It was a volatile week for the FTSE 100, but it managed to drag itself back over the 6,000 mark by Friday's close. And surprisingly enough, investors have the Chancellor to thank for that.
Budget 2006 saw Gordon Brown remain silent on the more embarrassing aspects of the economy, such as the NHS. The health service is currently lying in intensive care, being pumped full of cash at one end and haemorrhaging staff at the other. No doubt the education system, Brown's next target, will end up in the bed next door.
However, his plans for Real Estate Investment Trusts (Reits) cheered the City up no end. The main beneficiaries were property groups like British Land, Land Securities and Hammerson.
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And let's not forget, of course, high street behemoth Tesco...
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Gordon Brown's gift to Tesco shareholders
So why did Gordon Brown's decisions on Reits help the country's biggest supermarket group?
It's simple. Tesco not only supplies about a third of the country with their weekly shopping it's also one of the largest property owners in the UK.
The group has UK freehold property worth about £6.2bn, according to broker Collins Stewart Quest. And its global portfolio is worth £13.1bn. To put that into perspective, the UK's biggest listed property company, Land Securities, has a portfolio of £11.5bn.
As The Telegraph suggests, Tesco could put some of its property into a Reit, which would be listed on the stock exchange. The cash it would raise could then be used to buy back its own shares or to plough into further investment.
It's one way for Tesco to realise the value of its property portfolio though not the only one. Last week, J Sainsbury issued bonds worth £2.1bn backed by its property portfolio. The group used the proceeds to buy back £1.7bn of outstanding bonds and pay off £350m of its pension deficit.
Tesco might find it is able to raise more money by going down the Reit route, rather than by issuing bonds. As John Foley on Breakingviews points out, Reits "tend to trade at a premium to the underlying property's net asset value."
But a major sticking point could be that Tesco would have to give up control of its property portfolio. A single shareholder can only hold a maximum 10% stake in a Reit. So it may yet go down the same route as Sainsbury's.
But if Tesco's does decide to float its property portfolio, does this mean we can expect a flood of retail Reits? Maybe not. Foley adds: "It's not obvious that what's good for Tesco would be good for its competitors too." By separating out the value of their property portfolios, retailers leave their share prices even more exposed to the fortunes of the high street.
Tesco's position as market leader should enable it to weather any consumer spending downturn. However, "other big property owners like William Morrison, which has around $6bn of freeholds, aren't so well buffered."
And as Tom Stevenson in The Telegraph points out, anyone tempted to buy into William Morrison simply because of its property holdings, should think again. The group "trades on a recovery multiple of 30 while Tesco, sitting on a property goldmine, is half the price."
Why the French have shops and the UK has supermarkets
General handwringing in the media about the demise of the local shop hasn't helped Tesco's share price - though most people who complain about Tesco's dominance ignore the fact that the French-style high streets they long for never actually existed in Britain. Swapping the soulless shopping experience of cheap goods and convenience for the sights and smells of la boulangerie and la boucherie may indeed be a very attractive idea. But the reality of local shopping in pre-supermarket Britain was overpricing, understocking, and shoddy customer service.
Of course, that hasn't stopped the Competition Commission from launching another investigation into the supermarket sector - and as market leader, Tesco is clearly the main company at risk from any adverse findings.
So is the latest competition probe likely to have any more impact on the sector than the others? We covered the subject in last week's MoneyWeek, but if you missed it, subscribers can read the piece online here: Will the latest competition probe hurt supermarkets?
And if you're not yet a subscriber, you can get access to all the content on the MoneyWeek website and sign up for a three-week free trial of the magazine, just by clicking here: Sign up for a three-week free trial of MoneyWeek.
Turning to the stock markets
The FTSE 100 closed 46 points higher at 6,036, a fresh five-year high. Insurer Prudential was the main faller, down 5% to 681p as rival Aviva said it would not be making a bid for the group. Miners were in good form again, with Anglo American up 4% to £21.52 and Rio Tinto up 3% at £28.48. For a full market report, see: London market close
Over in continental Europe, the Paris Cac 40 was up 24 points at 5,218, while the German Dax gained 26 to close at 5,973.
Across the Atlantic, US stocks made modest gains as investors stayed cautious ahead of the Federal Reserve's interest rate decision, due this week. The Dow Jones gained 9 points to 11,279, while the S&P 500 rose 1 to 1,302. The tech-heavy Nasdaq climbed 12 to 2,312.
In Asian trading hours, oil was edging lower, trading at around $64.20 a barrel in New York. Brent crude was trading at around $62.50 a barrel.
Meanwhile, silver hit its highest level since September 1983, rising to $10.82 an ounce, before easing back to $10.78, on continued excitement over the anticipated approval of a US-based silver exchange-traded fund. Spot gold eased back, to trade at around $559 an ounce.
In Asian stock markets, the Nikkei 225 gained 89 points to 16,650. Exporters climbed on hopes that US interest rates won't go much higher than 5.25% after official figures showed that US new home sales fell 10.5% in February.
And in the UK today, shares in ports group AB Ports have jumped amid reports that the company is being eyed by a consortium backed by Goldman Sachs for a 740p-a-share bid.
And our two recommended articles for today...
Can China and Japan save the US dollar?
- Many people believe China and Japan will keep propping up the US dollar. Why? Because they can't afford to devalue the reserves they already hold, and they rely on US consumers to buy their goods. Good points, says gold commentator Paul van Eeden - but irrelevant. To find out why China and Japan won't be able to prevent a dollar collapse, even if they want to, click here: Can China and Japan save the US dollar?
Why US stocks face a bear market until 2016
- The S&P 500 has rarely gone more than two years without a 10% correction. But we're now at the end of a third year without such a retreat, say Andrew Selsby and John Robson of RH Asset Management. And that suggests that US markets are heading for a fall any day now. To find out why they next 10 years will be tough one for US equity investors, click here: Why US stocks face a bear market until 2016
