Macro views

Market Reviews - GBP (February 2020 )

Market reviews - GBP, FTSE All-Share, FTSE World Europe ex UK TR GBP, FTSE All-World North America TR GBP, FTSE Japan TR GBP, FTSE All-World Emerging TR GBP, FTSE World Asia Pacific ex Japan TR GBP
March 2020

Investment Content team

Subscribe to our Insights

Risk Disclaimer

Past performance is not a guide to future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any products that may be mentioned.

UK

The FTSE All-Share Index lost 8.9% in sterling terms during February as stocks sold off sharply on the back of coronavirus worries. While the UK itself reported relatively few cases of the virus, the government was preparing emergency legislation to deal with a possible pandemic. There were rising expectations of an imminent UK interest rate cut after Bank of England governor Mark Carney warned the coronavirus outbreak was likely to weigh on domestic growth this year. Meanwhile, official data showed the UK economy registered zero growth over the final quarter of 2019. Composite PMI data suggested the UK economy expanded at a modest pace in February, broadly in line with January. In terms of sectors, oil & gas producers (14.2%) and food producers (12.0%) lagged, while electricity (1.0%) and forestry & paper (1.0%) outperformed.

 

 

Risk Disclaimer

The value of investments and any income from them can go down as well as up and investors may not get back the original amount invested.

 

FTSE All-Share Total Return (TR) GBP (%)*

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any products that may be mentioned.

Europe

The FTSE World Europe ex-UK Index returned -5.4% in sterling terms. In common with global equities in general, European stocks suffered from fears over coronavirus. While various European countries reported coronavirus cases during the month, there was particular concern centred on Italy, where a cluster of towns in the country’s north were quarantined. Official data showed the eurozone economy grew by just 0.1% over the final quarter of 2019, the slowest pace since 2013. Eurostat also reported a 2.1% decline in eurozone industrial production in December, with weakness in Germany, Italy and France. PMI survey data for February pointed to some monthly improvement in eurozone economic activity, though manufacturing continued to contract. The Zew survey suggested investor sentiment on Germany’s economic outlook deteriorated sharply in February.

FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

 FTSE World Europe ex UK TR GBP (%)*

FTSE World Europe ex UK TR GBP (%)

US

The FTSE All-World North America Index fell 5.2% in sterling terms over February. Along with global equities in general, US stocks came under pressure from the coronavirus crisis and worries over the potential for a global pandemic. Though relatively few, there were a rising numbers of US cases, with health officials warning the disease was likely to spread through US populations. Comments from Federal Reserve (Fed) chair Jay Powell alluding to economic risks posed by the spread of coronavirus raised expectations that the Fed would cut interest rates in March. Survey data released early in the month showed US manufacturing activity had swung into expansion in January from contraction in December. The US economy also added more jobs than expected over January. The US and China repealed certain trade tariffs that they had imposed on one another in September.

FTSE All-World North America TR GBP (%)*

FTSE All-World North America TR GBP (%)

Japan

The FTSE Japan Index lost 6.4% in sterling terms during January, with stocks suffering a sharp sell-off on the back of coronavirus worries. Given a rising number of cases across the country, Japan closed all its schools until at least the first week of April in a bid to help contain the disease. Japan appeared on course for recession after official data showed the economy had contracted by an annualised 6.3% in the final quarter of 2019, hindered by October’s rise in consumption tax. Economists widely forecast Japan’s first quarter growth rate to be hit by coronavirus related supply chain disruptions and faltering demand. Japanese exports fell for the fourteenth consecutive month in January year on year, while machinery orders declined at the fastest rate since 2018.

FTSE Japan TR GBP (%)*

FTSE Japan TR GBP (%)*

Emerging Markets

The FTSE All-World Emerging Index returned -2.0% in sterling terms over February, outperforming the global average during a month when stocks came under pressure from the coronavirus crisis. China (4.4%) outperformed, boosted by stimulus measures from the nation’s central bank, while new coronavirus cases began to rise at a faster rate across the rest of the world than in China itself. There was also some easing in US-China trade tensions, with the two countries repealing certain trade tariffs imposed on one another in September. Various emerging markets experienced double-digit losses, with Greece (-19.3%), Poland (-12.8%), Turkey (-12.2%) and Russia (-11.8%) among the worst performing markets as global stocks suffered from coronavirus induced risk aversion. Greece and Turkey were additionally hindered by increased bilateral tensions as the latter began to allow migrants to cross into Greece.

FTSE All-World Emerging TR GBP (%)*

FTSE All-World Emerging TR GBP (%)*

Asia Pacific ex Japan

The FTSE World Asia Pacific ex Japan Index returned -3.7% in sterling terms during February, outperforming the global average. While the coronavirus crisis weighed on global stocks in general, Hong Kong (1.5%) and Taiwan (1.2%) were among the best performing world markets, buoyed by hopes surrounding Chinese monetary stimulus measures. There was also some easing in US-China trade tensions, with the two countries repealing certain trade tariffs imposed on one another in September. Thailand (-9.3%) was one of the region’s worst performing markets amid worries over the impact of coronavirus on the country’s tourism industry amid a rising number of domestic cases. Australia (-8.2%) similarly underperformed amid concerns over the outlook for the country’s economy in the event of a global coronavirus pandemic.

FTSE World Asia Pacific ex Japan TR GBP (%)*

FTSE World Asia Pacific ex Japan TR GBP (%)*

Government Bonds

Global government bond yields fell over February as sovereigns were boosted by safe-haven flows given coronavirus concerns and the outlook for the world economy in the event of a global pandemic. US 10-and 30-year treasury yields traded around record lows as investors priced in the increased likelihood of an interest rate cut from the Federal Reserve (Fed) in March, with Fed chair Jay Powell acknowledging rising risks to the economic outlook. German 10-year bund yields slid further into negative territory amid fears that coronavirus would tip the eurozone into recession. US economic data continued to be generally more robust versus the eurozone. The US PCE inflation gauge rose 1.7% in January versus 1.5% in December. Meanwhile, core eurozone inflation declined to 1.1% in January from December’s 1.3% reading.

Corporate Bonds

Global corporate bond spreads widened over February amid a flight to safety on rising concerns over coronavirus and its impact on the economic outlook. Various corporate bond deals were put on hold during the month amid increased caution from investors. Attention increasingly turned to the disease’s accelerating spread outside China and the potential for a fullblown global pandemic. There were rising expectations that the Federal Reserve would cut rates following its March meeting. However, eurozone economic data continued to be comparably weaker to the US, with official data showing the eurozone economy grew by just 0.1% over the final quarter of 2019, the slowest pace since 2013. There was some easing in US-China trade tensions as the two sides repealed certain trade tariffs that they had imposed on one another in September. 

*Source: Lipper to 28-Feb-2020, total return. Indices rebased to zero at 31-Jan-2020.

Subscribe to our Insights