After a six month high last week, the FTSE 100 Index came off 2% this week reflecting a mixed picture. Sterling was boosted by much better-than-expected UK economic growth data - the economy grew 0.8% between July and September, twice as fast as forecasts – and there was a vote of confidence from ratings agency S&P in the government's economic management.
However, uncertainty over plans for a further round of quantitative easing and wide-ranging austerity measures also weighed down on equities.
Forget the FTSE 100 Index
Given its international and large-cap bias, focusing on the headline FTSE 100 index move can sometimes give a deceptive view of overall UK equity market performance trends. One way to understand underlying pulse of the market is by looking at the stocks and sectors making new 12-month highs or lows. Interestingly, there were 84 highs this week versus 31 lows. This is above last week (75 highs) and, analysing the list, it's encouraging to see that included a more diverse set of businesses than the predominantly oil & gas and mining highs seen last week.
Buyouts are back?
Amongst the star performers this week was listed mid-market buyout shop, HG Capital Trust (LON:HGT) , which hit a new 12 month high after recently announcing an improvement in the market for new buy-out investment, with bank finance said to be more freely available and noting that the “vast majority“ of its portfolio were enjoying sales above last year. Charles Cade, an investment trust analyst at Numis Corp (LON:NUM), has suggested that now might a great time to be investing in private equity. "It's been an interesting time over the past couple of years. Lots of companies were hit badly, and are now trading at wide discounts”, although - given the state of the banks - it's perhaps questionable where the requisite debt financing will come from!
In another sign of nascent economic recovery, previously hard-hit recruitment Robert Walters (LON:RWA) PLC rose to a high of 332p, up almost 8% on the week. It recently reported quarterly profits up 65% and announced the opening of its first German office. CEO Robert Walters noted that ‘trading in the UK has been positive in spite of…
