Uncertainty over interest rates and US inflation figures are giving the UK market a lack of directio...
Uncertainty over interest rates and US inflation figures are giving the UK market a lack of direction, although certain sectors are trading well.
However, Neil Richardson, head of UK research at Scudder Threadneedle Asset Management, believes that the quietness of the market is down to the holiday season.
Andrew Kelly, investment manager with Scottish Value Management, highlights the oil market as a particularly good performer due to the strong prices.
He says: "It is not only highly rated stocks such as BP and Shell that are ripe for investment. For example, Enterprise Oil, which is now trading at £5, is a substantial discount to its underlying value. It started the year at £4.20, seeing a 20% gain against the total oil market."
On the other hand, there are a lot of questions being asked about the UK banking sector.
Richardson says: "There has been a lot of competition which is pushing up costs and putting pressure on margins."
Kelly points to the media sector as a prime example of a strong mover, in particular advertising-related stocks.
Market researchers Corbiant and Taylor-Nelson are both trading fairly well.
The advertising industry has also had good long-term growth over the past 10-20 years, faster than the general economy, according to Kelly. However, he warns that moves towards media industry consolidation - recently highlighted by Granada, United News & Media and Carlton - could well leave companies vulnerable to activity.
Richardson believes that the technology sector is currently staging a comeback following the recent drop in confidence, spurred on by rises on Wall Street. For example, Psion & Arm has risen from a low of £5 in June to £8, a gain of 60%.
Kelly says: "People are still looking for evidence of a slowdown in the UK economy, with inflation not creeping in."
There has been a confident return to the equity market in the hope that interest rates start to fall, but he does not expect that to happen for at least a couple of months.
According to Richardson, something is likely to happen when companies start bringing out their interim results. He is also keeping a lookout for further movements in the US market.
However, he thinks that it is unlikely interest rates will rise before the end of the year.
He remarks: "It is only a matter of months now before the forthcoming US presidential election. The Federal Reserve is unlikely to increase interest rates so close to an election."
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