Cat: CFM News
17 Oct

Market Commentary October 2013

After successfully completing our first 100 mile cycle in 2013 the ‘CFM cycling team’ was looking for a new challenge for 2014 when one of our ‘team’ suggested that we participate in the London to Paris Cycle. Global equity markets ended September in positive territory after another month where global policy making and politics over-shadowed economic fundamentals. The spotlight was very much on the US Federal Reserve whose surprise decision not to reduce its quantitative easing programme provided support to equities globally. This was followed by a battle between the main US political parties which saw the US government go into “shut down” and market confidence falling again towards month end. Angela Merkel’s election win in Germany led to a more benign backdrop in Europe as the process of coalition building began. The Federal Reserve’s decision also led to a rebound in emerging equity markets. Fixed interest markets also delivered positive returns after several months of rising yields.


US equity markets were boosted following the announcement that the US central bank would not “taper” its bond buying programme, largely ignoring that the reasons given were concerns over the strength of the US recovery. The US government later initiated its first partial shut down in 17 years as Republicans sought to use budget approval legislation to extract concessions on “Obamacare” health law. Around 800,000 federal employees were placed on unpaid leave. US unemployment fell to 7.3%, the lowest level since December 2008. But recent housing data was mixed, with pending home sales falling whilst house prices increased at an annual rate of 12.4%. US Q2 GDP was confirmed at 2.5%.

European equity markets were strong over the month, supported by improving macroeconomic data and German election results. The telecoms and utilities sectors outperformed, while energy and healthcare underperformed the broader market. Angela Merkel won the German election finishing just short of an absolute majority. CPI inflation was recorded at its lowest level for over three years driven by falling energy and food prices. Manufacturing data in peripheral Europe was strong, as were key business and economic sentiment indicators.

UKequity markets rose over the month although early gains were offset by political developments in theUS. Utility companies saw share prices fall on Labour party proposals to freeze energy prices.  Data was strong for the construction and industrial sectors with expansion at its highest rate for three years.UKunemployment was announced at 7.7% in July. CPI inflation fell to 2.7% in August attributable to smaller rises in petrol and airline costs. UK Q2 GDP was confirmed at 0.7%.

Asian equity markets were also positive over the month supported by the US central bank’s decision not to taper. Chinese manufacturing data hit a six-month high in September with industrial production and retail sales data also exceeding forecasts. In India, Raghuram Rajan was appointed as the new central bank governor. He unveiled his plans to help stimulate India’s struggling economy. Japanese markets received a lift from Tokyo’s success in securing the 2020 Olympic Games. Japanese Q2 GDP was confirmed at 0.9%.

Emerging market equities, and their local currencies, rebounded strongly over the month, generally outperforming developed markets. Turkey and Brazil were amongst the strongest performing markets whilst Indonesia and Peru underperformed the broader market. The strongest returns were seen in the industrial, financial and consumer staples sectors. Macroeconomic data from Brazil was positive with both higher retail sales and falling unemployment. Interest rates in Mexico were reduced by 0.25% to a record-low of 3.75%. Gains in Turkey were encouraged by a narrowing trade deficit as well as the manufacturing sector moving into expansion.

In fixed interest markets, the Federal Reserve’s decision not to taper eased the selling pressure on government bonds and saw yields fall back in a reversal of the recent trend. German government bonds also rose partly driven by political instability in Italy. Corporate bonds performed in line with sovereigns, while lower credit quality outperformed

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Cat: CFM News
12 Aug

Market Commentary August 2013


Global equity markets ended the month higher following stronger corporate earnings and broadly positive macroeconomic data. Comments made by US Federal Reserve Chairman Ben Bernanke, to dampen fear of an imminent slowing of stimulus policies, helped markets bounce back after a difficult June. UKmarkets were supported by better than expected economic growth figures. Asian equity markets were negatively impacted by Chinese economic growth concerns. Japanese equity markets remain volatile but ended the month flat.

US equity markets reached all time highs towards the end of the month following a series of strong corporate earnings reports. USQ2 GDP was announced at 1.7% surpassing market expectations. US employment data was also positive recording 195,000 jobs being added in June. House price data confirmed that prices increased at a rate of 0.7% in May. Credit rating agency Moody’s upgraded its outlook for the US from negative to stable following some reduction in government spending and a fall in budget deficit figures.

European equity markets posted strong returns over the month. The financials and consumer services sectors outperformed, while healthcare and basic materials underperformed the broader market index. In Portugal, markets were adversely affected by the resignation of several key politicians at the start of the month. Ratings agency Fitch downgraded the French credit rating one notch to AA+ following earlier downgrades from the other main credit rating agencies.  Eurozone manufacturing data was stronger than expected for the month of July.  Eurozone unemployment was steady at 12.1% following several years of increasing unemployment. CPI inflation was also stable at 1.6%.

UK equity markets were positive over the month. Comments from newly appointed Bank of England Governor Mark Carney sought to ease concern over interest rates, implying they are likely to remain at the current low level for a long period. UK Q2 GDP growth was announced at 0.6%, providing further upside in equity markets. The service industry offered the largest positive contribution. UK CPI inflation increased to 2.9% in June. Increases in petrol, clothing and footwear provided the largest upward contribution. Data showed that the UK unemployment level remained at 7.8% in May.

Asian equity markets also posted positive returns, albeit more muted than returns in western developed markets. The outlook for economic growth in China remains a concern. Chinese trade data was announced lower than expected for the month of June, including Chinese GDP growth reported at a rate of 7.5%. Toward month end, the Chinese State Council unveiled a new stimulus package including tax breaks for small businesses, reduced fees for exporters, and opening up of railway construction. In Indonesia, an increase in interest rates adversely affected markets. Japanese equity markets ended the month flat as a pre-election market rally was offset by currency strength.

Emerging equity markets ended the month in positive territory, partly encouraged by comments from the US Federal Reserve. Emerging Europe out performed while Latin America underperformed within the broader market. Russian markets were supported by positive macroeconomic data, including increasing retail sales and real wages. Brazilian data was mixed, with strong industrial production numbers partly offset by increasing unemployment. The price of oil reached a 14-month high, while agricultural prices reduced over the month. Interest rates were cut by 0.25% to 2.5% in Poland while, in Turkey, lending rates were increased by 0.75% to 7.25%.

In fixed interest markets, strong macroeconomic data saw US treasury yields rise, negatively impacting existing investors. UK and German government bond yields fell, indicating positive returns to existing investors. Corporate bonds and high yield bonds outperformed, indicating greater appetite for risk over the month. Draft European legislation on banking capital requirements had a positive impact on subordinated bank debt.

Cat: CFM News
17 Oct

Star Fund Manager Neil Woodford to leave Invesco Perpetual

Global equity markets posted positive returns over the month with developed markets delivering strongest returns. US equity markets surpassed recent market heights while in the UK, economic growth was upgraded for the fourth consecutive period, encouraging market gains.


Invesco Perpetual have announced that after 25 years Head of UK Equities, Neil Woodford (pictured) will be leaving Invesco Perpetual on 29 April 2014. Fund Manager Mark Barnett will then take over as Head of UK Equities.

Neil Woodford will remain responsible for all funds for which he is the sole manager through a transition period during the six months prior to his departure. At the end of the transition, Mark Barnett will be appointed as manager of the Invesco Perpetual High Income Fund and the Invesco Perpetual Income Fund. Mark will then also succeed Neil as Head of UK Equities.

The CFM Investment Committee are reviewing matters and are considering whether any action is appropriate at this stage, however, If you have any questions, or require any further information, please do not hesitate to contact us.

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Cat: CFM News
10 Jul

Market Commentary July 2013


Global equity markets declined over the month of June amid fears that central banks would begin to taper quantitative easing programmes. Emerging markets were negatively affected by social unrest in Brazil and Turkey. Chinese markets suffered following a series of poor macroeconomic data announcements. A sharp increase in interbank lending rates prompted concerns of a liquidity crisis in China. Fixed interest markets experienced negative returns as investors feared that governments would stop purchasing bonds from financial institutions.

US equity markets experienced losses, as Ben Bernanke signalled that the Federal Reserve could taper its QE programme by the end of 2013. The US central bank added that they may wind down completely by mid-2014, if the US economy continues to improve in line with expectations. Telecoms and utilities sectors outperformed, while materials and information technology dragged the market index lower. US housing continued to improve as sales of new homes increased by 2.1% in May to reach the highest level for 5 years. The final reading for US Q1 GDP was confirmed at 1.8%, well below the previous estimate of 2.4%.

In Europe, markets fell following fears that central bank quantitative easing would decline sooner than expected. Technology, healthcare and consumer services sectors out-performed while financials, oil & gas and basic materials under-performed the broader market. Eurozone manufacturing data improved over the month but the sector still remains in recession. Eurozone unemployment reached a new record high of 12.2% with youth unemployment at twice the headline rate. MSCI, a leading publisher of market indices, removed Greece’s status as a developed market following a breakdown in its coalition government towards month end.

UK equity markets declined in line with developed equity markets over the month of June. The end of the month marked the end of Mervyn King’s role as Bank of England governor. Mark Carney (former Bank of Canada governor) took over at the beginning of July. UK inflation rose to 2.7%, driven by higher transport and clothing costs. The final reading for UK Q1 GDP was confirmed at 0.3% meaning the country narrowly avoided falling into recession.

Asian equity markets also suffered losses due to the QE tapering announcements, as well as a series of poor macroeconomic data in the region. Chinese equity markets were the largest detractor following an unexpected spike in interbank lending rates. Market falls were encouraged by investor concerns over a liquidity crisis in China. The most recent manufacturing data showed marginal expansion, but the rate was much lower than expected. In Japan, equity markets were marginally lower by month end. Strong economic growth revisions provided market support as Japanese Q1 GDP increased to 4.1% from 3.5% previously.

Emerging equity markets were negatively impacted by concerns in China, US dollar strength and falling commodity prices, excluding oil. Brazil and Turkey were amongst the worst performing regions following social unrest, while Hungary and South Africa were amongst the most resilient markets over the month. In Hungary, equity markets were supported by a 0.25% interest rate cut to 4.25%. South African equity markets were supported by a narrowing current account deficit and easing inflation pressures. Macroeconomic data in Russia was positive as retail sales improved along with labour markets. In Brazil, ratings agency Standard & Poors revised the countrys’ outlook to negative citing slower growth.

In fixed interest markets, rising yields led to negative returns for investors. The Federal Reserve’s comments on quantitative easing measures led to a sell-off in bond markets. Core government bond yields rose, driven by worries that interest rates could now rise sooner than expected. Corporate bonds also experienced losses with financials outperforming the broader market.