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Blame It On Brussels
By
Investment Editor
Adrian Ash
Nov 02, 2005
*** Staggering incompetence...blame it on Brussels...
*** Why history's no guide...but you'd be daft to ignore it...
*** Square Mile rumours...a frenzy in oil...cash needs a home...and more.. -------------------
- 'Staggering incompetence' said one Midlands MP. 'A tragedy,' said a spokesman for Labour. The Lib Dems claimed it all went wrong in 2000...the Green Party called it 'an indictment of global free trade'...and Roger Knapman of UKIP said the workers were 'victims of EU legislation'.
- But maybe - just maybe - the cars made at Longbridge couldn't find enough buyers. MG Rover's collapse leaves New Labour stuck in reverse, however, with just four weeks 'til polling day.
- 'Tony Blair apparently spent 25 minutes on the phone to the Chinese premier begging him to reconsider and put some pressure on, so the [Shanghai Automotive] deal could go ahead,' reports Andrew Marr for the BBC. 'But he was unsuccessful and it's the end of the road for MG Rover.'
- Better news for Tony Blair in the stock market, however. The FTSE100 managed to close up on Friday for the first week in five. It ended 1.3% higher from last Monday's open at 4,977. The All-Share rose 1.1%...and the mid-cap 250 added 0.8%...while the Small-Cap index stood still for the week.
- Enough of last week. Where's the best place to put your money today? History's no guide, or so the regulators claim. But if you don't study history, just what will you study instead?
- 'Markets often spring into life in April,' said David Schwartz, stock market historian, in the FT recently. Prices have risen during this month 85% of the time since 1945, says his research. But as evidence gathered by MoneyWeek shows, next month's General Election could hurt City investors if the wrong party wins.
- Of the 16 post-war elections, Labour's won 8 and so have the Tories. But in the months preceding a Labour victory, the All-Share has dropped 2.1% on average. In the following month, more worryingly, the market's lost 5.6% on average...dropping 7 times out of eight!
- Still, with waiting lists and stern-faced matrons weighing heavy on the electorate's mind, the UK Health sector still looks a 'buy'. It rose almost 6% last week. Whichever party wins, spending on the NHS is unlikely to shrink.
- Beverage stocks also had a good run last week, despite Labour's plans to ban pubs selling alcohol to drunks! According to tittle-tattle in the Square Mile on Friday, SABMiller wants to buy Scottish & Newcastle. And in keeping with City tradition, traders sold off the predator and bought into the target. SAB closed the week down 0.3% at £8.23, while SCTN added 3.7% to £4.77 -------------------
- Indeed, much of London's stock market movement is being driven by rumours, a trend that began last summer. Boots closed Friday as the session's top dog, rising 3% to £6.34, after tittle-tattle claimed the chemists might be subject to a bid.
- 'With the shares at 630p, the market is anticipating a possible private equity bid for the group,' according to a analyst at Dresdner. And why not? The City is flush with cash right now. It's got to find a home somewhere.
- 'With all the technical analysts a couple of weeks ago having been very, very negative on the market we're now nudging [the FTSE100] up towards 5,000...which is quite nice,' said one UK equities trader.
- 'There's lots of cash around and more bids - it's great, just what the market needs.'
- 'Fundamentally people don't feel very comfortable with this market,' another trader told Reuters, 'but this quarter is increasingly showing a major influx of cash. You've got fund managers with equity mandates and therefore you're seeing people looking for safe, sensible ideas to put a bit of cash into the market.'
- Putting a bit of cash into oil & gas stocks is fast-becoming the ONLY idea for many investors. The sector added 2.7% on average last week, even though crude oil pulled back to drop 8% from Monday's new record high.
- Brent closed on Friday just north of $53 per barrel. But BP and Shell - the UK's top oil stocks - still managed to add 2.2% and 3.2% for the week, closing at £5.64 and £4.91 respectively. BG Group, meantime, shot ahead 4% to close up on Friday at £4.32.
- Smaller-cap energy stocks have seen no end of action, too. The little-known D1 Oils shot up more than 8% on Friday, closing at £4.27 after announcing successful trials of a new refinery that converts vegetable oil into biodiesel fuel. Black Rock Oil & Gas ended the day 25% higher at 2.15p on news that it's bought half of an oil field in Uzbekistan, thought to contain 70 million barrels of oil.
- 'Certainly, a new floor has been set for the oil price,' writes Merryn in the latest edition of MoneyWeek, 'and yes - that suggests many analysts are still using the wrong long-term forecasts in their valuation models.'
- 'But that doesn't justify the over-excitable behaviour of the AIM-listed oil companies,' she explains. 'And it certainly doesn't justify buying shares in cash shells run by people who think they might one day get an oil deal.'
- Which, of course, dear reader, you'd never dream of doing!
- If you're looking for solid stocks offering leverage to the oil price, in fact, look no further than BP, Merryn tells me today. It isn't cheap compared to its rivals like Shell or Total. But its diverse portfolio and the sheer size of its assets make BP a 'buy' for any energy investor.
Until tomorrow...
Adrian Asfor MoneyWee
Published in News & charts
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