After a sluggish first quarter of the year for global stock markets, April saw strong performance for the FTSE 100. The index rose 6.84 per cent during the month, making it one of the best performing global indices, despite investor survey’s showing it to be one of the most unloved regions.
According to Lee Wild, head of equity strategy at interactive investor: ‘A combination of successful international diplomacy, a weaker pound, rising oil prices and supermarket sector M&A restored investors’ faith in equities during April.’
As part of a new monthly Money Observer series, we will be providing monthly updates on the top risers and fallers in the FTSE 100 each month.
In April this year, Sainsbury’s (SBRY) saw the strongest performance, following the announcement of a merger with Asda. Whether or not the UK competition authorities will approve the move is yet to be seen – but investors still seem to be positive. The price of Sainsbury’s share prices rose by 29 per cent in April, with half of the gains coming on the last trading day of the month following the Asda announcement.
Wild notes: ‘Sainsbury’s came from nowhere to become the top FTSE 100 performer in April after agreeing a £7.3 billion.’
April overall was a good month for supermarkets, with Tesco (TSCO) also featuring in the top five, rising by 15 per cent. The appearance of both supermarket giants is welcome news for a sector increasingly seen as under threat from the discounters, most notably Aldi and Lidl.
Russ Mould, investment director at AJ Bell, the broker, adds: ‘Sainsbury and Tesco did well, the former thanks to its perceived strategic coup of striking a deal with Asda, the latter owing to good full-year results and growing investor enthusiasm for boss Dave Lewis’ swoop for wholesalers Booker.’
The second-best performance came from technology and software firm Micro Focus (MCRO). The company saw its share price rise by 27 per cent in April, a partial recovery from its over 40 per cent drop in March following a profit warning.
Royal Dutch Shell (RDSB) also made a showing, rising by 14 per cent. This came on the back of rising oil prices that helped raise the firm’s fist quarter profits.
According to Mould this ‘gave further confidence that its dividend and juicy yield were safe, confounding those who feared that the oil price slump of 2015-16 would force it to cut the $1.88-a-share annual shareholder distribution for the first time since at least 1945.’
When it came to the losers of the index – those that saw their share prices fall the greatest- there was a general theme: a move away from solid, well-run, fairly defensive stocks on the grounds they have done well and now look potentially expensive.
However, there were also specific factors at play. British American Tobacco (BATS), for instance, fell by 3 per cent in April. This, says Mould, is the result of ‘knocked faith in the e-cigarette market.’
The firm’s global peer, Philip Morris, recently warned that its cigarette-alternative products had seen disappointing sales in Japan, one of the leading markets for Phillip Morris’ cigarette-alternatives. This, said Mould, raised questions of whether ‘big tobacco firms would be able to compensate for a slow decline in cigarette demand with sales of newer technologies.’
Meanwhile, Coca-Cola Hellenic Bottling Company (CCH) had the worst month, with its share price taking a 7 per cent hit. In part, this was due to global fears around sugar taxes and the ability of Coca-Cola to reformulate their recipe as such regulations proliferate.
At the same time, Coca-Cola HBC itself is heavily focused on the Eastern European and Russian market. Therefore ‘investors may have been concerned by any knock-on effect from global sanctions on certain Russian firms and businessmen upon the wider economy,’ noted Mould.
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