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Stock market A volatile month for the stock market, with factors ranging from oil companies’ accounts to international terrorism. The FTSE 100 reached a 20-month high of 4,559.1 on 4 March following the Bank of England’s decision to leave interest rates unchanged, but the terrorist bombing of commuter trains in Madrid on 11 March precipitated the worst one-day fall since May last year, with the index losing 2.2% of its value in a 100.1-point drop. 22 March saw the FTSE close 83.9 points down for the day, on fears of geopolitical instability following the Israeli assassination of Hamas spiritual leader Sheikh Ahmed Yassin, and the index fell to a 4-month low of 4,309.4 on 24 March, but the next day finished 64.2 points up, the best one-day jump since 19 February. Reactions to Shell’s over-estimation of its oil reserves and BP’s decision to buy back its own shares sent prices in different directions, but by the close on 31 March the FTSE stood at 4,385.7, down 106.5 for the month. Oil The month opened with a price jump of more than $1.00 per barrel to go above $33.00, and by 18 March security fears following the Madrid train bombings had pushed prices to levels not seen since 16 October 1990, shortly after the Iraqi invasion of Kuwait. Thereafter, uncertainty over whether OPEC would go ahead with its proposed cut in output, and the announcement of an unexpectedly large build in crude stockpiles in the USA, contributed to prices falling below $32.00 and Brent crude closed at $31.53 on 31 March. On the domestic front, Canadian exploration company Oilexco has announced the first major new oil find in the North Sea since 2001, with test drilling in the Brenda Field in the outer Moray Firth indicating a reservoir of at least 150 million barrels. Interest rates Interest rates were held unchanged in the UK, Europe and the USA. Following the increase from 3.75% in February, the Bank of England kept the Repo rate at 4%, although commentators believe that a further quarter-point rise is imminent. The European Central Bank maintained its 2% rate, resisting pressure for a cut, while the US Federal Reserve hinted that that any increase from its 46-year low of 1% is more likely to be later than sooner. Exchange rates From a high of $1.8682 on 1 March, sterling dropped to $1.7938 by 12 March. A fall of nearly 4¢ on 11 March took the pound below $1.80 for the first time since January, in response to news that UK exports to the USA had slumped, but by the end of the month it had risen to $1.8388. The euro experienced its high and low for the month against the dollar within the space of three days, falling from $1.2438 on 1 March on the back of rising optimism in the US over job growth and expectations that this would bring an increase in interest rates, to $1.2083 on 3 March, its lowest level of the year so far. The closing rate on 31 March was $1.2298. Rumours that Federal Reserve chairman Alan Greenspan had suffered a heart attack prompted the dollar to slip briefly against most major currencies on 31 March, before markets rallied in the absence of any corroborative evidence. Against the euro, sterling peaked at €1.5044 on 3 March, dropped to €1.4685 by 11 March, but was back up at €1.4958 by 31 March. According to the quarterly survey from logistics firm DHL, just 41% of exporters now believe that joining the euro would benefit their business, compared with 71% five years ago, while 40% said the euro would make no difference to trade. Balance of trade The Office for National Statistics reported that Britain’s trade deficit reached £4.6 billion in January, up dramatically from £3.1 billion in December, with the deficit in goods hitting an all-time record of £5.6 billion. Economic growth The Fraser of Allander Institute, Scotland’s most respected independent think-tank, has cast serious doubts on the Scottish Executive’s new GDP estimates, suggesting that Scotland might be growing at a slower rate than the UK average rather than faster, as ministers have claimed. In February the Scottish Executive announced that it had upgraded its figures to 2.1% for the year, against a UK average of 1.6%, but according to the Institute the official estimates are based on output volumes, not values, and so do not take into account the effect of price movements. Inflation Inflation as measured by the new Consumer Price Index was 1.3% for February, down from 1.4% in January and well below the 2% target set by the Chancellor. The old RPIX measure, still used by many employers for setting pay rises, showed inflation at 2.3%, its lowest level since September 2002 and below the Bank of England’s 2.5% target for the second successive month. Consumer credit A survey by high street bank Abbey revealed that more than half of all UK adults plan to make unsecured borrowings in the next twelve months. People living in Scotland expect to borrow the most per head, with an average of £6,915 compared to the expected UK average of £3,997. The most popular reason given for borrowing was to pay for a holiday (25%), with 15% intending to finance a car purchase and 11% adding an extension to their home. Overall consumer credit rose by £1.93 billion in January according to the Bank of England, the biggest monthly increase since May 2003, although the number of new mortgages was down by 8,000 for the month. Consumer spending Bank of England figures show that credit card spending reached a record £11.7 billion in January, a rise of £744 million for the month, as shoppers took advantage of seasonal sales. However, the Association of Payment Clearing Services said the number of credit and debit card transactions in January was 18.6% down after the previous month’s Christmas shopping, but 14.7% up on the same month last year. Property market Nationwide building society reported that house prices rose 1.4% on the month in March. After February’s 3.1% rise, this brought the annual rate down from 17.1% to 16.7%, but Nationwide expects prices to rise by 15% this year instead of the 9% inflation rate originally predicted. The average price of a house was up from £138,730 in February to £142,584. Earlier in the month, data from mortgage lender Halifax put annual house-price inflation at 17.8% for the year to February, up from 16% the previous month, with an average house price in February of £148,089. According to a survey by Bradford & Bingley, first-time buyers are getting older, taking out larger mortgages and increasingly relying on family and friends to help them pay for a home. 51% said that house prices were rising faster than they could save, and 22% had given up trying to save for a deposit and were hoping to obtain a 100% mortgage. In a separate poll by Nationwide building society, the majority felt that there should be lower rates of stamp duty for first-time buyers, with only 17% believing that the same rates of stamp duty should apply for all. Around 24% said they could not raise the deposit for a mortgage, 23% could not afford the monthly repayments, and 17% did not think they earned enough to be offered a mortgage. Business start-ups The four members of the Committee of Scottish Clearing Bankers helped finance 2,950 more businesses in 2003 than in the previous year. The total of nearly 21,500 for the year comprised around 12,500 sole traders, 2,500 partnerships and 6,500 companies. Working past retirement age A survey by Reed Consulting and Age Concern found that nearly half of all workers over the age of 50 intend to stay in work rather than retire when they reach the normal retirement age. Gordon who? A survey published by accountancy firm BDO Stoy Hayward two days before the Budget revealed that 39% of those polled (and 75% of 16-24 year olds) could not name Gordon Brown as the Chancellor of the Exchequer, and half did not believe that the Budget would have any real impact on their personal income. |
