FT-SE 100: Treasurers turn back to cash

LONDON MARKET

UK stocks are expected to fall this week and gilts to extend gains, pushing yields to new lows, as investors shun equities on concern over the impact of slowing growth on profits. "Corporate treasurers are saying: 'I want no risk'. They're parking their money in gilts or cash," said John McNeill, market strategist at Sutherlands stockbrokers. "If it's the only thing that people are willing to buy then yields can go to nothing."

On Friday, the benchmark 7.25 per cent 10-year government bond yield closed at 5 per cent, having touched 4.98 per cent, the lowest in the 30 years for which the Bank of England has records. That's down over 20 basis points since last week and 60 basis points down since mid-August.

Stock markets were shaken last week, sending investors to bonds, after Federal Reserve chairman, Alan Greenspan, dashed hopes of rate cuts to help boost growth. That was followed by a report that the IMF cut its forecast for global economic growth to 2 per cent, from 3.1 per cent in May.

"Wherever equities go, bonds will do the opposite," said James Mitchell, market strategist at Nomura International. "Over the next few weeks yields will be headed lower. We could see 4.75 per cent on the benchmark bond."

Gilts are expected to gain on optimism that the Bank of England will cut interest rates. Reports showed inflation slowed to the target 2.5 per cent rate in August. "UK economic news does point to a reduction in rates," said Robin Younger, equity strategist at Henry Cooke Lumsden.

The FT-SE 100 index on Friday slid 77.3 points, or 1.5 per cent, to 5055.6, led by Shell Transport & Trading, after the company warned it may write down its assets this year because of waning Asian demand and plummeting oil prices. Still, the index closed the week little changed, down 1.23 per cent.

The broader FT-250 index fell 1.08 per cent last week to 4646.8, its losses led by engineering companies that export a large proportion of their products. The FT-SE 350 index, a combination of the other two, dropped 1.2 per cent to 29.5. TI Group slid 21.4 per cent, Cobham lost 14.2 per cent and Siebe fell 15.2 per cent.

"The depressing effect on the UK manufacturing industry from slow growth in export markets and the strength of the pound has resulted in lower growth during 1998," said Richard Jeffrey, chief economist at Charterhouse Tilney.

Start your day with The Independent, sign up for daily news emails
News
newsAnother week, another dress controversy on the internet
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
Life and Style
Scientist have developed a test which predicts whether you'll live for another ten years
health
News
news... and what your reaction to the creatures above says about you
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003