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The Week In Hindsight 21 February 2014

Global equities extend gains despite mixed economic data

Global equity markets extended their recovery from January lows this week despite poor economic data figures emerging from most developed nations over the period. Investors responded positively to a number of earnings updates in the UK and the US, while those in Japan opted to buy the likelihood that more stimulus could be in the pipeline.   

Global Equities (FTSE 100 in black)

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UK Inflation drops below 2 % target, unemployment ticks upwards; both reinforcing argument for low interest rates

The UK joined with the rest of the developed world this week in announcing a minor step backward along the path to recovery. This was as CPI inflation dipped below the Bank of England’s 2% target for the first time since 2009 while the unemployment rate also posted a modest increase from 7.1% up to 7.2%.

UK retail sales also slowed at a faster pace than was expected during January. Office for National Statistics data showed spending on the high street dropped by 1.5% against expectations for a reduction of just 0.9%.

Given the pace of expansion that has taken place within the economy over the latter half of 2013, a pause for consolidation and readjustment in economic barometers has been a likely event for some time. Despite what some headlines may suggest, we feel that the current interruption to the recovery will be likely to persist only for a short time. For this reason, our outlook for the UK economy throughout 2014 remains unchanged.

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Vodafone leads the FTSE higher as Return Of Value payment deadline passes

One of the top performers among global markets this week was the FTSE 100 which had gained by nearly 2.5% a short time before the Friday close. The index was driven higher by gains in a number of its heavy weight constituents. One of the bigger movers on the week was Vodafone PLC which gained 8% from trough to peak as investors scrambled to purchase shares ahead of the 20th February deadline for the company’s bumper dividend payment under its Return of Value program.

Management also confirmed the amount to be paid under the program, along with the conversion ratio it intends to apply to existing share holdings when the ordinary shares on issue are consolidated at the start of trading on Monday.

All shareholders are expected to receive 6 new ordinary shares for every 11 currently held, with the change taking effect from 0800 am on Monday 24 February. The amount to be paid in dividends will be 102 pence per ordinary share.