Emerging markets review – July 2016

Global equity markets generally rose during July, and the overall performance of emerging markets outstripped that of developed countries as investors sought growth opportunities. Investor sentiment in China received a boost from encouraging retail sales data: retail sales rose at an annualised rate of 10.6% in July, compared with 10% in July. Industrial production proved … Continue reading “Emerging markets review – July 2016”

Europe market review – July 2016

Having dropped during June following the UK’s shock Brexit vote, European equity markets rose during July, boosted by speculation over further stimulus measures. Nevertheless, confidence remained brittle, undermined by terrorist atrocities in France and Germany , and by continuing uncertainties surrounding Brexit. European Central Bank (ECB) policymakers believe that Brexit could have a “significant” effect … Continue reading “Europe market review – July 2016”

US market review – July 2016

US equity indices rebounded in July after a June that was marred by the fallout from the UK’s Brexit vote. Investors drew encouragement from some relatively strong corporate earnings releases, and both the Dow Jones Industrial Average Index and the S&P 500 Index both hit new all-time highs during the month. During July, the Dow … Continue reading “US market review – July 2016”

Global bond market review – July 2016

Although the initial shock of the UK’s Brexit vote had time to wear off as July progressed, global bond yields remained under pressure. Against a backdrop of declining yields and low interest rates, demand for bond funds continued to rise as investors searched for returns amongst the relative safety of high-quality government bonds and investment-grade … Continue reading “Global bond market review – July 2016”

UK equity market review – July 2016

The fallout from the UK’s Brexit decision continued to overshadow newsflow and sentiment during July. In particular, the first half of the month was dominated by political upheaval that resulted in the appointment of Theresa May as Prime Minister and Philip Hammond as Chancellor of the Exchequer. Over July as a whole, the FTSE 100 … Continue reading “UK equity market review – July 2016”

UK equity income market review – July 2016

Yields continued their downward path during July. The yield on the FTSE 100 Index fell from 3.84% to 3.72% during July; meanwhile, the FTSE 250 Index’s yield dropped from 2.82% to 2.66% and the FTSE Small Cap Index’s yield declined from 3.07% to 2.91% . In comparison, the yield on the ten-year UK government bond … Continue reading “UK equity income market review – July 2016”

UK bond market review – July 2016

Expectations of monetary easing, combined with strong demand for safe-haven investments, drove down UK bond yields during July. However, investors were surprised – and, in some cases, disappointed – by the Bank of England (BoE) policymakers’ unexpected decision to leave UK interest rates unchanged at 0.5% at their July meeting. A cut in rates, accompanied … Continue reading “UK bond market review – July 2016”

Global markets rebound in July

Global equity markets generally rose during July. Concerns about the UK’s decision to leave the European Union (EU) appeared to subside as the month progressed and investors’ appetite for equities was boosted by hopes that central banks in the UK, Europe, and Japan will introduce fresh stimulus measures. In the UK, however, investors were surprised … Continue reading “Global markets rebound in July”

The economic future of the Euro area

The falls in Euro-area share prices over the last year have been led by big falls in commercial bank shares. In part, this reflects slow progress in dealing with the bad debts and poor conduct of the pre-crash period, leaving many of them with low levels of cash and capital to absorb past losses. It … Continue reading “The economic future of the Euro area”

Does the world need more quantitative easing?

Should central bankers be contemplating more quantitative easing? It is clear that many still are: even though the Bank of England kept rates on hold at this month’s policy meeting, many are anticipating further stimulus in August. The ECB and Bank of Japan continue to print money, while the Federal Reserve shows itself reluctant to … Continue reading “Does the world need more quantitative easing?”

The negative interest rate experiment

The start of this year has seen a continuation of central banks’ policy experimentations, with Japan joining the eurozone, Switzerland, Denmark and Sweden in employing negative interest rate policies (NIRPs). NIRPs can refer to economies’ base interest rates, or more specifically to negative central bank deposit rates (i.e. the interest rates that central banks pay … Continue reading “The negative interest rate experiment”

Paying to lend? The failure of negative interest rate policy

We look at the economic and market impact of negative interest rate policy and where policymakers might head next. It has been a universal truth that borrowers need to incentivise lenders to provide loans, normally via the promise of the return of capital (hence “My word is my bond”) with additional compensation in the form … Continue reading “Paying to lend? The failure of negative interest rate policy”

Now is not the time for knee-jerk reactions

Much has happened since the referendum. Politicians have come, gone, not gone and we have a new Prime Minister. Markets have whipsawed. All of this has led to a whiff of panic. It is time for a bit of calm and for politicians to chart a safe course for the country.   Some have made … Continue reading “Now is not the time for knee-jerk reactions”

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?”