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FTSE Set For Lowest Weekly Close In 10 Months

Published 09/02/2018, 13:27
Updated 18/08/2020, 10:10

It’s been another challenging week for UK investors with the FTSE 100 dropping sharply and set to close at its lowest level since April. The pound has also declined this week on balance, despite the hawkish rhetoric from the Bank of England yesterday and may be set for more downside ahead.

UK stocks look precarious going forward

The weekly decline for the UK index is the fourth in a row and the positivity bordering on exuberance that surrounded the market at the start of the year has well and truly subsided, being replaced with a sense of concern and worry that further declines may lie ahead. The latest UK data has done little to allay these fears with the release of a sharp decline in the industrial production figure particularly negative. A drop of 1.3% in month-on-month terms is below consensus forecasts and in fact marks the largest decline in more than a year but it should be pointed out that this is almost entirely due to the shutdown of a key oil pipeline. The temporary closure of the Forties Pipeline in the North Sea meant that the mining and quarrying sector contracted by almost a fifth during December compared to the previous month, with this being the only subsector in the data that actually contracted in the period.

Trade figures hurt by high oil prices

A strong rally in the price of oil which began last summer has contributed to an increase in the UK trade deficit which could be seen to have a negative impact on the pound going forward. An accompanying fall in British exports of the commodity has exaggerated the issue with Brent crude, an international benchmark for oil, rising by more than 60% since the low last summer. The deficit expanded by £3.8B in the final quarter of 2017 to £10.8B with around £1.5B of that coming from commodities.

Commodity stocks amongst the biggest fallers

Looking at individual shares, there is very few bright spots seen the week across the benchmark with Compass Group (LON:CPG) the solitary stock sitting on a gain since last Friday’s close. Several of the big commodity names have endured a tough time of it of late with Glencore (LON:GLEN), Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) all lower with the first two declining in excess of 8% on the week and Randgold shedding some 14%. BT (LON:BT) has continued lower after hitting a new 5-year low and has dropped another 8% in the last week to trade back at 230.

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