Q1 Global Market Overview

 April 22, 2014
 

Major Global Stock Market Indices

Index 1 Month 3 Month 2013 2012
FTSE 100 -2.6% -1.3% 18.7% 10.0%
FTSE 250 -2.5% 2.5% 32.3% 26.1%
FTSE Small -3.9% 2.1% 43.9% 36.3%
FTSE All Share -2.6% -0.6% 20.8% 12.3%
Dow Jones 0.9% -0.2% 29.7% 10.2%
S&P 500 0.8% 1.8% 16.3% 16.0%
DAX -1.4% 0.0% 31.8% 29.1%
CAC 40 -0.2% 2.4% 22.2% 20.4%
Hang Seng -2.7% -4.6% 6.6% 27.5%
Nikkei 225 0.1% -9.0% 56.7% 22.9%
China SE -1.1% -3.9% -6.7% 3.2%

Source: Datastream 31st March 2014

United Kingdom

A total return over the first quarter of -0.6% by the FTSE All-Share index confirmed the stock market’s pattern of trading since the summer of last year, as most ‘up’ months have been followed by a ‘down’ month. The strongest returns were seen once again in the mid and small cap sectors.

UK equity markets also saw share price falls on the back of two shocks. Firstly, the UK Budget announced that pensioners would no longer be required to use their accumulated pension savings to buy an annuity. Secondly, the Financial Conduct Authority announced an enquiry into charges and restrictions on historic insurance policies.

In terms of economic news, the trend of improvement continued.

• Core manufacturing output rose by 0.4% month on month resulting in the largest annual increase in output (at 3.3%) for nearly three years.
• The public sector net borrowing figure was recorded at a net borrowing of £99.3bn for the fiscal year versus £103.6bn for the comparable period last year.
• Annual inflation as measured by the Consumer Price Index (CPI) fell in March to 1.6% versus 1.9% in January. The February rate is the lowest it’s been since October 2009.
• The unemployment rate was recorded at 7.2% for the three months to January 2014, which was pretty much unchanged from the previous quarter.

Such statistics helped the Chancellor give an upbeat assessment of the economy in his Budget speech commenting that: “the economy is continuing to recover – and recovering faster than forecast”.

Europe

European equity markets produced mixed returns over the quarter with the strongest returns seen on the CAC 40 with a rise of 2.4%, whilst the Dax was flat. There was divergent performance across other European markets with the much maligned Spanish market leading the winners.

March’s Eurozone labour market figures suggest that the economic recovery is still too weak to make a significant dent in the high level of unemployment across the currency union.

The annual rate of inflation as measure by the Consumer Price Index (CPI) fell from 0.7% in February, to 0.5% in March, a touch below the consensus expectation of 0.6%.

United States

During Q1, US equity markets were mixed with the Dow Jones broadly flat and the S&P 500 up by 1.8% and held on to the gains made from the rebound from the earlier low. This was despite a number of potentially negative headlines including the Ukraine crisis, and the new US Federal Reserve (Fed) Chair’s suggestion that US interest rate increases could happen within six months of the completion of tapering of QE. This was far sooner than had been forecast. The S&P 500 Index ended the month just below a new record high.

In economic news, there was continuing improvement in the employment market as jobless claims started to fall. Despite adverse weather conditions, job creation figures released in March for February were better than expected, while figures for December and January were also revised upwards. There were also signs of wage growth.
Elsewhere, consumer spending, which accounts for circa 70% of the US economy, disappointed slightly in February. However, retail sales rose for the same month.

Asia Pacific

There was dispersion in performance across Asian equity markets. The Indian market was the strongest performing over March, but Chinese equity markets ended March in negative territory.

SE Asian equity markets in general produced negative returns in Q1 2014, with last year’s strongest performer the Nikkei 225 bringing up the rear with -9.0%, the Hang Seng -4.6% and the China SE -3.9%.

In China weaker macro-economic data weighed on equity markets with returns negative over the month. Amidst the weaker data the Chinese government confirmed an annual growth target of 7.5% for 2014 raising speculation that further stimulus will be provided to aid the Chinese economy.

Further support for this view was provided towards the end of the month through comments by Premier Li Keqiang in which he said that China has policies in reserve to deal with any economic volatility this year and that China can’t ignore difficulties and risks from a slowdown in the economy.

Global Fixed Interest

Bond market levels were little changed again in March, with the trends of positive developed market economic data, modest price pressure and strong demand for higher yield-bearing assets extending. Returns were driven more by yield than price, leading to modest outperformance for corporate bonds in most markets and for non-core sovereign bonds. The US Federal Reserve (Fed) took another ‘measured step’ in the winding down of its quantitative easing programme, announcing a reduction in asset purchases to a total of $55bn in April.

Important information – Opinions constitutes our judgement as of this date and are subject to change without warning. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance.

The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.