FTSE bounces as Boris resigns

08 July 2022

The noise

  • The Euro sank to a 20-year low against the US Dollar with investors paring bets on the European Central Bank as interest rate hikes highlighted growing recession risk in the region. The price of one Euro in USD sank to a low of 1.01 to reach near parity.
  • Amidst a string of resignations in UK parliament Boris Johnson agreed to step down as Prime Minister on Thursday bowing to pressure from members of the cabinet. Johnson’s resignation means that Britain is on course to have four leaders within the space of six years. With the resignation count reaching above 50, this means that almost a third of the UK government has left. Post the announcement, both the FTSE 100 and sterling witnessed a bounce.
  • Copper hit its lowest level since November 2020 in light of a slowdown in economic activity, fears surrounding recession and widespread interest rate increases. The London Metals Exchange Index has also capped its worst quarter since the 2008 financial crisis.

The numbers

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The nuance

Investors have resigned themselves to the fact that recession is likely but are uncertain if it will cure the inflation problem. Inflation remains elevated and there are no signs yet of pressures easing, indeed the expectation for July's US inflation print is for a further acceleration from 8.6% to 8.8%.

After the falls in price and corresponding rise in yields for fixed income this year, it’s likely that the worse has passed and that the return prospects from here have improved significantly. There may still be some volatility due to uncertainty around inflation but upside and downside risks are more balanced.
We watch with amusement the antics of UK politics but when it come to it this has relatively low impact on global corporates. We note that even politicians who should know better do things which hurt the economy so the election of a sensible prime minister is far from a guarantee that they will do sensible things.


Quote of the week

“It’s a mystery why Lurpak has to be nearly £10 a kilo when own brands are often about half of that amount.”
Marc Gander - Spokesperson for the Consumer Action Group

If there’s one product which is perfectly summing up the cost of living crisis currently gripping the nation, it’s Lurpack.

Britain’s largest dairy producer has warned that grocery prices will continue to rise after customer’s spotted Lurpack butter selling for more than £9 a pack.

Speaking about the rising food costs, Arla Foods’ Chief Commercial Officer Peter Giortz-Carlson whose company sells Lurpak, Cravendale and Skyr, said he has “never seen anything like it” in his 20 years in the industry.

After taking to Twitter to share the information, others were quick to agree with one branding it as 'insane’.

To monopolise on the current furore around Lurpak, the big four supermarkets have been cutting the price in recent days to lure shoppers in.

Source: The Independent

Phil Smeaton
Chief Investment Officer

All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested. 

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