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Yet another hurdle cleared this week as the UK flagship index went on to make a decisive breach of 6,600. The bulls are loving it, already eyeing up the pre-crisis highs of 6,760 and then even those of 6,940 before the dot.com bust. What has taken the FTSE up another 100 points during this shortened holiday week? No surprise that it was high beta names that were the drivers, but was it the banks or the miners? Stock-wise we look at the top and bottom four influencers below.
HSBC(HSBA) has been the biggest helper (21.7 points) following its Q1 results which showed a near doubling of Q1 profits, reaping the rewards of a 3yr restructuring and simplification programme, significant cost cutting, a halving of loan impairments and more diverse geographical exposure than peers. The stocks gains of 4.3% over the week and test of 3yr highs of 740p, was magnified by its significant 7.6% index weighting meant it was the biggest influence this week, helped also by favourable broker notes and upgrades.
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Next best was peer Lloyds Banking Group (LLOY) whose more impressive 9.1% gains added another 13.8pts to the index. This was a result of the taxpayer-supported bank announcing the sale of a commercial real estate loans portfolio and Sainsbury’s taking full control of Sainsbury’s Bank. Disposals looked upon favourably as taking it a step closer to release from the government’s clutches and back to the markets. BT Group (BT/A; +12.4%/+11.0pts on competition with BSkYB for football coverage). Barclays 6.3% weekly advance with a 9.2pt contribution, moving higher on sector/market strength.
At the other end of the table we have another non-UK focused bank – Standard Chartered (-4.5%, -6.3pts). While all the UK-listed the banks posted decant big trading day ranges (big beats, difficult to decipher headlines), STAN opened down sharply, giving up all the benefit from fellow emerging market-focused HSBC’s prior day rally to close significantly lower. Moderate Q1 revenue growth (dented by margin pressure) was offset by increased impairment and expenses (quite the opposite to HSBC). Shares suffered further after broker updates showed some preference for HSBC.
The next drags on the index were BP (BP; -1.2%/-3.7pts; trading sideways for 2 weeks), BSkyB (BSY; -6.3%/-3.0pts –on news it faces competition from rival BT on premiership football coverage) and G4S (GFS; -19.0%/-2.4pts after Q1 growth levels taken badly and brokers cut ratings and targets).
Macro-wise, big surprises were the poor Chinese HSBC Services PMI which maintained worries about growth, as did trade data which may have been flattered and mixed inflation. Eurozone Services PMI remained weak, German Factory Orders and Industrial production were much better, boosting hopes for the region. Portugal returned to the long-term debt markets with a successful first auction since its mid-2011 bailout. UK Production showed a rebound and US jobless claims continued to please near multi-year lows.
Next week is another busy one for reporting with names such as Aviva (AV), British Land (BLND), ICap (IAP), ITV (ITV), Wood Group (WG) and Vedanta (VED) amongst others. Economic data also remains in full flow with updates on Chinese Industrial Production & Retail Sales, US Retail Sales, ZEW Surveys, UK Employment, Eurozone GDP, US Production and much more to decide the direction of equities, indices, commodities and currencies. If you are not receiving our research already, rectify this now by clicking above to ensure you stay in the loop with the markets and their moves.
As always, have a great weekend.
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