- Weekly update
- 2 minute read
- Global equity market performance was primarily positive across the board. In GBP terms, Japan rose the most, up +2.98%, followed by Emerging Markets (+2.63%), the UK (+1.79%), Europe (+1.62%) and the US (+1.52%).
- Bonds were mixed over the week. UK Gilts and UK Corporates were down -0.22% and -0.04% respectively, whilst European bonds rose +0.20% and US government bonds fell -0.24%.
- GBP appreciated vs USD, JPY and EUR by +0.95%, 0.91% and +0.29% respectively.
- In USD terms, the oil price rose +7.57% and gold rose by +0.71%.
- Theresa May’s last-ditch attempt to shore up her Brexit deal appeared to be in the balance, with parliamentary arithmetic indicating it will not be approved on Tuesday 15th. Given the high likelihood that the deal will be rejected (at the first try at least), we expect considerable uncertainty to persist until 21st January, after which date parliamentary procedure indicates that a minister must make a statement to the Commons explaining how the Government intends to proceed.
- US consumer prices fell for the first time in nine months, dragged down by falling fuel prices. The headline figure slid 0.1% MoM for December, marking the first decline in CPI since March 2018. However, core inflation, which strips out volatile items such as energy and food, rose 2.2% YoY, in-line with forecasts and marginally above the Federal Reserve’s 2% target. Weaker inflationary pressure, despite labour market tightness, should offer the Fed greater scope to be accommodative in 2019, putting less upward pressure on the US Dollar.
- Eurozone unemployment has fallen to its lowest level in a decade, as the seasonally-adjusted unemployment rate fell to 7.9% in November, down from 8% in October. The report showed the fall was due to increasing employment in Greece and Spain, while labour markets remain tight in Germany especially. Strong employment data should provide some support for wages and consumption in coming months but, given the dramatic deterioration in Eurozone export and industrial production data, it remains so be seen if domestic strength can offset external weakness.
- Global growth has weakened somewhat from elevated levels. We expect earnings growth to remain positive but weaker inflationary pressure should cause more gradual interest rate rises.
- Despite elevated geopolitical risk, we believe this is an environment favouring equities over bonds.
- Within our regional equity allocation, we are cautious on UK equities and favour those regions most attractively positioned to benefit from the improvement in the global growth dynamic.
The information contained in this document is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.