In September, the UK equity market produced a negative return of 1.7%, as measured by the FTSE All Share Index. Market sentiment was adversely affected by the rise in Covid 19 cases in the UK and Europe.

Large companies outperformed with the FTSE 100 Index producing a negative return of 1.5% compared with a negative return of 2.5% for the FTSE 250 Index of medium-sized companies.

The oil price fell by some 7% over the month reflecting a continuing imbalance between demand and supply. Oil company shares were notably weak and City of London remains under represented compared to the market average in Royal Dutch Shell and BP. In contrast, the tobacco sector was among the best performers, recovering from a weak period over the summer. City of London benefited from its large holding in British American Tobacco.

Additions were made to the holding in Tesco, the UK’s leading food retailer. Tesco is trading well and benefiting from greater focus after disposing of most of its overseas operations. TP ICAP had a poor month and was sold after it announced a cut in its dividend and an acquisition.

Overall, a steady stream of companies have announced restoration of dividends. The yield on UK equities remains attractive compared with the main alternatives.

 

Glossary

Yield: The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.