UK STOCKMARKET[QQ] A growing confidence that the fall in interest rates will stave off recession, a revival of takeover activity in some cyclical sectors (such as bids for Stakis and Weir Group) and very cheap relative valuations have all contributed to a reassessment of the merits of medium-capitalisation stocks. The FTSE-250 outperformed the FTSE-100 by 10% in the first few weeks of the year. OVERSEAS EQUITIES Surprisingly strong economic growth in the final quarter of last year has been reflected in better-than-expected profits from US companies, although reported earnings in 1998 as a whole were still below 1997 levels. Economic buoyancy has also arrested the downward move of bond yields, which has been a major driver for the equity market in the last few years. INTEREST RATES While the trend in UK interest rates has remained firmly downward in 1999, rates in Euroland and the US have remained unchanged for three months. The current momentum of the US economy has led to some speculation that the next move in interest rates there might be upward, while signs of sluggish growth in Continental Europe have reinforced the view that euro rates will fall later in the year.
EURO CONVERSION RATES: E1 = DM1.95583 FFr6.55957 L1936.27 I£0.787564 Fl2.20371 BFr40.3399 LFr40.3399 Pta166.386 Es200.482 ASch13.7603 FM5.94573
EXCHANGE RATES Shifting interest rate projections have confounded the consensus that the euro would be the strongest major currency. A modest strengthening on its first day of trading marked its peak so far against the US dollar: it then fell from over $1.18 to around $1.13 by the middle of February. Market data supplied by Britannia Asset Management Ltd. Tel. (0141) 248 2000. Expressions of opinion contained within this document are subject to change. Britannia Asset Management Ltd is the holding company of Britannia Investment Managers Ltd (Regulated by IMRO).
SURVEYOR: WHOSE ASSET IS ON THE LINE HERE? Increase in number of press articles mentioning "outsourcing", 1995-99 390% Proportion of companies seeking "vendor expertise" as the main benefit from outsourcing 51.6% Proportion of companies citing "vendor expertise" as a major disappointment with outsourcing 58.9% Source: Reuters Business Briefing; Deloitte & Touche Consulting Group Don't let the fund go down on me ... Total money in funded pensions in 1997 (latest figure available) £980bn Increase in funded pensions over 1996 18% Proportion of fund managers using fax as their main means of communication 30% Chance that any one trade at a fund may fail due to outdated technology 2%-10% Source: Government Actuary's Department; Latchley Management Ltd. UK lags euro pack Proportion of UK companies that have completed euro conversion projects 35% Ditto in Germany 48% Ditto in Italy 51% Proportion of European shared service centres operated by US companies 75% Source: IBM UK Ltd; KPMG Consulting Pay, performance and pensions Proportion of companies with over 5,000 employees using individual performance related pay (PRP) schemes 81% Proportion of managers who think perceived unfairness in PRP schemes can be demotivating 92% Proportion of UK managers who think share-owning employees show greater commitment 86% Annual pension entitlement of Diageo chief exec Tony Greener £437,000 Ditto a Diageo employee on same length of service and £17,800pa £3,300 Source: Gee Publishing Ltd.; Labour Research Department, Towers Perrin Meeting out the punishment Typical cost to business of an out-of-town meeting for six professionals £1,645 Proportion of professionals who have dozed off in a meeting 23% Ditto, who express concern at work mounting up while at meetings 50% Proportion of company executives who want more meetings with their MP 47% Proportion of companies that think meeting MPs is a poor channel for influencing policy 57% Source: MCI WorldCom; 3i plc Recession Watch Increase in number of profit warnings, Q3 1998 to Q4 1998 46% Average drop in share price caused by Q4 profits warnings 19% Proportion of marketing managers who expect to miss sales targets 55% Proportion of businesses which consider themselves in better shape than in previous recessions to weather a downturn 80% Source: Ernst & Young; The Chartered Institute of Marketing; Yorkshire Bank Timewatch (10.00, 25.2.99) System programming hours left until Y2K 7,430
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