The FTSE 100 index of leading UK company shares finished February at 6,097.09 points, up by 13.29 points or 0.22% during what proved to be a rather volatile month.
The index experienced a quiet end to the month after substantial losses from earlier in the year were largely reversed following new stimulus measures in China. A meeting of G20 finance ministers over the weekend did little to address concerns about slowing global growth, but this did not appear to overly concern investors.
A new survey at the start of March found Eurozone manufacturing activity has expanded at its weakest pace for a year in February, with deep price discounting failing to put a floor under slowing order growth.
Markit’s Purchasing Managers’ Index (PMI) comes a week before the next European Central Bank policy setting meeting and gives little in the way of good news, although overall expansion was slightly better than previously thought.
The Eurozone manufacturing PMI fell to 51.2 from 52.3 in January, only marginally beating an earlier flash estimate of 51.0. An index reading above 50 represents expansion.
Oil prices remain low as a result of lower global economic activity, although at the start of March a fall in US and OPEC output was expected to tighten up an otherwise bloated market. US crude futures were trading at $34.22 per barrel at the start of the month, up around 30% from 11th February when the contract dropped to an intra-day low of $26.05 a barrel, the lowest since 2003.
All eyes remain on China, where factories lost jobs at the fastest rate in seven years during February, with activity levels at the lowest level in five months, according to a private economic survey.
In the UK, attention has shifted to the European Union debate, with a national referendum called for 23rd June. A UK government analysis has warned that Britain faces a “decade of uncertainty” if it exits from the EU.
The analysis explains that a vote to leave the EU would represent the beginning of a lengthy renegotiation process; potentially hitting the financial markets, strength of the pound and British citizens living abroad.
It is expected to take a decade for the UK to fully exit the EU, if this is decided by the referendum, and to establish new trade and related agreements. Britain would also need to negotiate new trade deals with the US and other non-EU countries.
Polls for the EU referendum remain too close to call and the cabinet is fairly evenly split over the debate.
A new Reuters poll expects UK house price rises to outstrip price inflation and wage growth this year. Average house prices were expected to rise by 5% this year, 4% next year and by 3.8% in 2018. Wage growth was forecast in the poll of economists at 2.8% this year and 3.6% next year.
Property website Rightmove found the average asking price for a British home was £299,287 in February, at around 11 times the average salary. The average asking price in Greater London was £643,843.
Expectations for UK price inflation over the coming year have risen to their highest level in five months. The monthly YouGov/Citi survey found year-ahead inflation expectations rose to 1.5% from 1.2% percent in January. Inflation expectations for the next five to ten years also rose, from 2.9% from 2.7% the previous month.
The UK Consumer Prices Index (CPI) measure of price inflation rose from 0.2% to 0.3% for the twelve months to February 2016, in line with expectations. Downwards pressure from cheaper oil, food and import prices started easing.
The benchmark 10 year UK Gilt yield stands at 1.38%, lower than the start of February as investors seek a safe haven for their money.
£1 buys $1.40010 or €1.28750. The Forex Gold Index is $1,234.90/oz and the Silver Index is $14.75/oz. Brent Crude Oil Futures are currently trading at $36.82 a barrel.