Last week the FTSE 100 Index fell 442 points (-6.6%), losing £121bn in market capitalisation. It was the largest weekly fall since August 2011, and the 14th largest weekly fall ever for the FTSE 100 Index (created in 1984).
The following chart shows the 10 FTSE 100 stocks that fell the most last week.
Petrofac shares were down 12.9% last week, the largest faller, followed by Tesco (-12.6%).
The following chart shows the 10 stocks that saw the greatest absolute falls in market capitalisation – i.e. these were the stock that had the greatest impact on the FTSE 100 Index. The chart shows the proportion of the 442 point fall in the FTSE 100 Index that was attributable to each stock. For example, 10.3% (46 points) of the FTSE’s fall last week was due to the fall of the share price of Shell.
The above 10 companies accounted for 47% of the FTSE 100 fall.
The following table shows the three sectors that were most responsible for the FTSE 100 fall last week.
||MktCap lost (£m)
|Oil & Gas
The average return of the FTSE 100 Index on the first trading day of December since 1984 is -0.04%. We can also calculate the average return of the FTSE 100 Index on the second trading day of December – this happens to be 0.03%. We can continue this process until we have calculated the average return for the Index on each trading day of December since 1984.
With these average daily returns, we can calculate a theoretical average FTSE 100 Index for the month of December. If this theoretical index starts at 100 then the index will have a value of 99.96 on the first day (after a fall of 0.04%), and 99.99 on the second day.
The following chart plots the values of this theoretical average FTSE 100 index calculated from the average daily returns for December.
Starting at 100 the theoretical index ends the month at 102.5 – reflecting the fact that the average return for the FTSE 100 Index for the whole month of December is 2.5%.
One of the most remarkable features of this chart (and in fact for the whole year) is the strong performance of the market from the middle of the month. This surge in equities has been termed the Santa Rally (or the Christmas Rally).
From the above chart it can be seen that on average the Santa Rally starts on the 10th trading day of the month.
In the year 2014, the 10th trading day is the 12th December.
The chart below shows the extent to which the 100 stocks in the FTSE 100 Index are below their all-time highs (ATH). For example, RBS is currently 94% below its ATH, while Ashtead is 0% below its ATH (as it is currently at its ATH).
In the chart the stocks are ordered by the time since they hit their ATH. For example, IAG hit its ATH 14 years ago (the longest time for any FTSE stock). Persimmon, Dixons Carphone and Ashtead are at the bottom of the chart as they are all currently at their ATHs.
BAE Systems is only 12% below its ATH, but ranks high in the chart because its ATH is a long time ago, in 1998.
Weir is currently 35% below its ATH, but is placed relatively low in the chart because its ATH was fairly recently in September 2014.
A few further observations:
- Three FTSE 100 stocks are currently at their all-time share price highs: Persimmmon [PSN], Dixons Carphone [DC.], Ashtead [AHT]
- 14 stocks in the FTSE 100 Index have hit their all-time highs in the last two weeks.
- Eight stocks in the FTSE 100 Index hit their all-time highs in the last millennium: IAG, RSA, AV., LLOY, BA., GSK, KGF, BT.A
- 20 FTSE 100 stocks are currently more than 50% below their all-time highs.
- 37 FTSE 100 stocks are currently less than 10% below their all-time highs.
The Monetary Policy Committee (MPC) is a committee of the Bank England which was set up in 1997 to decide official interest rates in the UK (referred to as the Bank of England Base Rate). The MPC’s primary responsibility is to keep the Consumer Price Index (CPI) close to the Government’s inflation target (2% as of 2011) and, more recently, it also has a responsibility to support growth and employment.
Monetary policy in the UK is usually effected through the rate at which money is lent (the interest rate), but in March 2009 the MPC announced that it would also start injecting money directly into the economy by purchasing financial assets (aka quantitative easing).
The following chart plots the BoE base rate since the MPC was established in 1997 and the FTSE 100 Index. The chart goes to March 2009 – when the base rate was reduced to 0.5% and since when it has not moved.
