The Christmas period was a fruitful one for the UK market as the FTSE 100 index reached a new all-time high of 7,687.77 on the last working day of the year. Among the top five performers in the index during the month were three natural resource companies, namely Glencore, Anglo American and BHP Billiton, who all benefitted from a strong month for commodities and returned between 13 – 15%.
The ongoing Brexit talks made some headway during the month as a deal was struck between Theresa May and the EU, allowing negotiations to advance to the next phase. Outcomes from the deal included reassurance that there would be no ‘hard border’ with Ireland, the protection of rights of EU citizens living in the UK and a valuation of the ‘divorce bill’ between £35 billion and £39 billion. Later on in the month it was revealed that after Britain had left the EU, British passports would return to their blue and gold design.
In the cryptocurrency market, the Bitcoin had a highly volatile month, even by its own standards. From a starting point of $9,654 at the end of November, the price of Bitcoin rocketed to nearly $20,000 in just two weeks. However by the end of the month it had fallen back to $14,311, resulting in an overall gain during the month of +48.34%.
December was a positive month for most developed equity markets. In the UK, the FTSE 100 index surged +5.03. Medium and smaller companies, measured by the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) index, gained +4.39% and +2.81% respectively. In the US, the S&P 500 index rose +1.11% while in Europe the Eurostoxx 50 index slipped -1.71%. Japanese equities, measured by the Topix index, gained +1.57%.
Emerging markets also performed well. The MSCI EM (Emerging Markets) index picked up +2.61%. Chinese equities, represented by the MSCI China index, gathered +1.98%. Latin American equities measured by the MSCI Latin America index climbed +6.17%. The IISL Nifty index, which measures Indian equity returns, grew +2.97%.
UK government bonds, measured by the FTSE Gilts All Stocks index, returned +1.41%, and long dated (over 15 years to maturity) gilts rose +2.51%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, decreased -0.28% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, gained +1.53%. In the high yield markets, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index returned -0.07% and +0.18% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, moved +0.63%.
In the commodities market, the S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, delivered +4.41%. The Oil Price Brent Crude PR index jumped +5.19%. The precious metals, measured by the S&P GSCI Gold and Silver indices, gained +2.66% and +4.18% respectively. In the agricultural markets, corn and wheat fell -1.41% and -1.39% respectively.
In the FX market, the US dollar and the euro saw modest gains versus the pound, of +0.09% and +0.89% respectively.
James Timpson CFA, BSc (Hons), IMC
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