UK MARKETS

UK budget finally revealed

UK equities fell, with large-cap stocks outperforming small and mid-caps. The labour market remained tight, with the unemployment rate dropping to 4.0% and pay growth at 4.9% year-on-year in August. Inflation decreased significantly to 1.7%, while core inflation was at 3.2%. The UK budget revealed higher-than-expected borrowing and taxes, as Chancellor Rachel Reeves announced £70 billion in extra spending over five years, funded by £40 billion in tax increases and £32 billion in additional borrowing. She indicated a loosening of fiscal rules to permit this increased borrowing, which the Office for Budget Responsibility warned could hinder long-term growth.

Down -1.8% (UK All Share)

UK MARKETS

Weaker on energy prices and budget uncertainty

UK mid-cap stocks outperformed a weak FTSE100, with value leading growth. Weaker energy prices, and a softer dollar, weighed on the major oil stocks, while disappointing drug trials sent AstraZeneca, the FTSE's largest stock, down 13%.  Economic data was mixed overall, with weaker business and consumer confidence somewhat offset by lower unemployment (4.1%) and positive GDP growth.  The pending initial Labour budget added a touch of uncertainty to UK markets.

Down -1.4% (UK All Share

UK MARKETS

Mixed results during a volatile month

UK stocks saw volatility in line with developed peers. Large caps carried the index return (FTSE 100), while mid and small cap constituents declined. From a sector standpoint, the best performers were in financial services (+6.4%) and industrials (+3.4%), while real estate stocks underperformed. The new UK government is set to announce a tough budget in the coming months, which may introduce further market uncertainty. Gilts were largely positive despite continued concerns over more persistent inflation and issuance. While on the currency front, sterling gained against the euro and dollar.

Down -0.3% (UK All Share)

UK MARKETS

Positive economic momentum propelled marketing returns

UK equities outpaced global counterparts, with the FTSE All-Share index rising 3.1%. This growth is attributed to robust PMIs in the service sector for July, in addition to economic growth in the second quarter that surpassed expectations, both indicating a positive shift in economic momentum. Certain sectors within the FTSE All-Share, such as energy and consumer goods, have shown strong performance, contributing to the rise in the overall index. The general UK election did not cause any significant market fluctuations, as a Labour win was widely anticipated.

Up 3.1% (UK All Share)

UK MARKETS

Lagged global equity markets

The UK relatively lagged global equities, with the FTSE100 retreating from May’s all-time high. The index was weighed down by a weakness in banks and mining. The more economically sensitive FTSE250 fell even further, dropping -2.1 %. With global equity market leadership driven by tech, the UK has minimal exposure to this sector. The election campaign has had minimal effect on market performance, mainly as the expected results have been priced in. A modest upgrade in 1Q24 GDP and encouraging inflation numbers have raised expectations for an August rate cut.

Down -1.4% (UK All Share)

UK MARKETS

Mid and small caps help to deliver steady gains overall

The FTSE 100 made steady gains, achieving a 1.6% gain (2.1% total return), with mid and small caps leading the charge. Meanwhile, the FTSE 250 delivered a 4.2% return, and Small Cap ex-IT outperformed, rising by 6.7%. Across the market, the FTSE 350 Construction & Materials Index (6.5%) and the FTSE 350 Aerospace & Defence Index (6.5%) delivered the strongest returns, while the FTSE 350 Beverages Index (-4.1%) and the FTSE 350 Oil & Gas Producers Index (-2.9%) underperformed.

Up 2.0% (UK All Share)

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)