Macro views

Market Reviews - November 2019 GBP

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
December 2019

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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 gained 2.2% in sterling terms during November, though trailed the global average. Official data showed the UK economy grew by 0.3% over the third quarter versus the 0.2% contraction of the prior quarter. Labour market data indicated a modest drop in the number of people in employment in the three months to September, quarter on quarter. Survey data suggested that uncertainty around Brexit and the upcoming UK general election had weighed on services and manufacturing activity during November. UK retail sales for October disappointed forecasts, while UK inflation fell to its lowest level in three years in October, at 1.5%. In terms of sectors, leisure goods (24.5%) and electronic & electrical equipment (13.3%) led, while fixed line telecommunications (-5.7%) and oil & gas producers (-0.3%) underperformed.

Risk Disclaimer

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.

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

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

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.

Europe

The FTSE World Europe ex-UK Index rose 1.4% in sterling terms. German business confidence as measured by the Ifo gauge improved for the third consecutive month in November. Survey data suggested the German manufacturing sector continued to contract in November, though to a lesser extent than the prior month, a trend that was reflected in eurozone manufacturing survey data as a whole. Survey data suggested the eurozone services sector expanded in November but at a slower pace versus October. Official data indicated Germany had narrowly escaped a recession, with growth of 0.1% in the third quarter compared with a 0.2% contraction in the second quarter. While higher consumer and government spending propped up the German economy, there was also support from a surprise rebound in exports during the month of September.

FTSE World Europe ex UK TR GBP (%)*

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index advanced 3.7% in sterling terms over November. US stocks outperformed the global average, buoyed by optimism that the US and China would soon finalise a ‘phase-one’ trade deal. Separately, the US also appeared close to approving a new trade pact with Mexico and Canada. US economic growth was revised up to an annualised 2.1% for the third quarter versus the earlier 1.9% estimate, marking an acceleration from the second quarter’s 2% growth rate. Survey data suggested the US manufacturing sector had contracted for a third consecutive month in October, though the reading was modestly better than in the prior month. Meanwhile, survey data indicated the services sector had accelerated ahead of estimates in October. Non-farm payrolls beat forecasts, with the US adding more jobs than expected in October.

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

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

Japan

The FTSE Japan Index returned 0.6% in sterling terms during November. Yen weakness versus the pound over the month hit returns from Japanese equities for UK-based investors. The Japanese government pledged to raise fiscal spending and draw up a 15-month budget to boost the domestic economy, citing the impact of October’s Typhoon Hagibis as well as weaker global economic growth. Japanese third-quarter growth disappointed expectations amid falling inventories and exports, with the economy expanding by an annualised 0.2% versus the prior quarter’s 1.8% pace. Survey data suggested Japan’s services sector contracted in October in the aftermath of a sales tax rise and the impact of the typhoon. Core machinery orders disappointed forecasts, declining 2.9% in September versus August, the third consecutive monthly fall.

FTSE Japan TR GBP (%)*

FTSE Japan TR GBP (%)*

Emerging Markets

The FTSE All-World Emerging Index returned 0.3% in sterling terms over November, underperforming the global average. Turkey (7.3%) was among the best-performing markets over the month, benefiting from an improvement in investor sentiment along with lower domestic inflation. China (2.1%) advanced amid hopes the US and China would soon finalise a ‘phase-one’ trade deal, as well as being supported by better-than-expected domestic economic data. Greece (1.9%) was firmly in positive territory, continuing to find support from S&P’s recent move to upgrade the country’s credit rating. Chile (-11.6%) was the worstperforming market over the month, with Chilean assets battered by anti-government protests. Poland (-4.9%) suffered from worries over foreign currency mortgages following a court ruling. Brazil (-4.1%) was hit by currency weakness against political worries and a deteriorating trade balance.

FTSE All-World Emerging TR GBP (%)*

Asia Pacific ex Japan

The FTSE World Asia Pacific ex Japan Index returned 0.1% in sterling terms during November. New Zealand (7.2%) outperformed over the month, boosted by better-than-anticipated corporate earnings and robust M&A activity. Taiwan (1.6%) outperformed the regional average, with its technology stocks holding up relatively well. Australia (1.2%) found support from hopes that the US and China would imminently sign a ‘phase-one’ trade deal. Malaysia (-1.8%) suffered from political worries and a fragile corporate earnings backdrop. Korea (-1.5%) lost ground as concerns over slower global growth weighed on sentiment. Hong Kong (-1.4%) was also firmly in negative territory amid ongoing pro-democracy protests and as official data showed its economy had fallen into recession in the third quarter. Survey data suggested China’s manufacturing activity beat expectations in October, while separate data showed exports fell by less than anticipated.

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

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

Government Bonds

Global government bond yields were little changed over the month. US economic data released during November was broadly positive, with third-quarter growth revised up to an annualised 2.1% versus the earlier 1.9% reading, an improvement on the second quarter’s 2% expansion. Monthly data pointed to continued strength in the US labour market. US headline inflation accelerated to 1.8% in October versus 1.7% in September against higher petrol prices. Eurozone economic news was mixed, with survey data suggesting the eurozone manufacturing sector had continued to contract in November, though at a slower pace than in the prior month. Preliminary official estimates indicated eurozone inflation was at 1% in November, up from 0.7% in October. The European Commission warned that France, Belgium, Italy and Spain were unlikely to meet EU debt reduction objectives for 2020.

Corporate Bonds

Global corporate bond yields were little changed over the month. Corporate bonds found support from expectations that the US and China would imminently sign off on a ‘phaseone’ trade deal. US economic data released during the month was relatively robust, with services sector growth appearing to accelerate over October. Although survey data suggested US manufacturing activity had declined in October, the gauge suggested it did so at a slower rate than in the prior month.

However, separate survey data indicated the pace of growth in eurozone services had declined in November. US thirdquarter growth was revised up to 2.1% versus an earlier 1.9% estimate, while Germany narrowly escaped recession, registering growth of 0.1% in the third quarter. US pharmaceutical group AbbVie issued $30bn of debt to help finance its $83bn acquisition of Allergan.

 

*Source: Lipper to 29-Nov-2019, total return. Indices rebased to zero at at 31-Oct-2019.

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