Article / 16 March 2015 at 10:29 GMT

Week Ahead: FTSE flops, DAX rocks

Chief Executive / Prime Wealth Group
United Kingdom
  • QE helps DAX's staggering rise 
  • Odds even on FOMC removing 'patience'
  • Surveys should show continuing recovery in Europe

By Patrick Butler

In a Nutshell: The FTSE100 sold off sharply last week, giving up almost half of this year’s gains.

Sterling strength, jitters before next week’s budget and the election in May, further weakness in oil and profit-taking all serve to explain the down-draught, which contrasts starkly with the performance of the German index.


The DAX30 was up 3.04% last week (more, now, than the FTSE’s entire gain so far this year), and has seen a staggering 21.8% rise so far this year. As predicted, much of the new money generated through quantitative easing is finding its way into financial assets – in particular – the stock market. $35.6bn has flowed into European equity funds in 2015 so far breaking all previous records. 

The Euro’s fall (which finds its cause in the ECB’s easy money policies) has given the entire corporate sector a shot in the arm. It is not just exporters which benefit. Domestic producers are able to squeeze out foreign competition from the likes of the UK (with its relatively high sterling costs) through import substitution.

In the US, watch out this week for the Empire State Index (on Monday) and the Philadelphia Fed index (on Thursday). We expect to see modest increases in both cases. Industrial production for February, released on Monday will probably see a 0.2% to 0.3% rise, held back by poor weather.

More important than the data releases is the Federal Open Market Committee meeting on Wednesday. 

The big question is whether the FOMC decides to drop the word “patience” to describe its stance towards monetary policy normalisation. If it does not, a hike in the next couple of months will almost certainly be off the agenda. 

Given, though, the clear underlying strength of the US economy, the word probably will be dropped, though the balance of probabilities is relatively even. If the word is omitted, expect a knee-jerk sell-off of the US indices.

In Europe, the ZEW economic surveys should show continuing recovery which will further fuel stock market strength across the continent. As so often, any negative news is likely to emanate from Greece, where the government has been siphoning off public pension funds to meet current payments on civil servants’ salaries. 

Revived talk of war reparations from the Germans, raised once again by Prime Minister Tsipras, has served only to alienate further the Eurozone’s paymaster. What is disturbing is that the Greeks appear to be in desperate short-term financial straits little more than a week after the ECB increased emergency funding to Greek banks by EUR 600 million.

 The weakening euro is a shot in the arm for corporates. Photo: iStock

On the corporate front, Sainsbury's makes a trading statement on Tuesday when we expect to learn that fourth quarter like-for-like sales fell by over 2%. More important than the absolute numbers will be the trend; are there signs of the country’s third biggest supermarket chain turning the tide?

North Sea oil producers, among them Shell, Premier Oil and BP are likely to benefit on Wednesday from measures which we believe will be announced in the budget to increase investment allowances and reduce the overall tax rates on production.

Keep an eye on the battle developing at Alliance Trust where an activist investor, fed up with the lacklustre performance of the funds, is looking to inject new management at board level. Signs of a shake-up could energise the share price.

Astra’s shares are likely to rally on Monday after Saturday’s announcement that Brilinta, its blood-thinning drug, has been shown in intensive tests to reduce the risk of a recurrence of heart attacks. The company has forecast that annual sales of the drug could reach $3.5bn, so the importance of this development is difficult to overstate.

Among the stocks we believe worth watching in the coming days are Rio Tinto and BHP Billiton, which are both proving adept at countering the weaker commodity price environment through cost cutting, and which have the staying power to weather the tougher times while smaller competitors are squeezed out. 

What is more, both are benefiting from the stabilisation in commodity prices (with the exception of gold, which is not their focus) albeit at lower levels. 

Tesco, one of our March tips which, thus far, has proven relatively disappointing (though the past three months have seen a recovery overall) is, we believe on the right track and this will be increasingly recognised in the share price. We continue to like Inchcape, the high-end car sales company, and have started to favour Lookers for similar reasons.

Key Statistics and events:


UK corporate earnings announcements: Interim Result PureCircle Ltd (PURE), Final Result Frutarom Industries (FRUT) Petards Group PLC (PEG) Smart Metering Systems (SMS) Brady PLC (BRY) Global Ports Investments Plc Gdr (each Repr 3 Ord) (144a) (80GM) Tribal Group PLC (TRB).

UK corporate earnings announcements: Interim Results Regenersis PLC (RGS) Gfinity Plc Ord 0.1p (GFIN), Final Result Mears Group PLC (MER) KBC Advanced Technologies PLC (KBC) Safecharge International Group (SCH) WANdisco (WAND) Good Energy Group Plc (GOOD) Pennant International Group PLC (PEN) Just Eat (JE.) French Connection Group PLC (FCCN) Zotefoams PLC (ZTF) Antofagasta PLC (ANTO) Gem Diamonds Ltd (GEMD), Trading Statement IG Group Holdings PLC (IGG) Sainsbury (J) PLC (SBRY).


UK corporate earnings announcements: Interim Result Smiths Group PLC (SMIN), Final Result Burford Capital Ltd (BUR) Stilo International PLC (STL) UTV Media PLC (UTV) Hochschild Mining PLC (HOC) Cape PLC (CIU) Accesso Technology Group (ACSO), Trading Statement Imagination Technologies Group PLC (IMG). 

UK corporate earnings announcements: Final Result Ted Baker Plc (TED) Savills PLC (SVS) EnQuest Plc (ENQ) Lamprell PLC (LAM) Alpha Bank A E (01NX) Xaar PLC (XAR) Next PLC (NXT) Ophir Energy (OPHR) EMIS Group PLC (EMIS) Jimmy Choo Plc Premier Farnell PLC (PFL).

UK corporate earnings announcements: Interim Result CVS Group PLC (CVSG), Final Result JKX Oil & Gas PLC (JKX) Gamma Communications Plc Ord 0.25p (GAMA), Trading Statement Berkeley Group Holdings (The) PLC (BKG) Investec (INVR).

— Edited by Oliver Morrison

Patrick Butler is chief executive of the Prime Wealth Group

Disclaimer: The views and opinions expressed above (“Column”) are merely the personal views and opinions of the CEO of Prime Wealth Group Limited (“Prime”) and do not in any manner express the views and opinions of Prime. The Column is directed solely at investment professionals and exempt persons as defined by the Financial Services and Markets Act (2000) and subsequent orders and amendments. The information contained in this Column is for information purposes only and not intended to constitute any offer to sell or the invitation or solicitation of an offer to buy any product or service by Prime or any of its affiliates and subsidiaries and should not be relied upon in connection with any investment decision.
No employee, director or other officer of Prime or any of its affiliates (whether individually or collectively) gives any representation or warranty as to the accuracy, reliability, or completeness of any of the information contained in this Column (collectively the "Information"), nor as to the appropriateness of the Information for any use which any recipient may choose to make of it, nor accepts any responsibility for updating any part of the Information or for correcting any material error or omission which may become apparent after Information has been displayed in this Column. Except insofar as liability under any statute cannot be excluded, no employee, director or other officer of Prime or any of its affiliates nor any of its consultants accept any liability (whether arising in contract, or tort, or negligence, or otherwise) for any error, omission or misrepresentation in relation to the Information or for any loss, damage, cost or expense (whether direct, indirect, consequential or otherwise) suffered by the recipient of the Information or any other person as a result of any use of or reliance upon the Information or any statement of any kind (including statements of fact or opinion) contained in this Column. Prime Wealth Group Limited is authorised and regulated by the Financial Conduct Authority.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail