Knowledge Centre Archive
Weekly Market Update: 11 June 2010
- Economic data continued to reflect a cautious tone, which we view as another bump in the long, slow road to global economic recovery.
- U.K. interest rates have been kept on hold at 0.5% for 15 consecutive months. A recent poll by Reuters suggests that experts no longer anticipate that rates will rise in 2010.
- U.K. industrial output in April fell 0.4%, its first decline since late 2009. Expectations had been for output to increase.
- The trade deficit of goods and services in the U.K. grew in April, with volcanic ash being blamed for disrupting the supply of imports and exports.
- A report from the Chartered Institute of Personnel and Development predicted that proposed U.K. government spending cuts will increase unemployment levels from 2.5 million to approximately 3 million.
- As expected, the European Central Bank (ECB) left eurozone interest rates at 1% while warning that growth in the region would be “moderate and uneven.”
- Public-sector workers in Spain held a day-long strike, protesting against proposed 5% pay cuts that are set to occur at the end of June.
- Germany’s coalition government announced austerity measures on Monday, including public-sector redundancies and a potential restructuring of the armed forces. Germany aims to reduce its budget deficit by €80 billion within the next three years.
- The U.S. Federal Reserve stated that recovery was taking hold among all of its various regions, while cautioning that growth remained sluggish.
- The U.S. government reported a smaller-than-expected budget deficit in May, as the growing economy brought in an increased amount of tax revenue.
- U.S. inventories rose for the fourth consecutive month in April but were less than the gain in sales, which could mean companies are anticipating slower growth in upcoming months.
- U.S. mortgage applications fell to their lowest level since April, and refinancing activity also slowed significantly.
- U.S. jobless claims were higher than anticipated, posting a marginal drop, and continuing claims dropped to their lowest level since December 2008.
- U.S. retail sales unexpectedly fell 1.2%, the first decline since September 2009.
- Global stocks rose for the week on renewed demand for riskier assets.
- In the U.K., Materials led the market, benefiting from improved prospects in commodity-hungry Asian economies. Energy was the only sector with negative returns for the week, dragged down by the continuing slide of BP’s shares.
- In Europe, Financials and other high-beta (which are more sensitive to movements in the broad market) sectors such as Consumer Discretionary, Industrials and Materials led, while more defensive sectors like Utilities, Healthcare and Consumer Staples struggled.
- In the U.S., value stocks beat their growth counterparts, and large companies outperformed their small-company brethren. Energy was the best-performing sector, while Information Technology performed worst.
- Global bond markets fell slightly for the week, as investors were able to look past scepticism about global economic growth.
- Yields for government bonds (which move inversely to prices) were mixed, with yields falling in Europe and Japan and rising in the U.S.
- Emerging-market debt rose for the week, as investors looked for attractive opportunities outside the many troubled developed markets.
- U.S. high-yield bonds (which are perceived to be riskier) fell amid a hesitant environment.
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