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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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.