As the FT-SE 100 index of leading shares closed at 6,954 for a modest rise of 1% in October, it was however up by 11% on a year-to-date basis.
For many of the major markets nothing much happened in October: only three of the twelve markets covered by Stockport based Cullen Wealth Management were down in the month, but most managed only small gains. But two markets were significantly ahead in the month.
Cullen Wealth’s RICHARD CULLEN explains more:
“Away from the FT-SE 100 index and stock markets, the great and the good had their usual influence on world affairs. Whether either Hillary Clinton or Donald Trump qualify as ‘great’ or ‘good’ I’ll leave to your own political judgement, but the fact remains that in a week’s time one of them will have been elected as the 45th President of the United States. A few days ago it was long odds-on Hillary Clinton, but the re-opening of the FBI’s e-mail investigation has sharply narrowed her lead and in a year that has given us Brexit and Iceland’s Pirate Party, anything is possible.
No doubt Vladimir Putin and Kim Jong-un will be watching the result with interest and wondering what mischief they can make in the ‘lame duck’ period between November and January, when the new President is waiting to be sworn in and Barack Obama will be concentrating on his legacy and his Presidential library.
So following the successful challenge in the High Court, where are we at with Brexit and the UK’s future?
At the start of the month we had confirmation that Theresa May intends to trigger Article 50 – and begin the two year process of leaving the EU. However, the high court has challenged this, which could therefore lengthen the process. It is unlikely that Brexit is going to be overturned but it does increase the chances of a ‘Soft Brexit’ rather than a ‘Hard Brexit’.
The man charged with steering the UK economy through the period leading up to Brexit is new Chancellor Philip Hammond – aided by Bank of England Governor Mark Carney, who has now confirmed that he will remain in that position until 2019.
On 23rd November Philip Hammond will present his first Autumn Statement, which is expected to see significant investment in the UK’s infrastructure, as he seeks to protect the UK economy from the impact of leaving the EU. “Hammond to spend his way out of Brexit fallout,” as the Guardian put it.
Nissan reaffirms commitment to the UK
The Government received a welcome piece of news at the end of the month when Nissan committed itself to its Sunderland plant, announcing plans to build both the Qashqai and the X-Trail SUV there, following Government “support and assurances.”
This was significant news and represents a big vote of confidence in the UK car industry: the Sunderland plant now produces more vehicles than the whole of the Italian car industry. The news came on the same day as the growth figures for the third quarter, which showed the UK economy growing by 0.5% in the immediate aftermath of Brexit. This was lower than the Q2 figure of 0.7%, but significantly ahead of the generally-expected 0.3%.
Q3 – Good news for UK manufacturing and services sectors
Figures released for September showed another good month for UK manufacturing, which grew at its fastest rate since June 2014. The Purchasing Managers’ Index rose to 55.4 in September from 53.4 in August (with any figure above 50 indicating expansion). Manufacturing and exports have been helped by the fall in the pound since the Brexit vote, and with the pound now down to $1.22 we can presumably expect this good news for the sector to continue.
There was also good news for the UK services sector, as the PMI for September came in at 52.6. This was slightly down on August’s 52.9 but still ahead of expectations.
UK inflation rose in September, up to 1% from 0.6% in August with rises in fuel and clothing pushing the rate up. The Bank of England has long had a target of 2% for inflation and it now looks like we are moving in that direction. The Office for National Statistics has said that the fall in the value of the pound is not yet responsible for the rise in inflation: October’s howls of outrage from the nation’s web designers and developers suggested otherwise as Apple unceremoniously hiked the price of a Mac.
Finally in ‘official’ news, the latest figures showed that UK unemployment had held steady at an eleven year low of 4.9% for the three months to August.
We’ve long written about the troubles at Tesco in this commentary: the shares jumped in September as sales improved but the company is now being sued by its own investors over the recent accounting scandals: and in what will be an increasingly common development for many companies, the pension scheme deficit doubled. Additionally, Tesco Bank has been involved in a hacking scandal, with 20,000 customers losing money from their current accounts. It seems that if Tesco’s problems continue, they are going to remain a key component in our market commentary.”