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FTSE 100 holds steady as central banks keep interest rates on hold

·3-min read
Andrew Bailey: Next Governor of the Bank of England: REUTERS
Andrew Bailey: Next Governor of the Bank of England: REUTERS

The FTSE 100 was set for a slow start today at the end of a week which saw the Bank of England warn it may bring in negative interest rates.

Yesterday's surprise comments from the central bank that it could follow Europe down the path of reducing rates, currently 0.1%, to below zero saw the pound drift slightly lower today, while Asian markets had a mixed Friday. Japanese, Chinese and Hong Kong share indices inched higher while Australia's fell.

Reports that Donald Trump was now making noises about security issues at video games companies including Riot Games and Epic Games had a big impact on Chinese giant Tencent which invests in both companies. Tencent lost more than 2%, knocking some confidence in Chinese stocks generally.

Markets suggest Wall Street stocks will have another weaker session when trading opens there later, so there were few reasons to expect much strength in UK stocks.

The FTSE-100 Index was expected to open three points lower at 6047, with France's CAC-40 unchanged and the Dax in Germany 14 points up at 13,222.

UK retail sales data today rounds off a busy week for economic news with the figures for August expected to be up perhaps 0.8% - the fourth monthly gain on the trot. This series of data has a tendency to be erratic and wrongfoot market expectations but the general direction of traffic will help paint a picture of the state of the recovery.

The Bank of England yesterday said it had been surprised at the strength of the pickup but economists caution that could change when the state-funded furlough scheme ends next month. Anecdotal evidence suggests bosses were this week already beginning their redundancy notice negotiations with staff.

The CBI said today that almost half UK businesses were planning to cut back their recruitment over the coming year.

Traders will be eyeing Sainsbury shares again today after they rose following news that Czech billionaire Daniel Kretinsky had bought a stake of more than 3% in the group. The energy tycoon has had a similar effect on the share price of Royal Mail where he has also been stakebuilding. His stake there has risen in value from £200 million to £300 million since he started buying in March.

The question is, what does he plan to do with these stakes? Is he simply looking for undervalued stocks to hold for the long term or will he turn "active" and begin insisting on corporate changes such as mergers or disposals?

Value investing - jargon for the former of those two strategies - is a risky business, as M&G fund management veteran Tom Dobell found in the latter years of his career. Dobell, who stepped down yesterday from the £1.4 billion M&G Recovery Fund after 20 years, had a stellar track record in his first decade in charge but has underperformed badly in recent years, returning 14% over the past decade against the 79% from the UK All Companies sector.

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