Member Article

Quarter round-up: FTSE lags European/US peers

Data out overnight showed that British consumer confidence weakened this Month, with the index
declining from -29 in February to -31 in March. It accompanied mixed data across Europe, with the
most pessimistic being German retail sales that posted an unexpected 1.1% decline in February,
against predictions of a 1.2% increase. The data is notoriously volatile and as such the market
didn’t appear to be too perturbed. On a brighter note, French consumer spending increased 3.0%
from January to February, vastly exceeding forecasts of a 0.2% increase. The figure was lifted by
increased spending on energy consumption during a cold phase, although many hope that the boost
in spending will help a relatively weak French economy.

The much anticipated Spanish budget was also announced today; highlights included €27 billion
worth of budget cuts aimed at reducing the country’s budget deficit to 5.3% of GDP in 2012, as
agreed with the European Commission. Public sector salaries will be frozen and departmental
budgets will be reduced by 16.9%, as well as tax increases for large companies. Whilst the scale of
the cuts are significant, many question whether they will be sufficient to achieve the 5.3% target,
and others have also raised concerns as that the measures may have devastating consequences for
an already weak economy. Spain’s unemployment is currently the highest in the eurozone at 24%,
with the equivalent figure for youth unemployment at around 50%.

The Budget came as eurozone finance ministers met in Copenhagen, separately agreeing to join the
temporary and permanent eurozone bailout funds together to create an €800 billion firewall. It
must be noted however that even the enlarged commitment would struggle if central economies
such as Spain or Italy were to get further into trouble, with the two nations owing more than €2.5
trillion to creditors.

The FTSE 100 finished the day 0.46% higher at 5768, a level that it reached by midmorning and
clung to for much of the day. Today’s close also represented the end of the first quarter, and looking
back over the first three months of this year, the FTSE 100’s approximate 3% gain was paltry in
comparison to the 17%+ gain on the German DAX and the 8%+ gain on the French CAC, with US
indices higher by around 10% over the same period. On a stock specific basis, banking stocks posted
the biggest gains of London’s Blue-Chip listed socks, with RBS, Barclays and Lloyds appreciating
37.9%, 33.0% and 29.0%, respectively.

This was posted in Bdaily's Members' News section by James .