UK STOCKMARKET[QQ] The revival in small companies continues: between the end of December and the middle of May the FTSE SmallCap outperformed the FTSE 100 by 15%. Given their relatively high domestic focus, they have been beneficiaries of the improving outlook for the UK economy. Takeover and other corporate activity has also provided a boost – almost 10% of the SmallCap Index has been subject to some form since last September. OVERSEAS EQUITIES One market theme in recent years has been a revaluation of ‘growth’ stocks, those perceived to retain pricing power in a disinflationary environment. But in the US, since the middle of April, ‘value’ stocks have returned to favour, accelerating a trend already apparent in Europe. The S&P Basic Materials index has now outperformed the Consumer Staples index by over 30% this year, after underperforming by 40% during 1997 and 1998. INTEREST RATES Speculation about the possibility of an increase in US interest rates has contributed to a sharp rise in US government bond yields, which has also dragged UK and European yields higher. By the middle of May, 10-year US bonds were yielding 5.6%, a rise of over 0.5% in a month, and almost 1.5% above the lowest levels, which were reached back in October last year. EXCHANGE RATES Pessimism about the Kosovo conflict took the euro down to a new low of 1.055 against the dollar at the end of April, from where it rose quickly to over 1.08 on hopes of a diplomatic resolution. Much of this recovery was then lost following the bombing of the Chinese Embassy and a bout of political instability in Russia.
SURVEYOR: MONEY - GETTING IT, MAKING IT, SPENDING IT AIM HIGH! OR FOLLOW THE MONEY? Proportion of AIM-listed companies unhappy with the amount of liquidity in their shares 87% Ditto, which are considering venture capital or bank finance as an alternative to AIM 65% Amount UK venture capitalists invested in UK companies, 1996 £2.8bn Ditto, 1998 £3.8bn Source: Mazars Neville Russell; British Venture Capital Association. IT'S ALL OVER THE FRONT PAGE Proportion of CEOs who expect IT to make a significant contribution to future business results 48% Ditto, who think IT currently makes a significant contribution 28% Proportion of UK manufacturing firms that have serious computer problems 73% Ditto, that will never go back to the same IT supplier 40% Growth in IT outsourcing, 1997 to 1998 (to £4.4bn) 26% Source: Compass; FMC Resolve; ITNET Index. SOFT-LANDING? RECESSION? WHO KNOWS! Number of UK receiverships, Q1 1998 256 Ditto, Q1 1999 304 Proportion of these in manufacturing 31% Insolvencies in England and Wales, Q1 1999 3,729 Increase in Q1 insolvencies year-on-year 16.6% Source: KPMG; PricewaterhouseCoopers. RIDE A COCK HORSE TO ... PROFITS National return on capital employed (ROCE) Q4 1998 15.75% Number of industrial sectors (out of 20) where profitability fell, Q3 to Q4 1998 13 ROCE in pharmaceuticals, Q4 1998 37.0% ROCE in utilities, Q4 1998 8.4% Proportion of "top businesses" in Banbury which declared a profit 89.9% Years (to date) Banbury has occupied top spot as most profitable town 3 Source: Experian; Dun & Bradstreet. EURO-RO-RO THE BOAT UK company transactions with eurozone in January made in sterling 57% Ditto, in legacy eurozone currencies 23% Ditto, in euros 5% Proportion of UK companies supporting euro entry, September 1998 65% Ditto, March 1999 55% Number of times conversion to the euro will cost compared to Y2K 3 Source: KPMG; Dun & Bradstreet; Decision Vision Europe. TV SPECIALIST, LOCAL, CALL 0898 ... UK households with a colour TV, 1979 74% Ditto, 1999 98% Expected number of US and European households with interactive TV, 2003 67m Proportion of "opinion leaders" who think the BBC will bring about a communications revolution 5% Ditto, British Telecom 71% Source: Institute of Management; Datamonitor; British Telecom.