15 April 2014

Market comment: a personal view 15 April 2014

Shares have been in a risk-off mode recently,primarily as a result of the worsening situation in the Ukraine

While the uncertainty generated by the situation out east is likely to remain as a cloud over sentiment, there is plenty happening to give investors food for thought. Amongst the most important company statements due shortly will be that of Tesco’s chief executive, Philip Clarke.Their full year figures are likely to disclose a second year of falling profits on his watch. Little wonder their shares are trading at around a ten year low.

On the economic front inflation figures brought no real surprise, with the Consumer Price Index (CPI) showing a further modest decline due to lower fuel and food prices. Arguably of more significance will be the European cost of living numbers, where a further decline in the CPI could raise the spectre of deflation. It will be interesting to see if the European Central Bank embraces the concept of quantitative easing (QE), so freely used here and in the US.

As for the unemployment numbers, also imminent, a further decline looks likely, bringing the chance of an interest rate rise that little bit closer. Still, with economic growth muted and fears of downward pressure on activity developing if the Ukrainian crisis deepens, it is hard to see our own central bank taking any action that might push our recovery off course. QE remains very much on the agenda here.

So, as with earlier reflections on the likely direction on stock markets, investors find themselves facing an uncertain future where sentiment appears to remain in the hands of the Russian President. His hardline approach on foreign policy has done his popularity at home no harm – a bonus for him, given the poor performance of the economy there. A resolution to this crisis cannot come too soon, in my opinion.

Brian Tora, who is a respected writer and broadcaster on investment issues, is a consultant to JM Finn & Co. Brian has enjoyed a long and distinguished career in the City. Any opinions expressed are his own and should not be construed as advice from JM Finn & Co. A version of this article may appear elsewhere in the press

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