The MPC monthly meetings
The MPC meets once a month to set the bank rate. The meetings take place over two days: on the Wednesday and Thursday following the first Monday of each month. This schedule might occasionally be changed, for example in May 2015 the meeting is delayed by 48 hours to avoid clashing with the General Election. The interest rate decision is announced at noon on the second day of the meeting; and the minutes of the meeting are published two weeks later (on the Wednesday of the second week after the meetings take place).
The monthly MPC announcement on interest rates was an important event; the announcement – and the anticipation of the announcement – could move the markets. However, since March 2009 the announcement has generated little interest as the rate has been set at 0.5% with little likelihood of changing in the short-term. This period of abnormally low interest rates should end at some point. In anticipation of this the following briefly analyses the historic behaviour of the UK stock market around the time of the monthly announcements.
The following chart plots the average daily returns of the FTSE 100 Index for the three days around the MPC announcement: the day before the announcement MPC(-1), the day of the announcement MPC(0), and the day following the announcement MPC(+1). For each day, three values are plotted: the average FTSE 100 return for all days (i.e. for all the 144 MPC announcements 1997-2009), the returns on the days for the 18 times the MPC announced an increase in the bank rate, and the returns on the days for the 26 times the MPC announced a decrease in the rate.
The above is an extract from the newly published UK Stock Market Almanac 2015.
Order your copy now!
The following chart plots the average performance of the FTSE 100 Index during December since 1984.
As can be seen, historically the market has traded fairly flat for the first two weeks of December and then risen very strongly in the second half of the month.
The following chart shows the average performance of the market in November (1984-2013) and overlays the actual performance in November 2014.
The following chart plots the average performance of the FTSE 100 Index during November since 1984.
As can be seen, historically the market has increased, with a few ups and downs, throughout November, ending the month at the month high.
The following chart shows the average performance of the market in October (1984-2013) and overlays the actual performance in October 2014.
Next Monday will be the first trading day (FTD) of November.
The market has a tendency to be strong on the FTD of a month. And this effect has been even more pronounced in recent years.
Since 1984, the FTSE 100 Index has risen on average 0.17% on the November FTD. The index has had a positive return on this day in 67% of years since 1984.
Since 2000, the performance has been a little stronger on the November FTD, with an average return of 0.2% on the day, with positive returns seen in 79% of years.
The following chart shows the returns for every November FTD since 1984.
Tomorrow will be the last trading day (LTD) of October.
The LTDs of months used to be stronger than average, but in recent years they have been weak. This is quite different from the first trading days of months which strongly out-perform the average for all days, and where the effect has strengthened in recent years.
Since 1984 the market has on average risen 0.47% on the LTD of October, with positive returns in 70% of all years, which makes it easily the strongest LTD of any month in the year.
However, as can be seen in the chart, the behaviour of the October LTD has changed markedly over time. For the 19 years from 1984 the market only fell twice on the October LTD; but in the 11 years since 2003 the market has only risen significantly on this day in three years.
The following chart shows the FTSE 100 Index returns for every October LTD since 1984.
Today will see a full moon and a total lunar eclipse (best seen from the Pacific and neighbouring regions).
A previous post looked at the relationship between the lunar calendar and the stock market. The below updates the chart that appeared in that previous post.
Since the previous post there have been three total lunar eclipses:
- 25 May 2013 – the timing of the eclipse coincided with the high point of the year for the FTSE 100; in the four weeks following the eclipse the index fell 10%.
- 18 Oct 2013 – the eclipse occurred in the middle of an upswing.
- 14 Apr 2014 – the eclipse marked the bottom of a short down trend; the market rose 5% in the following four weeks.
Tomorrow will be the first trading day (FTD) of August.
Since 1984, the FTSE 100 Index has an average return of 0.06% on the August FTD, which makes it the ninth strongest FTD of the year.
The following chart shows the returns for every August FTD since 1984.