Market snapshot: UK shares and reasons to be cheerful

by Richard Hunter from interactive investor |

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Ongoing issues with China and mixed success with the vaccine rollout validate portfolio diversification. 

The differing fortunes of economies depending on vaccination rollout progress is becoming more pronounced.

Europe is becoming something of a laggard with the need for some further targeted lockdowns, while in the US and the UK the rollout programmes continue apace.

For the US, a better than expected jobless claims number adds to the likelihood that the economic recovery is becoming slowly established. With the stars aligning as the vaccine programme accelerates, and with monetary and fiscal stimulus likely to provide a turbocharge, the rotation towards conventional cyclical sectors continues, largely to the detriment of the previously firing big tech sector.

In the year to date, the more traditional Dow Jones index has risen by 6.6% and the S&P 500 by 4.1%, while the Nasdaq’s gains are currently capped at 0.7%.

In the UK, retail sales were better than expected, if some distance off the levels of a year ago. Nonetheless, if the figure represents some unlocking of pent-up demand as restrictions slowly begin to ease leading into summer, further progress can be expected.

There were also some promising signs that M&A activity continues to be a feature of recovering prospects as Aviva (LSE:AV.) announced the sale of its Polish unit to Allianz SE (XETRA:ALV) for €2.4 billion, while KAZ Minerals (LSE:KAZ) was the subject of an upgraded and likely final bid from consortium Novagold Resources (TSE:NG) for £4.1 billion.

Less positively, strained relationships with China took another turn following accusations of human rights abuses in Xinjiang. The likes of Nike (NYSE:NKE) became the subject of a social media backlash in China, with its shares dropping by 3% as a result.

Meanwhile, Burberry (LSE:BRBY) also felt the wrath of Chinese social media, with its brand ambassador stepping down and its branding dropped from a popular video game in the absence of the company stating a position. Despite the clear ramifications this could have for its burgeoning Chinese market, Burberry shares edged ahead in early trade.

Overall, the FTSE 100 remains 4% ahead for the year as the end of the first quarter approaches, having been the subject of some international interest following a period in the doldrums. 

There are many plates spinning at the moment which could threaten to derail this progress, although on valuation grounds alone the market is ripe for institutional investors looking to buy on any dips.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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