30 (2.86%)
Hang Seng 23601.78 (1.12%)
ASX200 4771.23 (0.31%)
Shanghai Composite 2317.07 (1.41%)
NASDAQ Composite 3134.71 (-1.29%)
Dow Jones Industrials 13649.70 (0.39%)
S&P 500 1485.98 (0.34%)

Key events for the UK for the week ahead – January 21 – 25

22/01/2013 – Public sector net borrowing: Tuesday will see the December 2012 public finance data being released. The previous month saw a disappointing deficit of £17.5 billion. The forecast for December is expected to be a deficit of around £12.6 billion and potentially see an improvement in excess of £2 billion compared to December 2011.

23/01/2013 – December Unemployment: The December job market report is scheduled to be released along with November’s average earnings data. The previously reported unemployment data saw a robust growth with unemployment benefit claimants dropping by 3000 in November 2012.

It is expected that the December unemployment report will see a steady hold on the number of unemployment claims wile November’s earnings growth continues to be subdued at 1.5%.

MPC Minutes meeting: The Monetary policy committee minutes for January is expected to show the future course of action from the BoE. During the November meeting, the MPC steered clear from launching more quantitative easing and the same sentiment was held during December’s meeting as well.

25/01/2013 – Preliminary GDP estimates: The all important economic data is due to be out on Friday with the first estimate of the fourth quarter UK GDP. Analysts will be keenly watching the numbers after the third quarter showed a +0.9% GDP growth. Focus will be if Q4 managed to keep up the growth. A drop in the GDP during Q4 will clearly point towards a triple dip recession, which the UK clearly wants to avoid.

The overall consensus however doesn’t look positive with expectations of a -0.4% Q4 GDP as other data such as services sector posted moderate growth of 0.1% increase in October while manufacturing come out with monthly declines of -1.3% and -0.3% in October and November is a point of concern.

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