Posts Tagged ‘ FTSE ’

Carney at the TSC – and it impacted the FTSE

Mark Carney finally gave his eagerly anticipated testimony to the Treasury Select Committee today, and it confirmed to me something that I’ve been thinking about for a while – that the appointment of Mark Carney as the new Bank of England Governor could have a major impact on the UK stock market. That sterling rose when he seemed cooler on easing than investors thought isn’t the biggest surprise, but sometimes people doubt that the stock market is so sensitive, being composed of many constituent companies with their individual earnings profiles which are so much more than just a proxy on monetary policy (and so detached from the condition of the domestic UK economy). Today’s stock price movements did suggest sensitivity to what he was saying, however, from weakness in the banking sector to the minute by minute chart of his speech and price movements. The picture was muddied by the conflation of his written answers and what he was saying in both media reports and investor reaction.  But the combination of at least the use macro-prudential tools to tackle asset bubbles without raising interest rates and his scepticism over QE could have interesting effects on stock prices, and potentially pressurise them in different directions. Have to shoot now: the market report I wrote on this today is here, but more soon on this, I promise…

The underperforming FTSE – set to rebound?

See my piece here. The FTSE’s underperformance in the last year is rooted in two main factors: that it has a defensive skew, which mean it naturally rises less in rising markets, and the fact that the rising market itself has not been driven by those cyclical sectors that it is more heavily weighted in. That means that the last year has been the perfect storm for the FTSE to lag.

The converse is therefore also true, and moving into next year, the FTSE could find itself a winner whatever the weather. If miners rebound, as is expected, then that will benefit the FTSE disproportionately but also if the global growth outlook darkens and the “Draghi put” runs out of steam, with the euro zone debt crisis re-intensifying and hammering financials once again, the the British defensive skew should also help it out.

As China sees a soft landing, a certain amount of cyclical rotation into miners seems likely, which may dampen enthusiasm for financials even without renewed crisis. Fund flow data reflects this. And while the perfect storm that has hampered the FTSE could carry on into the first part of next year, the bets on the FTSE falling are being reduced by even more than my story says, with Karl Loomes, Market Analyst at Astec Analytics, informing me yesterday that over the past 30 days there has now been a 54% decrease in shares being borrowed on the FTSE– far outstripping European peers.