City traders were reciting the old adage “Sell in May and go away, don’t come back till St Leger Day” as screens were painted red on the first trading day of the month.
The saying reflects the tendency for stock markets to be weaker from May to October than during the other six months of the year, but this isn’t some old wives’ tale. In fact, in the past 33 years it has been on the money 28 times and the average annual outperformance of the November-to-April period since 1982 has been 8.6 per cent, according to Stephen Eckett, author of The UK Stock Market Almanac. “Very few trading systems can match that record,” he wrote.
“Everyone is saying the same line to me,” a London trader said, “but maybe it will be different this year.” No sign of that so far, with both the FTSE 100 and the FTSE 250 indices conspicuously under water yesterday.
Even in isolation, May traditionally is one of the weakest months of the year for shares, which on average have fallen by 0.2 per cent since 1970. Since 2000 the May return is -0.6 per cent. All of which made for a subdued start to the shortened trading week.
More specifically, sentiment was weakened by a steep fall in mining stocks amid underwhelming manufacturing activity figures from China for last month and a lower oil price. The Footsie slid to a three-week low, down 56.30 points to 6,185.59, having hit a 2016 closing high of 6,410 points last month. The mid-cap index gave back 71.46 points to 16,730.09.
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Miners dominated the fallers’ board. Anglo American shed 97¾p to 665¾p in the latest sharp swing in its price. Glencore fell by more than 13p to 149¾p.
Other stocks exposed to Asia were weaker, too. Standard Chartered, the emerging markets-focused bank, fell 31¾p to 520¼p. HSBC lost 7½p to about 445p after it became the latest bank to announce a decline in first-quarter profits and as analysts questioned the sustainability of its dividend.
Time for some insurance, then, for a canny investor. RSA Insurance, the top riser, gained nearly 13p to 472p after an upgrade to “overweight” from Barclays, which also increased its target price to 545p from 457p. The broker said that RSA’s plan to close the gap to the “best-in-class players” in its core British, Scandinavian and Canadian markets by 2018 was realistic. Admiral Group rose 46p to £19.03 and Direct Line 6½p to 368¼p, despite an AA survey showing a fall in motor insurance rates.
Investors also sought out defensive stocks as risk appetite waned. National Grid rose 13p to 987¾p.
Miners and energy companies dominated the fallers in the FTSE 250. Tullow Oil slipped 32½p to 247¼p after a downgrade to “neutral” from Goldman Sachs, and Amec Foster Wheeler, the oil and gas services businesses, fell nearly 28p to 466p.
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Other sliders included Aberdeen Asset Management, down 22p to 276¾p after its first-half profits halved amid £16.7 billion of outflows of client money, which it warned could continue. Outperforming the market was Just Eat, up 18¾p tat 402¼p, after the takeaway company raised its full-year profit guidance.
Tribal made its switch to AIM, having announced in December its intention to delist and apply for admission to the junior market. Shares in the education software company rose ½p to 45½p.
Conviviality raises a toast
A little fizz seeped out of Conviviality’s shares yesterday after the off-licence group behind Bargain Booze and Wine Rack tapped investors for fresh funds at a discount to the share price.
The AIM-quoted company said that it planned to raise £32 million through a placing of shares priced at 205p a pop to help to finance the acquisition of Bibendum PLB, a wholesaler, for £60 million. A further £10 million will be raised from revised bank facilities. Diana Hunter, Conviviality’s chief executive, said that the latest acquisition would bolster the company’s wine business, particularly in old world and premium wines.
The board expects the deal, which comes after the £200 million takeover of Matthew Clark, the wholesaler, last September through a separate £130 million share placing, to increase the group’s revenues by 23 per cent and to boost earnings in the present financial year.
Shares in Conviviality edged down towards the placing price, closing 6p lower at 207½p. They are down by 7.2 per cent this year.
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N+1 Singer, the broker, said that the deal “strengthens the group’s position in the sector and takes out a key rival”.
Wall Street report
Shares fell after weak economic data in China and Europe reignited worries about global growth, while oil prices declined for a second day, dragging down energy companies. The Dow Jones industrial average lost 140.25 points to close at 17,750.91.
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