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Last Week in London

09 May 2004 ANgelo Coppoal

Re-opening after Monday's May Bank Holiday, the London market got off to a good start.

Quentin Smith from OMAM reports that with banks higher on takeover speculation and energy stocks up, Brent crude oil futures hit new 13 year highs amid growing concerns over Middle East security and gasoline supplies.

The market then lost ground following Thursday's interest rate rise amid concerns over the impact of possible future rises on economic growth, before coming under further pressure at the end of the week after stronger than expected US employment data increased the chance of an early interest rate rise across the Atlantic.

At its monthly meeting, the Bank of England's Monetary Policy Committee raised its benchmark lending rate to a 3½ year high of 4.25%, further widening the differential between the US and Europe, where the ECB left rates unchanged at its own meeting last week.

The MPC is committed to a gradual raising of rates and remains concerned over high levels of spending and debt.

Further rationale for the rise will be contained in the minutes of the meeting, to be published next week.

The monthly HBOS house price survey showed annual growth accelerating in the three months to the end of April, adding to the case for a further rate rise.

The average price rose 1.8% in April from the month before, giving a year on year rise of 19.1%, up from 18.5% in March.

HBOS commented that the strength of the economy in general and the labour market in particular were key factors driving the housing market.

Over the week the All-Share and the FTSE 100 were broadly flat, while midcaps and smallcaps both lost over 1%, enabling large caps to narrow the gap that has widened this year.

The defensive areas of utilities and consumer staples were among last week's outperformers, although the strongest sector was oil & gas, benefiting from the strength of the oil price, which gained a further 6%. Technology was the weakest area.

Low cost airline Easyjet (-22.2% to 230p) warned that it was cautious about its full year performance, leading to a sharp decline in the share price.

Although the company expects to make continued and sustainable progress this year, it expects increasing competition to take its toll.

Easyjet's reported a narrowing first half loss after filling more seats and keeping costs stable.

The company is expanding its European network, adding Airbus SAS A319 jetliners to its fleet and reducing costs while planning to offer 20% more seating to attract more budget travellers. It is also opening two new airport bases in Germany.

Quick Polls

QUESTION

There are countless articles written about South Africa’s poor retirement outcomes. Which of the following would you single out as the biggest contributor to local savers not accumulating enough to buy an adequate and sustainable pension?

ANSWER

Lack of personal accountability
Poor participation in formal retirement funds
Reluctance to seek financial advice early on
SA’s high unemployment rate
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