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News Shorts for the Year End

  1. A prolonged Christmas holiday seemed to be sapping the energy from equity markets as the awkward few days before new year got under way. Trading on the London Stock Exchange was thin, and the FTSE-100 appeared to be plateauing around 6,610 as it headed for a probable 2% loss over the twelve-month period. Early December had seen the index at 6,753; early September at 6,905. Golly, we hope that’s not a head and shoulders?
  2. The US economy grew at a massive 5% annual rate during the third quarter, according to revised figures from the Commerce Department. The New York Times said that the biggest factor had been a large increase in personal consumption spending, which had risen at a 3.2 percent annual rate, not the 2.2 percent rate earlier estimated.
  3. The UK economy, however, saw a growth downgrade: The Office of National Statistics  said that the third quarter figure had been 2.6% higher than in the same period of 2013 – some way short of the 3% that Chancellor George Osborne had been crowing about during the Autumn Statement, and somewhat undermining his claim that Britain was still the developed world’s fastest-growing economy. Actual third-quarter growth, the ONS said, had been an unremarkable 0.7%.
  4. UK house prices are on course for an average 8.5% growth during 2014, the Halifax says. But nine out of the ten top growth areas have been in London: Greenwich saw a 25% price increase. But Sheffield also witnessed a 13.7% price rise. Parts of Greater Manchester saw falls of 4-5%.
  5. China’s domestic equity market remained the big surprise of 2014, with the Shanghai SE Composite beating 3,200 in the days after Christmas – a massive 51% improvement on the 2,115 at which it had started the year. The Hang Seng, however, had made less than 2% growth on the year to date.
  6. Oil markets remained on the floor, with Brent crude stuck below $60 a barrel, and with West Texas Intermediate struggling for $55. Increasing US government stockpiles, cheaper shale oil, a perceived demand slowdown in China and a Saudi refusal to reduce production were all seen as major factors.
  7. Bitcoins continued to struggle, with both volume and appetite apparently at low levels. The $313 price being quoted by Coindesk on 29th December compared with $418 in mid-November and a startling $1,147 in early December 2013.
  8. Russia’s economic mess continued to worsen, with the rouble under renewed pressure through Christmas and with President Putin announcing new central bank measures to support troubled commercial banks. On 22nd December the Bank made 22 billion roubles available for National Bank Trust after it experienced a run on deposits; but only days later the package was increased to 99 billion roubles.The Deposit Insurance Agency said it would also provide 28 billion roubles to Otkritie Bank. And two leading banks, Gazprombank and the state-owned VneshtorgBank, are also acknowledged to require urgent recapitalisation. IFA Magazine has been warning of this likelihood since last June. One cause has been that Western blockades on refinancing Russian corporations are starting to bite.
  9. Sony’s film The Interview, which plays political football with the merry idea of assassinating North Korea’s leader Kim Jong Un, made $15 million in its first day of internet release – having been initially withdrawn from cinemas after overt security threats. Its theme might not be in good taste, but at least it probably beats Frozen 2 on that score.
  10. Volatility? It was hard to find an analyst who didn’t stress that 2015 is going to be just as hair-raising as its predecessor. (For our own Burning Issues panel’s opinions, see here.) But then, if you’d spent 2014 failing to predict the shrinking bond yield, the Russian crisis, the oil price slump and the manifold weaknesses of Japan’s Three Arrows policy, maybe you’d be hedging your bets as well?
  11. Next trouble spot for 2015? Most bets seem to be on the Eurozone, where German production is falling, Italy is flirting with another recession and France has yet to show any proper determination to deal with the budget deficit. But the looming economic disaster in Russia probably has the power to trump everything in geopolitical terms. Watch this space.

 

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