UK Markets

Outperform global peers

Thanks to index composition, notably due to the banking, mining, and oil sectors, UK equities outpaced global counterparts. Robust performances from NatWest and others buoyed stock prices. Corporate actions, such as BHP bid for Anglo American, fuelled a 21% surge in its shares. Strong oil prices further bolstered UK equities. Concurrently, UK business activity surged, hitting its swiftest pace in nearly a year, as evidenced by the Composite PMI climbing in April. However, escalating input costs, coupled with declining output prices, hint at dwindling demand, squeezing business margins.

Up 2.1% (UK All Share)

UK MARKETS

Catching up to developed market peers

UK equities broadly followed global trends, albeit with the recognition that they have trailed developed markets for a sustained period, most notably the US. A strong rally in commodities meant large index heavyweights, such as BP (+7.6%) and Shell (+6.8%), outperformed, while mining stocks also fared well owing to this tailwind. The market also saw a steady stream of corporate acquisition offers and activity (for example, Wincanton, DS Smith, Spirent) despite confirmation that the UK has been in a technical recession. Sterling appreciated versus major currency pairs, while Gilt yields declined on the back of better inflation data.

Up 4.2% (UK All Share)

US Markets

Continue their upward trajectory

US equities moved higher through February, driven chiefly by gains in the Consumer Discretionary (+8.6%), Industrials (+7.0%), and Information Technology (+6.2%) sectors. Despite the recent cycle of interest rate hikes, the US economy continues to remain resilient and even above expectations in areas, almost expansionary territory, given the recent growth and PMI indicators. The ‘Magnificent Seven’ stocks are increasingly looking like the magnificent three (Nvidia, Meta and Amazon), with Q1 earnings exacerbating this trend. The dollar moved higher in the month, while fixed income has languished year-to-date, with investors now expecting that the Fed will not cut rates until later in the year.

Up 5.2% (US 500)

UK MARKETS

Weak performance as a result of inflation data

The UK market saw negative returns on the back of December Core CPI inflation (+5.1%) coming in way ahead of expectations, dampening any hopes for interest rate cuts from the Bank of England. This sapped some of the euphoria that we saw the previous month, particularly in the more interest rate sensitive sectors. Mining, oil, and banks all underperformed a weak overall UK market, as global sector sentiment (positive technology, negative global cyclicals) proved an additional headwind. Miners were particularly weak as investors reacted to negative news from China, and on electric vehicle sales.

Down -1.4% (UK All Share)

UK MARKETS

Strong energy stock performance could not curtail overall weak results

In spite of surging natural gas and gold prices contributing to strong performances from energy-related stocks, which the UK has a meaningful exposure to, the UK markets declined overall. In terms of exposure, largecap stocks outperformed small-cap stocks, and growth stocks outperformed value ones. With the overall financial ‘health’ of the UK consumer remaining a concern on the back of a drop in consumer confidence and house price worries, gilts continued to sell-off and most sectors, including the banks, delivered weak performance.

Down -4.2% (UK All Share)

UK MARKETS

Strong energy stock performance could not curtail overall weak results

In spite of surging natural gas and gold prices contributing to strong performances from energy-related stocks, which the UK has a meaningful exposure to, the UK markets declined overall. In terms of exposure, largecap stocks outperformed small-cap stocks, and growth stocks outperformed value ones. With the overall financial ‘health’ of the UK consumer remaining a concern on the back of a drop in consumer confidence and house price worries, gilts continued to sell-off and most sectors, including the banks, delivered weak performance.

Down -4.2% (UK All Share)

UK MARKETS

Solid performance on the back of large cap selections and higher oil prices

UK equities performed well in sterling terms, owing to the macroeconomic backdrop; dollar feed-through on larger cap selections and higher oil prices being the key drivers of index performance. The underlying benefit to energy companies saw BP and Shell, up circa 8%, lead the market. Natural Resources and Financials fared well too, all boosting the FTSE 100. The mid-cap FTSE 250, which has more domestic earnings, was modestly lower, while small-cap stocks had a stronger second half of the month, boosted by the better inflation data. Index Linked Gilts lagged, as inflation data surprised to the downside.

Up 1.7% (UK All Share)

UK MARKETS

Weak first half followed by a late month rally

UK equities mirrored global trends, with a weak first half followed by a late month-end rally. However, returns lagged other developed markets. Unlike the US, there was little difference in performance across the market cap spectrum. Despite better inflation data in the previous month, August showed more modest progress. That, and concerns over the scale of future gilt issuance levels, as well as a continued hawkish tone from the Bank of England, saw short term Gilt yields move higher, with 2yr Gilt yields moving up from 4.99% to 5.16%.

Down -3.3% (UK All Share)

UK MARKETS

Inflation continues to impact sterling and UK markets overall

Disappointingly strong core inflation data precipitated a 0.5% Base Rate increase from the Bank of England (BoE), to 5%. The greater than expected June hike pressured short-duration sterling bonds. After a torrid start to the year, longer-dated bonds found some solace in the more hawkish BoE stance. The stronger pound was supported by the bond market pricing in a Base Rate of 6% by year end. Impacted by the strong pound, UK equities, particularly the more economically sensitive mid-caps stocks, lagged most other developed markets.

Up 0.7% (UK All Share)

UK MARKETS

Inflation continues to impact sterling and UK markets overall

Disappointingly strong core inflation data precipitated a 0.5% Base Rate increase from the Bank of England (BoE), to 5%. The greater than expected June hike pressured short-duration sterling bonds. After a torrid start to the year, longer-dated bonds found some solace in the more hawkish BoE stance. The stronger pound was supported by the bond market pricing in a Base Rate of 6% by year end. Impacted by the strong pound, UK equities, particularly the more economically sensitive mid-caps stocks, lagged most other developed markets.

