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Market Analysis: November 2015

While approximately every shop window in the UK is proclaiming winter with every Christmas themed ornament they own, the Chancellor gave the UK a gentle reminder that it is still technically autumn (google it) with the appropriately named Autumn Statement. Here’s the latest market analysis from independent financial planning and investment management firm, Gale and Phillipson.

The Autumn Statement brought a few expected announcements for public sector pay (still capped at a 1% rise), state pension protection (it’s still there) and the deficit (they still don’t want one), as well as a few less expected ones. The Chancellor has scrapped plans for tax credit cuts and introduced a 3% surcharge on buy-to-let properties and second homes (to take effect from April).

Elsewhere the Eurozone economy slowed to 0.3% growth in the third quarter, this added to predictions that the European Central Bank would increase its Quantitative Easing program (currently at €60bn a month until September 2016). Technically this did come to pass as the program was extended until March 2017, committing the ECB to another €360bn of financial easing, but clearly markets were not impressed as following the announcement Eurozone indices fell back. To put this in perspective, the addition was a bit more than Denmark’s GDP for 2014.

UK

The mortgage lending in the UK has reached a seven year high (the highest since before the financial crisis) according to the Council of Mortgage Lenders. In October lending was up nearly 20% over the year before. In related news the UK government has sold £13bn worth of former Northern Rock mortgages, at £280m above their book value, meaning that the government has now disposed of more than 85% of the assets it acquired after Northern Rock’s collapse. A clean slate, wonderful!

EUROPE

The Greek government has finally got its hands on the latest tranche of financial aid, following some ‘wrangling’ (to be polite) about repossession protection for Greek homeowners. While up to €10bn of the €12bn released is earmarked for support for the banks, perhaps there will be a little to buy a few Christmas presents as well. It’s rumoured that calculators are the ‘in’ gift this year.

US

As the US Federal Reserve inches ever closer to rate rises (with the speed of an elderly snail), there was a little good news as consumer prices rose in October. While obviously consumers were overjoyed to hear the news, this sign that inflation may be strengthening was seen as another hint that rate rises may finally (finally!) be coming. Oh be still my heart.

ASIA/PACIFIC

It’s official – Japan is back in recession. For the fifth time since the start of the financial crisis in 2008 the world’s third largest economy is shrinking. This (delicious-sounding) quintuple dip recession did not trigger an expansion of the Bank of Japan’s ¥80tn a year program as some analysts expected, but the bank did emphasise that this option remained open to them. Watch this space.

EMERGING MARKETS

African economies received welcome news this month as President Xi Jinping of China announced $60bn of assistance and loans for different states. Elsewhere, perhaps celebrating Diwali India’s economic growth picked up to an annual rate of 7.4% (official figures for the Q3 period). While this was welcomed as good news the increasing Indian population means the pressure remains on Prime Minister Narendra Modi’s government to boost economic growth. Stay tuned for the exciting results of his tax reform bill.

FIXED INTEREST SECURITIES

October saw the highest levels of public sector net borrowing in six years, according to official figures. This leaves Chancellor George Osborne with a mere (!) £15bn of allocated funds to last until April, without exceeding the Office for Budget Responsibility’s forecast for this year. However, before the government turns to handmade Christmas gifts it’s worth noting that gilt prices actually rose over the month, so while the Government is borrowing more it’s gotten cheaper for them to do so.

Merry Christmas!

The information in this document is provided for information purposes only and does not take into account the investment objective, the financial situation or the individual needs of any particular person. It is not investment research and you should not treat this publication as a recommendation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. Past performance is not a guide to future performance. The value of investments and income from them can go down as well as up and you could get back less than you have paid in.

This was posted in Bdaily's Members' News section by Gale and Phillipson .