Next stop, stagflation?

Stagflation is a poisonous mix of slow growth, inflation and unemployment. What causes it, and how to deal with its effects, divide opinion among professional economists. It gives central bankers and policy makers a severe headache and because it is difficult to combat, stagflation builds anxiety and uncertainty in financial markets, which is bad for … Continue reading “Next stop, stagflation?”

China outperforms, but is this economy a one-trick pony?

Chinese GDP growth was better than expected in the second quarter, but appears overly reliant on one engine of growth: fiscal stimulus. Chinese GDP growth was unchanged in the second quarter of the year, at 6.7% year-on-year, though it accelerated in quarter-on-quarter terms to 1.8%, from 1.2% previously. The reading, along with other activity data … Continue reading “China outperforms, but is this economy a one-trick pony?”

Flash UK PMI signals post-referendum slump

Private survey data suggest the UK economy has slumped since the result of the EU referendum was announced, increasing the chances of an interest rate cut in August. Markit has released a one-off set of surveys of its purchasing managers’ indices (PMIs), which suggest that both the manufacturing and the services sectors are now contracting … Continue reading “Flash UK PMI signals post-referendum slump”

Emerging markets could provide real diversification

Investors have generally been exhorted to ‘look internationally’ to compensate for domestic uncertainty, but is that really the best option? After all, given that the pound has slumped, investors are paying a lot more for, say, US or European assets than they were just a few short months ago. Looking internationally has a number of … Continue reading “Emerging markets could provide real diversification”

Brexit boosts emerging markets

Emerging equity markets generally performed better than developed markets during June. Although the UK’s decision to quit the European Union (EU) exerted heavy downward pressure on share prices around the world, many developing markets enjoyed relatively strong performance. Sentiment towards emerging markets was boosted by supportive statements from leading central banks in the wake of … Continue reading “Brexit boosts emerging markets”

Brexit raises questions over EU’s future

In Europe, June was dominated first by speculation over the possible outcome of the UK’s referendum on its future membership of the European Union (EU), and then by the unexpected news that a slim majority of UK voters had opted to quit Europe. The shock result plunged global financial markets into a state of heightened … Continue reading “Brexit raises questions over EU’s future”

Yen’s surge hits Japan’s exporters in June

Having fallen heavily in the wake of the UK’s shock decision to quit the European Union (EU), Asian markets experienced a slight rebound as June drew to a close. Japan’s Prime Minister, Shinzo Abe, attended an emergency meeting between the Government and the Bank of Japan (BoJ) to discuss the implications of the UK’s exit … Continue reading “Yen’s surge hits Japan’s exporters in June”

Strong demand for defensive and high-yielding stocks

Global markets experienced their worst-ever two-day loss in the wake of the UK’s decision to quit the European Union (EU), losing a record US$3.01 trillion, according to S&P Dow Jones Indices. Nevertheless, the leading mainstream US equity indices managed to rebound from sharp initial losses to end the month in marginally positive territory. The Dow … Continue reading “Strong demand for defensive and high-yielding stocks”

Global bond yields plummet

Investors’ appetite for high-quality bonds received a huge boost during June. Demand surged following a shock victory for Brexit campaigners in the UK’s referendum over its future membership of the European Union (EU). The news triggered turmoil in financial markets: equity prices plummeted and investors focused on perceived “safe-haven” assets, including the Japanese yen, gold, … Continue reading “Global bond yields plummet”

Gilt yields plunge after Brexit vote

UK gilt prices surged during June, boosted by an unexpected triumph for “Brexit” in the referendum over the UK’s future membership of the European Union (EU). Sterling and gilt yields fell sharply amid renewed expectations of lower interest rates. Over June as a whole, the yield on the ten-year UK gilt plunged from 1.56% to … Continue reading “Gilt yields plunge after Brexit vote”

Brexit decision shocks UK markets

Sentiment during June remained hostage to the fortunes of the referendum on the UK’s future membership of the European Union (EU). Market performance was volatile in the run-up to the vote; however, on balance, investors appeared to believe that most voters would ultimately opt to remain in the EU. However, in a surprising turn of … Continue reading “Brexit decision shocks UK markets”

Volatility and lower yields in June

Share prices in the UK plunged in June following the UK’s unexpected decision to leave the European Union (EU). In the much-discussed referendum, a narrow majority voted in favour of Brexit, triggering turmoil across global financial markets. In the UK, gilt yields posted sharp declines, the pound plunged to a three-decade low against the US … Continue reading “Volatility and lower yields in June”

Even lower for even longer: How low can they go?

Interest rates held, for now…. Mark Carney surprised markets by not cutting interest rates. However, he has made it clear that he is poised to cut whenever the moment demands and while this threat hovers over markets, slightly bonkers asset pricing can persist. But while the high price of defensive assets may persist, it doesn’t … Continue reading “Even lower for even longer: How low can they go?”

What does Brexit mean for trade?

The fallout from the United Kingdom’s vote on European Union membership, in which the ‘Leave’ campaign won a narrow victory, will have a wide range of repercussions that are difficult to assess in terms of scope, duration and size. The initial impact of this result has been global, and uncertainty remains a part of the … Continue reading “What does Brexit mean for trade?”