Week in Review: FTSE nudges down as interest rates are held
The UK’s leading stock market index ended the week down slightly as the Bank of England held interest rates and warned on an “unusually uncertain” outlook for the economy.
- Rightmove’s keenly watched house price index will land on Monday (21 September). It is seen as a useful indicator of buyer and seller confidence.
- The Confederation of British Industry releases its Industrial Trends survey on Tuesday (22 September), offering insight into the health of the UK’s manufacturing sector.
- CIPS/Markit provide an update on the productivity of UK firms on Wednesday (23 September).
- On Thursday (24 September), the Cranfield School of Management publishes its annual report on the number of women on FTSE boards.
- Z/Yen Partners publishes the 27th edition of its Global Financial Centres Index on Friday (25 September). Last year London retained second place in the rankings behind New York.
SECTOR IN FOCUS
Like double-decker buses and fish and chips, British Airways is a national institution in the eyes of many, despite complaints of slipping standards in recent years.
Therefore, it will have shocked many to hear Alex Cruz, the chief executive of BA, which is part of International Consolidated Airlines Group (IAG), tell MPs this week that the airline is fighting for its very survival.
His blunt assessment of BA’s fortunes highlights the plight many airlines are facing. And it’s not limited to long haul carriers; low-cost players Ryanair Holdings plc (RYA) and easyJet plc (EZJ) have both announced job and wage cuts to make it through the crisis.
Record-low interest rates are here for some time, it seems. On Thursday (17 September), the Bank of England (BoE) kept rates at 0.1% and warned they would not rise until the economy picked-up and inflation returned to its 2% target.
With inflation currently 0.2% and the economy still roughly 11.5% smaller than it was at the end of last year, it could be some time before the BoE increases the cost of borrowing.
But who are the winners and losers from low interest rates?
Homeowners are the obvious winners, as it means they are charged less interest on their loans. Low rates should also be supportive of share prices in the short-term – in theory, at least.
The biggest losers are savers, who will have to continue to put up with poor rates on their savings, and banks, which will see their profits squeezed.
In previous weeks we have covered good starter funds for both adventurous and cautious investors. But what about those in the middle? L&G Multi-Index 5 I Acc (GB00B8VZ3F59) is made-up mainly of low-cost passive funds that invest globally, meaning it has a relatively small ongoing charge of 0.31%. It has returned nearly 15% in the past three years and 42% in the past five.
22 September – Lockdown sparked a DIY boom that helped B&Q owner Kingfisher plc’s (KGF) post strong sales growth in the second quarter. Has that continued now that the restrictions have been loosened? We will find out when the group releases its interim results on Tuesday (22 September).
24 September – Coronavirus has forced a raft of UK companies to slash their dividends in order to preserve cash. However, water services company United Utilities Group plc (UU) bucked that trend in May when it hiked its pay-out. This will likely be a key focus when issues a trading update on Thursday (24 September).