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Friday Email: 23 January 2015

Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:

The FTSE 100 has been very strong in the past week with further good gains expected today. According to the futures this morning, we will be challenging the resistant 6850 mark for the first time in quite a while. Any sign of a pick up in the natural resources sector will see the FTSE 100 fly through the 7000 level. The latest spur for the market is the rumoured 1.1 trillion Euro QE move by the ECB. Having looked over the pond at the apparent success of QE, it looks like the EU have decided that it might have some credence, especially in the face of the spectre of deflation that has been brought to the fore by the very rapid fall in the price of oil. A major cost to all firms has plummetted and we are now starting to see related industries such as gas announcing price cuts. People are starting to talk about oil prices staying low for 3 years (BP). Personally, I am not convinced that this will happen at all. The markets have driven the price of oil far too low, very quickly and when it becomes apparent that production has fallen, which it inevitably will (Enquest announced a 40% reduction in its capital spend for the next 12 months this morning and Afren said similar things earlier in the week. It is also interesting that Enquest's lenders were happy to relax covenants on their debts), then the price of oil will start to rise.

The past week was very quiet in terms of companies reporting and next week is similar.

We produced our latest piece on The UK housebuilders this week. It is a sector where sentiment has waned somewhat, but valuations remain low and with all of the current enthusiasm in the markets, I would expect the sector to re-rate.

The key question for me this year is whether or not we will see the pick up in commodity prices start to emerge because there is a lot of potential upside in those companies. As always, avoid those laden with debt and stick to the lowest cost producers because they will always survive. I remain bullish of both Rio Tinto and BHP Billiton for their strong dividends and leading market positions.

This email was originally sent on Friday 23 January 2015

The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.

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