Last month saw Chancellor George Osborne deliver his autumn statement and the big news was his U-turn on tax credit cuts. Osborne had previously announced plans to cut £4.4 billion from tax credits for low paid workers from next April, but the plans were rejected by the House of Lords and during his Spending Review Osborne revealed that the proposed cuts would no longer go ahead. Other announcements in the Review included increased stamp duty for people buying second homes and a rise in basic state pension to £119.30 a week.
In the latest update on interest rates, the Governor of the Bank of England, Mark Carney, has said that UK rates are likely to remain low “for some time”. The basic rate has remained at the record low 0.5% since March 2009. Despite strong expectations of a rise next year, Carney didn’t rule out the possibility of the next move being a rate cut,
citing a downside-skewing balance of risks around UK GDP growth and inflation as a possible cause.
The retailing discount day known as Black Friday took place on 27th November, and online retailer Amazon had its biggest ever sales day in the UK. The annual tradition, which originated in the US, sees retailers offering huge discounts on a variety of products, and this year’s event saw Amazon UK sell more than 7.4 million items in one day. Retail analysts estimated total online sales to have passed £1 billion for the first time.
November was generally a positive month for developed equities. In the UK, the FTSE 100 index climbed +0.33%. US equities, measured by the S&P 500 index, grew by +0.30% and European markets, measured by the Euro Stoxx 50 index, surged +2.73%. The Topix index, which measures Japanese equities, picked up by +1.42%. In the UK mid- and small-cap markets, the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) index provided returns of +2.00% and -0.86% respectively.
Emerging market returns were mostly negative, as the MSCI EM (Emerging Markets) index went down by -2.68%. Chinese equities, represented by the MSCI China index, decreased by -3.35% and Latin American equities, measured by the MSCI EM Latin America GR index, fell -2.54%. The IISL CNX Nifty PR index, which measures Indian equities, dropped -1.62%.
Commodities had a very poor month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, fell by -8.97%. Brent blend oil, measured by the Oil Price Brent Crude PR index, plummeted -9.99%. According to the S&P GSCI Gold and Silver indices, the prices of gold and silver declined by -6.73% and -9.78% respectively. In the agricultural markets, corn lost -4.92% and wheat was down -9.51%.
It was a good month for fixed income securities. The Bank of America Merrill Lynch Euro High Yield index rose by +0.59% and the Bank of America Merrill Lynch Sterling High Yield index was up 1.01%. The domestic sovereign bond market fared well, as the FTSE Gilts All Stocks index increased by +0.92% and long dated (over 15 years to maturity) rallied by +1.69%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, lifted +0.72% and sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, jumped +1.83%. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, saw a small drop of -0.06%.
In the currency markets, the US dollar appreciated against the pound by +2.60%. The euro on the other hand depreciated against the pound by -1.91%.
James Timpson CFA, BSc (Hons), IMC
(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).
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