IC July 2008 business news

05 March 2009

Having plummeted at the start of the year as the global banking sector went into crisis, shares prices had been recovering in the second quarter. But that all changed in June with inflation delivering a second haymaker to the markets.

As well as the well-publicised spike in oil prices, the cost of other basic commodities - including food - has shot up this year. This has pushed many national, regional and global inflation measures up from the low levels that have prevailed for a decade or more.

What's more, the consensus seems to be that inflation is going to get worse before it gets better.

As a result, share prices took some heavy losses in June. Weeks 21 - 25 saw the UK market suffer particularly badly, with the FTSE 100 losing 8.14% of its value. The Dow, down 6.20%, followed this while the Nikkei escaped relatively unscathed with a 1.10% loss.

These losses saw both the FTSE and the Dow cross some important psychological barriers. It was the first time the Dow has been below 120000 points and the FTSE below 6000 points since October 2006.

IC's Share Index for crane manufacturers also took a thumping over the four-week period, with a 12.75% drop to 526.34 points. This market indicator tends to be more volatile than the mainstream benchmarks, and was last in this territory at the start of the year in the wake of the banking crisis.

All of the companies that make up the IC Index apart from Tadano lost ground between weeks 21 and 25, although none particularly stood out as being particularly heavily sold.

Long-term

Our comparison with the position 12 months ago shows the net effect of all the various ups and downs of the last year. Late June 2007 saw many markets at their peaks (although the Dow was at its highest in October), so the comparison with today's levels generally shows the maximum peak-to-trough losses.

Although it was relatively unscathed in the last four weeks, the Nikkei 225 has seen the biggest fall over the last year, losing 23.81% of its value. The crane sector is not far behind with a 21.05% loss, and then there is clear water to the FTSE 100, down 14.26% and the Dow, down 12.57%.

With such volatile conditions, it would be foolish to make any predictions about the following months. July's half-year results season should provide some guidance to the markets, but whether it is good news or bad news depends on how hard the current rise in inflation is hitting corporate profits.

July IC Share Index

Stock Currency Price at start Price at end Change % Change 12 months ago 12 month % change

IC Share Index* 603.37 526.43 -76.94 -12.75 666.76 -21.05

Dow Jones Industrial Average 12626 11843 -783 -6.20 13546 -12.57

FTSE 100 6157 5656 -501 -8.14 6596 -14.26

Nikkei 225 14012 13857 -155 -1.10 18189 -23.81

Hitachi Construction Machinery YEN 3510 3180 -330 -9.40 4450 -28.54

Konecranes € 29.70 25.47 -4.23 -14.24 31.90 -20.16

Kobe Steel YEN 353 301 -52 -14.73 471 -36.09

Manitowoc US$ 39.50 37.40 -2.10 -5.32 82.57 -9.41

Palfinger € 25.36 22.83 -2.53 -9.98 152.03 -39.93

Tadano YEN 1106 1145 39 3.53 1866 -38.64

Terex US$ 71.42 61.48 -9.94 -13.92 83.99 -26.80

*IC Share Index, end April 2002 (week 17) = 100

Exchange rates - value of US$

Currency Value at start Value at End Change % Change Value 12 months ago 12 month % change

YEN 104.03 107.42 3.39 3.26 124.06 -13.41

0.6368 0.6400 0.0031 0.49 0.7463 -14.25

UK£ 0.5054 0.5067 0.0012 0.24 0.5014 1.05

Period: Week 21 - 25

Palfinger 4 for 1 stock split in week 27 2007

Manitowoc 2 for 1 stock split in week 37 2007

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