UK shares started the week cautiously amid ongoing political uncertainties and with a US interest rate decision looming.
Miners helped the FTSE 100 index to a gain of 0.3% on Monday, with Fresnillo up 5.6% and both Anglo American and Rio Tinto adding 4%.
Tuesday saw energy stocks down as oil hit a three-month low on news that Saudi Arabia had increased production. Royal Dutch Shell fell 1.7% while BP was down 1.4%. The FTSE 100 slipped 0.1%.
Builders’ merchant Wolseley hit a 10-year high on Wednesday on hopes for its upcoming results. The shares added 2%, while the wider market was up 0.2% ahead of the expected interest rate rise in the US.
Lloyds Banking Group gained after the government reduced its stake to less than 3%.
But AstraZeneca was lower despite issuing an apparently positive update on the Phase 3 trial of its ovarian cancer treatment Lynparza.
House builders including Persimmon were also under the cosh after a warning that the UK could lose 200,000 European construction workers if it did not retain single-market access.
The FTSE 100 hit a record high of 7,415 on Thursday, led by miners as a weaker dollar boosted metal prices.
Anglo American climbed 8.6% while Vedanta Resources added 8.3%. The FTSE 100 gained 0.6%.
UK shares were little changed in early trading on Friday.
Company Focus:J Sainsbury
Sainsbury’s reported a decline in supermarket sales since January, but strong growth at newly-acquired Argos.
In a trading statement for the nine weeks to 11 March, the retailer said like-for-like supermarket sales were 0.5% lower compared with the same period last year. The group attributed most of the negative performance to Easter and Mother’s Day being later this year.
However, Argos posted 4.3% growth in like-for-like sales, well ahead of forecasts of 1.9% and helping the group to a 0.3% sales increase overall.
Chief executive Mike Coupe said the group continues to invest in digital and has introduced enhancements to the Argos website and app. There was a 7% rise in online grocery sales.
“Online participation is growing, driven by mobile and Fast Track delivery, and customers are responding well to new ranges.”
But, he added: “The market remains very competitive and the impact of cost pressures remains uncertain.”
Home-moving activity in the UK appears to be in “secular decline”, the Council of Mortgage Lenders said, as it reported a 28% fall in borrowing by homebuyers in January compared to December.
Compared with a year ago, borrowing by homebuyers was flat overall, though for first-time buyers it was up 9%.
"January gives the impression of a flattish market overall, albeit one with a resurgent remortgage sector,” said Paul Smee, director general of the CML. “We expect a seasonal dip in activity in the winter months and this appears to be the case in January. However, the lull in moving activity appears stubbornly persistent, and we have commissioned research on the reasons why the number of transactions seems in secular decline."
Unemployment has fallen to its lowest level since 1975, but wage growth has slowed. The unemployment rate fell to 4.7% for the three months to January, from 4.8% previously, said the Office for National Statistics (ONS).
The number of people in work increased by 92,000 to 31.85m. But the so-called wageless recovery continued, with the increase in average earnings slowing to 2.2%, from 2.6% previously.
IHS Markit economist Howard Archer said: "The labour market has been helped by the economy's extended resilience since June's Brexit vote, but mounting signs that consumers are starting to limit their spending fuels belief that 2017 will become increasingly difficult for the economy and for the jobs market."
The US Federal Reserve raised interest rates by 0.25% on Wednesday to a new range of 0.75%-1%. But Fed chair Janet Yellen calmed the nerves of those fearing an aggressive series of hikes, saying “we have plenty of time to see what happens”.
Donald Trump released an outline of his first budget, including a 10% increase in military spending next year, and funds to help deport more illegal immigrants and build his wall on the Mexico border. He is also fulfilling his campaign pledge to leave social security and Medicare funding – more than 40% of federal spending – untouched. His spending plans are to be funded in part by downsizing government.
The Bank of England voted to keep interest rates unchanged at 0.25%. But for the first time in eight months the decision was split, with one member of the bank’s Monetary Policy Committee voting to raise rates.
Research by the ONS confirmed that housing is less affordable than ever, with the average property in England and Wales costing 7.72 times earnings.
The so-called “affordability ratio” of house prices to earnings is up from 7.52 in 2015 and has more than doubled since 1997. House prices increased by an average of 5.4% in 2016, while average earnings were up only 2.4%. Since 1997, average prices have risen 258%, compared to a 68% increase in earnings.
Company announcements that caught our attention this week
Key company diary dates
Best & worst performing sectors (rel. to FTSE 350)*
Best & worst performing stocks*
* Weekly movements up until close of business Thursday.
Main source of information: Company Report and Accounts, Bloomberg
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