*** F&C caught off-guard
*** MPC leaves interest rates untouched
*** Boeing's remarkable recovery...Turkey's high unemployment...what next for gold?...and more
------------------- – F&C Asset Management was horribly wrong-footed by Resolution Life's decision to end a life fund contract with the fund manager.
– The terminated contracts – which amount to some £22bn of assets of closed funds – pulled in around £28m of management fees for F&C last year alone. The contracts were ended following Resolution's decision to merge with rival Britannic Group.
– 'We found out about this [contract termination] very recently and we have to assess what the impact is,' F&C chief executive Howard Carter said yesterday. F&C shareholders found out pretty suddenly, too, dumping 8% of their stock. Only Britannic Group fell further in the mid-cap index, shedding 14% to close at 440p.
– Tell you who did enjoy the news: Royal & Sun Alliance investors reckoned that further sector consolidation was due, with RSA the perfect candidate for a merger. The shares added 3% - to close atop the blue chip index.
– The FTSE 100 inched 5 points up to close at 5,009. The FTSE 250 closed 0.1% in the red, down to 7,219, while the All Share index climbed just 2 points, to trade at 2,508.
– Following a string of gloomy economic indicators, the Monetary Policy Committee's decision to keep interest rates steady yesterday at 4.75% – for the 10th month in a row – came as no surprise This past week the CBI said that plunging high street sales have spread into the consumer sectors, while Halifax noted that property prices suffered their steepest fall since October last month. Yet we hope the MPC hasn't forgotten that inflation – while below the 2% target – remains at a 7 year high of 1.9%, and does not look like easing anytime soon...
– Back in the market, Wm Morrison continued its fall yesterday, following its fifth profits warning since buying Safeway in 2003. The share price fell 3% on Thursday, and has now shed some 7% in the past four trading days. It closed at 177p, a 9-month low for the stock.
– And easyJet gained 5% on rumours that Icelandair may be contemplating bidding for the group. Its shares closed 10p up at 245p. Meantime easyJet supplier Boeing – which has been playing second-fiddle to Airbus since 2003 – is raising its game, and has propelled its sales for the new 787 model to 245 – compared to just 145 new orders for Airbus. And this is despite its recent scandals, including industrial espionage and a nasty sex drama.
------------------- – There's nothing wrong with the rate of economic growth in Turkey...but it's unemployment – and not low wages – that are the real source of poverty in the country, says investment bank Morgan Stanley. Moreover, if you've ever been to the country as a tourist, you'll know all about the high percentage of Turks who work in the unregistered economy – say as tour guides – which has no social safety net. There are ways for Turkey to get around these problems...and lift the unemployment rate and the country's performance in the process...but it will take hard work...
– The new President of the Dallas Fed Richard Fisher recently said, 'We're in the eighth inning of a tightening cycle [the Fed's interest rate hikes] – we have the ninth inning coming up at the end of June.' And what happens at the end of this 'inning'? asks MoneyWeek's Tim Price. Does the Fed 'declare quick victory, pack their briefcases and cheekily celebrate after nine effortless little baby-step innings?' Tim quotes Doug Noland. And what if this is a 'best-of- seven game series'...and the opponent comes back stronger than before?
– In order to determine what's next for the gold price, you need to keep the historical context for current prices, which shows that adjusting for inflation, gold is trading at just $175 per ounce in 1980-dollars, the same year the price of gold shot up $850 an ounce, says Doug Casey in the Daily Reckoning. But there's more reason to be bullish on the prospects for gold...the precious metal of course has an inverse relationship with the dollar: so when the dollar falls, the gold price rises. And right now the 'dollar's problems are legion and almost nothing will keep it from heading lower', says Doug.
Published in Stock markets
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Heather D'Alton
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