Up 0.7% (UK All Share)

UK markets fall despite better than expected economic data

Whilst economic data was generally better than expected, and the IMF and BoE both abandoned their UK recession forecasts, markets were agitated by rising Core CPI inflation, which helped drive Gilt prices lower. Weaker commodity prices and a rotation away from traditionally defined value sectors saw the FTSE100 decline by -5.4%, though the FTSE250 was slightly more resilient at -3.6%. The Oil sector was particularly weak, dropping -11.6%.

Down -5.1% (UK All Share)

UK markets outperform most major markets

The UK stock market rebounded from a tough March and outperformed developed market peers. As the market gyrated through April, top contributors were those which underperformed last month - banks, real estate and consumer staples companies. Headline inflation has declined but remains stubbornly elevated, not helped by a hot wage print causing yields to push higher intramonth. PMI’s are diverging with manufacturing falling into contractionary territory, while services are in expansion. Interest rates are expected to move higher, and Sterling has continued to strengthen through April from September lows, toward five-year averages.

Up 3.0% (UK All Share)

UK MARKETS

Inflation remains stubbornly persistent

UK stocks declined through the month, with the events surrounding SVB in the US, as well as Credit Suisse in Switzerland, impacting financial services. Unsurprisingly the FTSE 350 Banks Index (-13.7%) led the decline alongside consumer-focused sectors. Manufacturing and services PMI’s have deteriorated, and growth expectations have lowered. Despite this, the Bank of England decided to increase the base rate 25 basis points, as inflation moderates but at a frustratingly slow pace. This provided a headwind to relative fixed income performance and equities, but a tailwind to sterling, most notably versus USD.

Down -3.4% (UK All Share)

UK MARKETS

UK equities outperform their global counterparts but remain fragile

UK stocks outperformed their global market counterparts, driven by consumer staples and materials. As monetary policy efforts begin to take hold, the economy showed the initial signs of slowing, with GDP growth declining. House prices fell at their fastest rate in a decade. The Bank of England governor Andrew Bailey delivered a more dovish statement following another 50 bp hike early in the month. Despite some positive signals, the outlook remains mixed. While inflation remains at challengingly high levels, owing to prices of soft commodities and wage growth effects, PMI’s have improved but remained in contractionary territory, and consumer confidence has lifted.

Up 1.2% (UK All Share)

UK MARKETS

A strong start to the year for the markets bely a challenging economic environment Led by cyclical selections within consumer discretionary, construction and real estate, the UK equity market enjoyed a strong start to the year, outperforming broader developed market equities. December’s year-on-year inflation figures fell marginally, with energy and food prices easing. However, the country is still witnessing inflation well above long-term trend levels, with robust wage growth a contributing factor. PMI’s remain in negative territory and the market is pricing negative economic growth for 2023. Retail sales are declining and aggregate demand is beginning to slow. The Bank of England will have a difficult task raising borrowing rates against this increasingly recessionary backdrop. Up 4.4% (UK All Share)

UK MARKETS

Despite negative returns, the UK outperformed most developed markets in December. The UK declined but comfortably outperformed developed market peers in December. This performance was due, in some part, to index composition, with the FTSE comprised of a higher number of consumer staples and commodity-focused companies, which performed better. However, growth sensitive stocks languished, as PMI’s remained in negative territory but steadied, and yields rose. Inflation remains the key cause of concern, although there are signs that it is reaching a peak. The Bank of England raised interest rates 50 basis points higher, and it’s guidance remains hawkish going into the first quarter. Down -1.6% (UK All Share)

UK MARKETS - Political change leads to market stability and falling government yields. The UK opted for political change, trading Liz Truss and Kwasi Kwarteng for Rishi Sunak and Jeremy Hunt as Prime Minister and Chancellor, respectively. Equities responded positively to a more orthodox fiscal approach and greater political stability, while yields declined on UK government debt. From a sector standpoint, consumer related sub-sectors, such as travel/leisure and tobacco, performed best. The Bank of England is expected to raise rates at the November meeting. However, the consensus for future hikes has softened, with the latest PMI data signalling the country is moving into contractionary territory already. Up 3.0% (UK All Share)

Political change leads to market stability and falling government yields.

The UK opted for political change, trading Liz Truss and Kwasi Kwarteng for Rishi Sunak and Jeremy Hunt as Prime Minister and Chancellor, respectively. Equities responded positively to a more orthodox fiscal approach and greater political stability, while yields declined on UK government debt. From a sector standpoint, consumer-related sub-sectors, such as travel/leisure and tobacco, performed best. The Bank of England is expected to raise rates at the November meeting. However, the consensus for future hikes has softened, with the latest PMI data signalling that the country is moving into contractionary territory already. Up 3.0% (UK All Share)

Recently announced government policy initiatives spooked the markets.

UK Chancellor Kwasi Kwarteng announced a range of policy measures which jolted risk-assets into reversal, notably a £45 billion proposal of debt-funded tax cuts at a time when inflation is running dangerously high. UK 10-year gilt yields spiked more than 120 basis points to 4.6% in just four days, which prompted the Bank of England to intervene and state it would purchase bonds ‘at what scale is necessary’ to maintain bond market stability. In response to the volatility, sterling sold-off and traded at a 37-year low versus the US dollar. Down -6.1% (UK All Share)