Macro views

Market Reviews - November 2018 GBP

Discover our latest round-up of market news, featuring equities and both government and corporate bonds.
December 2018
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Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

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

UK

The FTSE All-Share Index fell 1.6% in sterling terms in November, underperforming the global average. While UK economic data was generally mixed, Brexit dominated the headlines amid concerns that the prospect of a no-deal scenario had increased. Prime Minister Theresa May agreed a controversial deal with the EU on the terms of the UK’s withdrawal from the bloc. However, with the declaration prompting further resignations from UK cabinet ministers, speculation mounted that the agreement would be rejected by the UK parliament in December. UK retail sales dipped 0.5% in October, disappointing forecasts, while survey data also pointed to fading consumer confidence. In terms of sectors, tobacco (-15.9%) and industrial metals & mining (-13.7%) sharply lagged the benchmark, while mobile telecommunications (16.1%) and technology hardware & equipment (8.3%) outperformed.

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

Europe

The FTSE World Europe ex-UK Index returned -0.5% in sterling terms over November. Survey data released during the month suggested that economic momentum across the eurozone was slowing as manufacturers and exporters were hindered by the trade war between the US and China. Meanwhile, initial estimates showed eurozone inflation had fallen to 2% in November, versus 2.2% in October, due to lower energy prices. The European Commission’s monthly consumer sentiment indicator for November fell to its lowest level since March 2017. In terms of country performance, Italy was among the bestperforming European markets amid growing expectations that the government would rein in its spending plans to head off EU opposition. Norway sharply underperformed as it was hit by a fall in crude oil prices over the month.

Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

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

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index gained 2.1% in sterling terms. US stocks rose after comments from Federal Reserve (Fed) chair Jay Powell raised hopes that the central bank may take a more accommodative approach. Towards month-end, there was also growing optimism that President Trump would use the G20 summit in early December to negotiate a truce in the trade war with China. However, for much of the period, US equites were hindered by worries over the global growth outlook and falling oil prices, with Brent crude plunging from $75 to $59 per barrel over November. The Fed’s core measure of inflation eased to 1.8% for October versus 2.0% in the prior month. US economic data was mixed, with the trade dispute weighing on industrial production.

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

Japan

The FTSE Japan Index returned 0.8% in sterling terms during November. Japanese economic data released during the month were mixed, with a recent spate of natural disasters blamed for a 1.2% annualised pace of contraction in economic growth over the third quarter. Nevertheless, the Bank of Japan struck a more hawkish tone, pointing to underlying improvement in the domestic economy. Monthly data showed industrial output for the month of October grew at its fastest pace in over three years. Consumer spending, however, remained relatively subdued, with Japan’s core consumer price inflation index unchanged in October, at 1%. The yen weakened against major currencies over the month, providing support for the shares of Japanese exporters.

FTSE Japan TR GBP (%)*

Emerging Markets

The FTSE All-World Emerging Index gained 4.3% in sterling terms over November. Emerging market equities outperformed their developed counterparts over the month, finding support from a more accommodative tone from US Federal Reserve chair Jay Powell, along with hopes that the US and China were nearing a truce in their damaging trade war. Turkey (13.1%) was the best-performing market over the month, buoyed by improving domestic economic data and a strengthening lira. India (10.3%) was also among the top-performing markets over November, helped by a sharp fall in crude oil prices and given its status as an oil importer. On the negative side, Mexico (-4.4%) suffered from worries over the agenda of newly-elected, left-leaning, President López Obrador. Chinese economic data was generally lacklustre, with manufacturing survey data for November suggesting activity had cooled.

FTSE All-World Emerging TR GBP (%)*

Asia Pacific ex Japan

The FTSE World Asia Pacific ex Japan Index advanced 2.2% in sterling terms during November. Hong Kong (6.9%) was among the best-performing markets over the month, lifted by hopes that the US and China were nearing a truce in their trade war. Asia Pacific markets were additionally supported by a more accommodative tone from the US Federal Reserve. Solid performances also came from New Zealand (4.9%), Korea (4.0%) and Singapore (3.2%). Elsewhere, Malaysia (-1.0%) was firmly in negative territory due to falling oil prices. Taiwan (-0.8%) lagged as it was hampered by weakness in technology stocks. Chinese economic data released during the month generally disappointed and pointed to slowing momentum. Along with renewed weakness in the housing market and sluggish credit growth, monthly survey data on manufacturing activity also softened.

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

Government Bonds

Global government bond yields fell modestly over November against subdued inflation and falling oil prices. The Federal Reserve’s (Fed) core measure of inflation eased to 1.8% for October versus 2% in the prior month, while initial estimates showed eurozone inflation had declined to 2% in November versus 2.2% in October. There was also the prospect of further falls for inflation globally as oil prices plunged over November, from $75 to $59 per barrel from Brent crude. For much of the period, safe havens found support from worries over the global growth outlook. Towards month-end, Fed chair Jay Powell grabbed the market’s attention by adopting a more accommodative tone. The European Central Bank, meanwhile, shrugged off the recent weakness in eurozone economic data and affirmed its commitment to end quantitative easing in December.

Corporate Bonds

Global corporate bonds underperformed in November. The month provided a mixed backdrop for credit, with falling inflation in the US and eurozone driven by lower energy prices. At the same time, further sharp falls in oil prices over the month, from $75 to $59 per barrel for Brent crude, added to market volatility and represented a particular concern for the energy sector. Along with elevated oil inventories, investors fretted over the outlook for global economic growth against mixed data from the US and eurozone as well as softening data from China. Federal Reserve chair Jay Powell grabbed the headlines by adopting a more accommodative tone. The European Central Bank, meanwhile, shrugged off the recent weakness in eurozone economic data and affirmed its commitment to end quantitative easing in December.
 
*Source: Lipper to 30 November 2018, total return. Indices rebased to zero at 31 October 2018.
 
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