Uttoxeter Online Magazine

Markets Stage Broad Retreat

Global equity markets retreated across the board last week as the bears gained the upper hand, sending share prices south as investors headed for the safety of the sidelines. After a more confident start, markets gradually gave ground in the face of poor economic news and data which raised fears of a so-called ‘double-dip’ scenario. Already worried about the impact on future growth of austerity measures being taken by many European countries, investors were additionally forced to think about a possible economic slowdown in two of the world’s largest economies – America and China. Boosted by unprecedented economic stimuli by their respective governments back in 2008-09, the world’s two engines of growth looked to be on track, with China quickly resuming double-digit growth and the US returning to long-term trend growth of around 3.5%.

On Thursday though, the mood changed when it became clear that firstly, the Chinese economy was slowing. The country’s official purchasing managers’ index for June fell from 53.9 to 52.1 - less than expected but still positive (any figure over 50 means positive growth). ..................

RBA Wealth Management Ltd., based at Charles House in Uttoxeter High Street, and are part of the St. James's Place Wealth Management Group have just issued an updated Economic Update doument which is available as a downloaded in pdf format here.

Pain in Spain

It was another tough week for global financial markets, which were rattled on Friday by a combination of weaker than expected US jobs data, European debt default fears and rumours of large derivative-related losses at French bank Société Générale. On the latter point, according to The Times, there was little evidence to support the speculation which was later rebuffed by the bank, but it reflected the particular nervousness of the markets at present.  However, the news from the US was real enough. The Labor Department confirmed that 431,000 new jobs had been created in May, the fastest increase since 2000, but this was significantly tempered by news that 411,000 of those jobs represented the Government hiring temporary workers to carry out the 2010 census, leaving the net gain an unexpectedly modest 20,000. The unemployment rate edged down from 9.9% to 9.7%, underlining the slow pace of recovery. Quoted in the Financial Times, Paul Ashworth at Capital Economics said: “This is another timely reminder that, although the economic outlook is improving, the recovery is still pretty fragile.”

All Eyes East

After the recent volatility, global financial markets steadied last week with investors’ nerves soothed somewhat by positive economic data from both China and India, together with reassuring noises from US Federal Reserve chief, Ben Bernanke. Not that there weren’t some surprises and concerns though. BP’s share price plunged to a 14-year low at one point as President Obama launched a scathing attack on the company’s chief executive, Tony Hayward, leaving many investors fearful that BP would bow to political pressure and cut its dividend. Such a move would hurt many pension funds – both here in the UK and in the US – as the company accounts for around 12% of all dividend income from the UK market according to The Financial Times. On top, as a major constituent of the UK index, its share price fall has accounted for around 250 points of the FTSE100’s recent decline.

BP’s share price rallied significantly as the week progressed though and accounted for around 14% of total stock market turnover for the week, as sellers were matched with buyers. “At these levels the company is on our radar screen and we will be thinking about whether to take a position” commented UK fund manager Richard Oldfield of Oldfield Partners...............