Read our full Market Update Week 46

Market Update

Global stocks continued their rebound this week, with both Global and European equities up +0.3%. Emerging Market equities led the pack, returning +2.5% as the slide in oil prices gave a boost to emerging market currencies. UK Stocks were hit by further Brexit volatility, hardest hit stocks were of companies with hefty exposure to the UK economy. The sterling, however, bounced back +0.6% to above the $1.28 mark and the UK 10-year bonds saw yields reverse and edge higher. US stocks were down -0.1% as the market swung between gains and losses due to tech and retail stocks down while telecommunications, utilities and healthcare sector performed well. The 10-year US Treasuries yields fell to 3.08% in the wake of cautious comments from the Federal Reserve’s vice-chair about the probable pace of interest rate rises. Japanese stocks were down -0.4%. Brent Crude Oil prices were down -4.6% at $66.9 a barrel. Gold prices rose in USD terms to $1,220 per ounce.

CIO Analysis

Brexit dominated the investment discussion last week, despite larger downturns in tech shares across the Atlantic causing further equity declines. As widely predicted, the PM’s compromises with the EU failed to satisfy either side of a very polarised debate. Brexiters focus on the Irish backstop, which could end up being a backdoor to keep the UK in the customs union and compromise the integrity of the UK, while Remainers focus on lack of protection for the financial sector and lack of closer ties with Europe. This Brexit Deal is a necessary step for the transition period until Jan 2021 to kick in, but clearing Parliament is by no means assured. We expect the politics to grab the spotlight this week, but investors should take the longer term view. A weak deal could see slower economic growth over the next years, while a no-deal would see sharper and more immediate economic pain. The real long-term positive outcome for investors in British local assets at this point would be an institutionalized long term Brexit, which would give the economy time to reset and find new competitive strengths, while allowing for partisanship to quiet down. All other outcomes could lead global investors to strategically underweight the UK for the foreseeable future.

David Baker, CIO