Market Round Up
UK
- Despite a correction at the end of the month the FTSE All Share rose 2.4% in February
- Commodity price inflation assisted the mining sector as well as huge profits reported by Rio Tinto and Xstrata
- Consumer Price Inflation figures published at 4% which is well above the Bank Of England’s target of 2%
- The view from many investment groups is that interest rates could rise by 0.25% in May, which is already priced into the market
US
- Stronger than expected corporate earnings data boosted share prices in February
- More than 71% of S&P 500 companies’ profits beat analyst estimates and General Motors reported a first full annual profit since 2004
- Wall Mart US sales fell and data released for January showed a general consumer spending decline
- Extremely high crude oil and energy prices, accompanied by tensions in the Middle East, prompted concerns which may put the recovery at risk
Europe
- European markets rose despite the Middle East issues and data which showed that Euro zone GDP grew by less than predicted at 0.3%
- Strong company earnings provided the boost to markets as quarterly profits beat forecasts
- Euro depreciation and strong emerging market demand support exporters
Asia & Emerging Markets
- China continued to squeeze by increasing interest rates to 6.06%, the third increase since October and the Government raised the reserve requirements for banks
- The result ensured the region lagged others and weighed on share prices in Hong Kong
- Consumer Price Inflation in China rose by 4.9% in January compared to the previous year
- Oil prices and inflation prompted concerns and this has resulted in outflows from Emerging Market equity funds of more than £20 billion since January
- Russia raised interest rates for the first time since the global crisis in a bid to control inflation
Japan
- Foreign investment led stocks to their highest level since May 2010
- Data released shows the economy shrank by an annualised 1.1% in Q4 2010
- Credit agency Moody’s cut its outlook on Japan to negative from stable which was priced into the market
- Encouraging news from Japanese retail companies which showed good results
Fixed Interest
- Index linked gilts reversed January losses by outperforming conventional gilts and corporate bonds
- Inflows continued into high yield bonds in February which continued to perform well
- Investors continue to seek higher yields in the low interest rate environment
- Emerging Markets bonds performed positively also benefitting from the hunt for yield
- Global inflationary increases and unrest in the Middle East will test Emerging Market debt going forward
Conclusion
Since the meeting and these minutes were first drafted it is fair to say that we have been overtaken by events. The terrible earthquake and ensuing tsunami in Japan and events in Libya rather dwarf issues in our economy and indeed last week’s Budget. Despite all of this news and the consequential concerns for the safety of nuclear power, rising fuel prices and slower growth in the UK economy forecast by the Chancellor, investment markets have held up pretty well.
There will undoubtedly be longer term consequences for Japan and these will impact on all of us to a greater or lesser degree. In the short term, our feeling is that a rise in interest rates next month or May is less likely.
There will be more in next month’s minutes and investment manager feedback after the end of tax year rush. In the meantime, please accept our apologies for the delay in the issue of these minutes.
Date of Next Meeting: 12th April 2011 | 
