Cat: CFM News
18 Dec

Market Commentary December 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 were broadly positive over the month with developed markets supported by the announcement of the new Federal Reserve Chair, Janet Yellen, whose comments supported continued monetary stimulus. Emerging markets produced negative returns adopting a more uncertain approach to withdrawal of stimulus in the US. Fixed interest market returns varied, with rising yields within core government bonds and tightening spreads, particularly within lower credit quality holdings.

US equity market indices surpassed all-time highs towards the end of the month, where more economically sensitive sectors outperformed. US Q3 GDP was announced at 2.8%, well ahead of consensus forecasts. The rise was largely attributable to businesses building-up inventory. US unemployment increased to 7.3% from 7.2%, largely as a result of the recent US government shutdown. US housing data was positive with further house price rises and increased construction activity.

European equity markets ended higher encouraged by an interest rate cut. The European Central Bank announced a cut in interest rate to 0.25% from 0.50% in order to combat deflation. The decision was following lower than expected CPI inflation figures at 0.7% for October. Eurozone Q3 GDP was announced at 0.1% in line with expectations. Eurozone unemployment was announced at 12.1% in October, falling from 12.2%. Credit ratings agency Standard & Poor’s, downgraded France’s credit rating one notch to AA on the back of weak economic growth, high unemployment and constraints on government spending. Conversely, Spain’s credit status was upgraded from negative to stable.

UK equity markets finished marginally lower over the month. UK Q3 GDP was announced at 0.8% marking the fastest rate of expansion in 3 years. The Bank of England announced the Funding for Lending scheme would end 1 year earlier than planned, on the basis that additional stimulus for lending to households would no longer be required. UK unemployment was announced at 7.6% with the Bank of England suggesting the 7% target could be met as soon as Q3 in 2015. Therefore interest rates could rise earlier than previously suggested. UK CPI inflation was announced at 2.2% in October, falling from 2.7%. The fall was attributable to reduced motor fuel prices and tuition fees.

Asian equity market returns were mixed with gains in China and ASEAN markets lagging the broader market. The Chinese government announced a number of reforms collectively known as the ‘third plenum’. Briefly the reforms aim to improve competition of state companies, reduce government intervention and abolish the one child rule. Several ASEAN markets suffered due to the typhoon in the Philippines, political unrest in Thailand and macroeconomic uncertainty in Indonesia. Japanese equity markets approached 6-year highs following further yen weakness. Japanese Q3 GDP was estimated at 1.9%, significantly lower than the previous two quarters of economic growth.

Emerging market equities decreased over the month with Latin America experiencing the greatest downside. Mexico was the strongest performing country within Latin America latching on to US economic growth. In Brazil, positive consumer confidence and unemployment data were combined with weak industrial production. Brazilian interest rates in were increased to 10% from 9.5% while rates were cut in Chile and Peru. A deal was made between Iran and P5 nations on its nuclear activities, which lifted trade sanctions for oil exports. This placed downward pressure on oil prices. Russian equity markets were forced lower encouraged by energy sector underperformance.

In fixed interest markets, core government bond yields rose leading to negative total returns over the month. Investment grade spreads remained largely unchanged except for tightening spreads within lower credit quality holdings. This produced a positive total return after the income yield. Market data shows high yield bond demand has been matched with fairly buoyant issuance of late.

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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
22 Nov

Market Commentary November 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 finished strong over the month following a dip in early October. This was largely attributable to the partial government shutdown in the US. The US central bank’s decision to maintain its quantitative easing programme at current levels also provided support for markets. Emerging markets were amongst the strongest performing regions with all countries registering gains over the month. Within fixed interest markets, government bond yields ended largely unchanged, while other sectors of the market reacted positively to central bank actions in the US.

The US government experienced its first partial government shutdown in 17 years as agreement to raise the budget ceiling was delayed due to controversial new US health laws. Around 800,000 federal employees were placed on unpaid leave. A bill was eventually passed, although this only extends funding through January 2014, so there is potential for similar disruption in the New Year. Credit ratings agency Fitch placed the US’s AAA rating on negative watch due to the delay in resolving the shutdown. US equity markets were negatively impacted by the news, although losses were later recovered to reach new all-time highs. US unemployment was announced at 7.2% in September, not reflecting the negative impact from the US government shutdown.

European equity markets ended positively following strong earnings reports, particularly from companies in Italy and Spain. Eurozone CPI inflation was announced at 0.7%, its lowest level since late 2009. Ratings agency Fitch upgraded Spain’s credit rating from negative to stable. A number of ministers from the PLD party resigned from the Italian coalition due to a government decision to raise sales taxes. Eurozone unemployment was announced at 12.2% in September, higher than consensus estimates.

UK equity markets were strong over the month, with positive growth offsetting disappointing industrial production data. UK Q3 GDP (first estimate) was announced at 0.8%. Output increased in all four main categories including agriculture, production, construction and services. UK CPI inflation remained at 2.7% in September, as rising air fare costs were offset by falling motor fuel prices. UK house prices increased 5.8% over the year up to October 2013, marking the highest increase in over 3 years, according to data provided by Nationwide.

Asian equity markets were buoyed by the Federal Reserve’s decision to maintain their quantitative easing programme. The Philippines and India outperformed, while Hong Kong and China lagged the broader market. Markets in India registered new all-time highs encouraged by better than expected corporate earnings. Japanese equity markets were flat although they have performed strongly year to date. Chinese Q3 GDP was announced at 7.8% driven by strong industrial production and increased retail sales. Manufacturing data was announced at a 7 month high which had a positive impact on the mining sector.

Emerging market equity prices rose higher with Morocco, Czech Republic and India displaying the strongest returns, and no single country registering losses over the month. Interest rates were increased in Brazil, while rates were cut in Chile, Hungary and Mexico. In the latter, this was to a record low. Ratings agency Fitch upgraded Peru’s credit rating one grade due to improving economic and growth stability. 21 trade agreements were made between Russia and China in attempt to strengthen business ties.

Within fixed interest markets, government bond yields fell in October, as did credit spreads. This had a positive impact on returns for investors. Broadly, bonds associated with greater risk outperformed, including peripheral European sovereign debt and high yield bonds. The decision by the US central bank not to taper quantitative easing was a large contributor to returns. The partial government shutdown was expected to have a negative impact on growth and employment figures, which influenced the Federal Reserve’s decision, and led the market to believe tapering may not take place until next year.

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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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