17 July 2014

Market Comment: a personal view 15th July

Early July was not a comfortable time for UK investors

As it happens, the Footsie did bounce back in the following week. Doubtless another major pharmaceutical takeover bid – again from America – helped sentiment. And we are entering a busy period for company results as those corporations trading to a calendar year end publish their half year figures. It is still too early to draw any conclusions on how business is faring, but we can hope there are not too many unpleasant surprises.

Central banks remain in the limelight. The head of the European Central Bank has been talking to the leaders of the European Union, while Mark Carney, the Governor of the Bank of England, provided evidence to the Treasury Select Committee. They probably wanted to hear when he thinks interest rates will rise and if he intends any action to cool the buoyant ho using market in this country.

Elsewhere, we seem to be winding down for the summer holidays. American markets have behaved well, even if trading volumes are low. Citibank reached a settlement with US regulators over action taken against them over the sale of certain mortgage securities. They ended up paying a whopping $7 billion fine, an indication of how tough conditions have become for the banking sector. Meanwhile, recent news includes the fact that the Costa Concordia has been refloated, while inflation has ticked up a little in this country.

House price inflation is also on the rise, something that represents a worrying trend. Quite how a first time buyer clambers on to the property ladder these days is now a real concern. Note too that Pizza Express has been bought by a Chinese private equity firm. Pizza Express does, in fact, own 22 restaurants in China, less than 5% of its worldwide total. Perhaps these Chinese entrepreneurs expect a growing demand for eating out from the rapidly growing middle class in the world’s second largest economy. We can expect more such deals as China grows in confidence on the world stage.

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