Market Review January

UK

The FTSE All-Share Index lost 3.3% in sterling terms during January, lagging the global average. The UK left the EU on the final day of the month after the two sides ratified the withdrawal agreement, as expected. Despite downgrading its growth forecasts for the UK economy, the Bank of England voted to keep interest rates on hold. UK headline inflation slid to its lowest level in over three years in December, at just 1.3%. Survey data suggested UK manufacturing activity had contracted further in December, though there was some improvement in the service sector PMI figures. UK retail sales declined in December, with the pace of contraction accelerating from the prior month. In terms of sectors, leisure good (7.6%) and household goods & home constriction (5.7%) led, while fixed line telecommunications (-14.8%) and forestry & paper (-12.8%) underperformed.

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

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Europe

The FTSE World Europe ex-UK Index returned -1.6% in sterling terms. Official data indicated the eurozone economy grew by just 0.1% over the fourth quarter versus 0.3% in the prior quarter, with both France and Italy contracting over the final few months of the year. PMI survey data for January pointed to some improvement in activity levels for Germany in contrast to deterioration in France. Early in the month, France was hit by a new wave of nationwide protests over its governments’ pension reform plans. Meanwhile, Germany’s Ifo business confidence gauge registered a surprise fall for January, its first decline since September. Eurostat figures suggested that headline eurozone inflation rose to 1.3% in December, up from 1% in the prior month, lifted by higher energy costs.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index rose 0.7% in sterling terms over January. US stocks initially found support from hopes surrounding easing trade tensions, with the US and China signing a “phase-one” trade deal. Towards month-end, however, US equities were hindered by the coronavirus outbreak that originated in China and worries over its potential impact on global growth. The US economy grew at an annual pace of 2.1% in the final quarter of 2019, unchanged from the prior quarter. PMI survey data suggested the rate of contraction in US manufacturing had accelerated in December, just as the ongoing expansion in the service sector quickened. US jobs growth for December disappointed estimates, trailing the prior month’s tally. Headline US inflation rose to 2.3% in December, up from 2.1% in November.

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

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*Source: Lipper to 31 January 2020, total return. Indices rebased to zero at 31 December 2019.

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