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a personal view of the week's news from Erithacus
Stock Markets fell steadily this week with shares in London following
New York downwards. The FTSE100 index lost 227.6 points to finish at 5723,
recovering slightly from a two-month low of 5657.7 hit earlier on Friday.
Nearly half the losses for the FTSE100 on Friday, however, were from Banks. A warning from Royal Bank that the risk of bad debt was rising and that low interest rates could squeeze profit margins led to its own shares dropping 5.4% to 1650 pence. Other Banks followed downwards, with Barclays dropping 1.5% to 2215 and Bank of Scotland losing 3.5%. Some analysts believe the warning from Royal Bank will have a significant knock-on effect across a much wider range of companies, with the already suffering tech shares taking the brunt of a further loss of confidence.
One of the worst fallers towards the end of the week was again Railtrack
despite a recovery earlier in the week. It dropped to an all-time low
of 298 pence in its last trading session on Friday before leaving the
FTSE100. Although not popular with investors and brokers at present, some
traders believe Railtrack to be substantially undervalued at present levels,
and expect a substantial rise in the price within a few days.
Confidence in European trade may not have been improved by comments from the Governor of the Bank of England Eddie George, and for the euro-enthusiasts the remarks made to economics student at Bristol University may have come as an unexpected kick in the teeth. In what many may see as an extraordinary attack on Europe , Eddie George said that the weak euro would not necessarily be strengthened should Britain decide on an early entry to the single currency, and the only hope for the euro would be divine intervention. "If you believe in the power of prayer, you will join me this evening in praying for the euro to recover," he was quoted as saying, ""I am not going to say the only thing we can do is pray, because a lot of people would criticise me for that. But it is the only thing we can do." He went on to say the weak euro would not necessarily be strengthened if Britain were to join the single currency. "Some people have argued that an indication that we would join early would help; I am not sure that that's my instinctive view," he said, "There could be circumstances in which we could join and it would damage the euro."
As the Queen’s birthday honours list is published naming nearly 1000 people, I note a few in the list who might, perhaps, not have received the award had the selections been made by their own shareholders. Notable among these is the Chief Executive of Vodafone Chris Gent who is to receive a knighthood. Mr Gent (or should that be "Sir Chris"?) is no doubt worthy of the honour, but Vodafone shareholders who have seen the value of their investment fall from a high of over £3.50 per share at the start of last year to today’s price of £1.64½ per share, may think otherwise. Although Vodafone shares are by no means unique in their price losses, this sort of award remains incomprehensible to many. Interestingly, Chris Gent is known to be a long-time friend of former Prime Minister John Major. It’s a strange world.
Excitement is mounting. It really is. You’ve missed it? Ah.
16th June 2001
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