Will they...
...or won't they?
The futile but nonetheless engaging game of guessing when the Bank of England will raise rates developed this week thanks to the Bank of England's Inflation Report. The report stated even if rates did not rise until 2017, and by then to only 1 per cent, inflation would only just breach the Bank's target level of 2 per cent. This was taken by the market to mean the BoE was now eyeing a rate rise in 2017 but Ben Broadbent, deputy governor, told the Financial Times while "broad references" on the path of rate rises "may well be reasonable", he warned, "you shouldn't push them too far".
Asset managers
In the crosshairs
Asset managers peeked through their fingers this week at the FCA's terms of reference for its market study. The regulator confirmed it "may intervene to promote effective competition" in the industry, which currently manages £6.6tn in assets for pension funds, insurance companies and everyday investors. A note from broking giant Hargreaves Lansdown said the amount of assets in direct fund manager Isas (£66.5bn) - where only that group's funds can be held - only recently fell below that of Isas on the five largest platforms (£67.7bn) where far greater choice is available. This shows the "power of inertia" the FCA will hope to tackle. *Read our Chronic Investor blog for more*
Pension change
Smiths revived
There was clear relief among shareholders in Smiths this week after it announced it would be able to contribute less to its pension scheme, both freeing up much needed cash and potentially paving the way for the disposal of parts of the business. The shares made their biggest one-day gain in seven years after jumping more than 10 per cent on the news. The engineering group will see free cash flow increase by £36m a year, which chief financial officer Chris O'Shea said would help the group "invest in attractive opportunities and to continue to grow dividends". *See our tips section for our updated tip*
Hold 'em
Dice split
The mooted deal between gambling technology provider Playtech and contracts for difference platform Plus500 could be on the rocks. Playtech said it now expected a decision on its application to buy its target from the Financial Conduct Authority in December. This process is "confidential", Playtech said in a stock market announcement, and the group would only announce further details on completion of the process. Now the deal "may be terminated" if an agreement cannot be reached by 31 December. Earlier this year Plus500's UK subsidiary was required by the regulator to review its anti-money laundering policies and temporarily freeze some client accounts.
Solemn samba
Brazil GDP
Things don't seem to be improving in Brazil where the central bank's IBC-Br index, a monthly proxy for GDP, showed economic activity fell by 6.2 per cent in September from the same period a year earlier. This, Capital Economics says, is the biggest year-on-year drop on record and looks set to mean a third quarter contraction of nearly 5 per cent. The IBC-Br tracks activity in manufacturing, services and agriculture and is generally seen by investors as a reasonably reliable indicator of overall GDP. Pressure on commodity prices and the fallout from the Petrobras scandal have contributed to the economy's woes.
Lidl by Lidl
Gaining share
The pitter-patter of discounter feet has been a sound haunting the established supermarket players for some time but now a milestone has been passed. Aldi and Lidl's combined market share has reached 10 per cent, according to new figures from Kantar Worldpanel for the 12 weeks ending 8 November. The researcher's head of retail and consumer insight, Fraser McKevitt, said as recently as 2012 the joint share was just 5 per cent. He added in the past 12 weeks the duo had attracted "another million shoppers compared with last year" while the average spend had risen 4 per cent to £18.85 - 75p ahead of the total retailer average.
Chart of the week
Large-cap investors, hold on to your dividends while you can. Since 2010, ‘cover’ for shareholder returns – that is, earnings divided by dividends – has steadily deteriorated. Analysts at Quest, a division of CanaccordGenuity, have urged private investors to look out for the “dangerous combination” of high forecast dividend yield, low cover and slowing momentum in earnings per share. Do not fear: our tips editor Algy Hall has identified the stocks that do the best job of combining a decent yield with dividend cover. Top of the list, as at the end of September, is private equity and infrastructure investor 3i (III), which is currently providing a dividend in line with the FTSE 350 average at 4 per cent.
