This week in the markets
By Andrew Webb, 2 January 2009
Investors ended the week in positive mood with all major equity markets gaining. On Tuesday, US shares were the leading risers gaining 2.4% followed by European and London shares each up 1.7%. Trading floors across the world were quiet as investors enjoyed their Christmas and New Year break. The week saw to a close the worst year for shares in decades and began 2009 on a faintly positive note with shares in London and Europe opening higher.UK retailers were among the rising stocks as the High Street’s traditional post-Christmas sale season continued in earnest. Kingfisher, the owner of DIY chain B&Q, rose 2.6% on Tuesday as analysts noted the positive effect to its balance sheet of the strong euro. The sale of an Italian subsidiary was agreed earlier in the year before the single currency (which celebrated its 10th anniversary at record highs) appreciated 20% against the pound.
Marks and Spencer rose 1.9% too as investors adjusted their positions ahead of next week’s first Christmas trading update. The sale season is being watched closer than ever this year as analysts seek clues on the state of consumer confidence and the consequences for the retail sector. The sight of crowded shops, full of bargain-hunters, will provide short-term comfort to retailers who face tough conditions in 2009.
In contrast to the crush on the High Street, Tuesday was the year’s quietest day for the FTSE 100 with just 433 million shares changing hands.
Car makers led Wall Street’s gains as the US Treasury revealed plans to support General Motor’s financing arm, GMAC. The $6bn aid will help free-up car finance and it is hoped trigger a boost to ailing sales. General Motor’s shares rose 5.6% with Ford gaining 3.2% on the news. Car dealer, AutoNation, rose a healthy 10.3% at the prospect of improved car finance availability.
Inchcape, one of the UK’s largest multi-franchise car dealers, was downgraded to “sell” by Citi’s analysts. Its shares fell 1.3% to 39p. As an indication of the dire conditions facing car dealers now, the broker first rated the stock a “buy” in August 2007 with shares at 469p.
Investors will be looking for positive signs in 2009. Last year was one of, or in some cases, the worst on record for shares. On Wall Street and in London, eight of the 12 months of 2008 were negative for shares. In Europe, nine of the 12 months led to losses. As the financial crisis gathered momentum, ultimately leading to the collapse of Lehman Brothers, it reached an acute stage at the end of Q3 when the worst losses were suffered. In September and October, Wall Street fell 9% then 17% consecutively, Europe 11% then 13% and London 13% then 10%. Investors in Tokyo were worst-off in those months suffering falls of 14% and 24% consecutively.
The first weeks of 2009 will set the tone for the New Year and investors will be hoping market fortunes improve in spite of gloomy economic predictions for 2009.
Past performance is not a guide to what might happen in the future. The value of investments and the income from them can go down as well as up. For investments in overseas markets, changes in currency exchange rates may affect the value of an investment. Reference to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity.
