26 May 2016

More of the same

Markets have steadied in the last week or so, with a strong one day performance for the FTSE 100 Share Index at the end of the week resulting in a positive return for the week overall.


A quiet start to the current week – the last full week in May - saw our market lose momentum, but with news media dominated by the in/out debate, it is difficult to see much headway being made for the next month.

Although this is the time of year when many companies hold their annual general meetings, giving shareholders the opportunity to quiz the board, there is little in the way of company results to look forward to. Even the AGMs look a dull lot, so we are unlikely to see any of the shenanigans that accompanied some meetings earlier in the year, particularly over directors’ pay.

Economic news will be flowing through, though, with UK growth numbers for the first quarter of the year due shortly. These are likely to confirm a rise of 0.4%, but recent surveys suggest growth has all but vanished as companies await the result of the referendum. Certainly, talking to a local businessman recently, I was told orders from clients in the European Union had slowed significantly. Perhaps this is no more than prudence in case a British exit results in the pound falling, but it is an indication of how the uncertainty could be affecting business.

There was a meeting of European Union fi nance ministers and central bankers recently, though little new emerged. However, with elections due in Spain, Japan and the US later this year, not to mention France and Germany next, perhaps this is unsurprising. Of more significance was the news that the Greek government had voted in a package of new austerity measures, which should allow further funds to be released to them. Indeed, Greek officials are due in Brussels to discuss just such a measure.

Looking forward, both the pound and shares are holding up remarkably well, given this uncertain scenario. Bookmakers are still forecasting that the Remain camp will win, which doubtless helps sentiment, while the dire economic picture painted by the Chancellor of the Exchequer and the Treasury might tempt some waiverers to opt for the status quo. Whatever the outcome in a month’s time, markets are likely to fluctuate according to how this often bad tempered debate progresses.


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