WEEKEND WEB: Increase in interest rate on the way?

Scott Woods
Scott Woods
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SCOTT WOODS takes a look at the global financial market.

Company shares worldwide edged lower in sterling terms, with the MSCI All Country World index slipping for a second week, largely due to strength in the pound, which lowers the value of overseas assets.

Financial stocks outperformed amid a rise in bond yields, to which bank profits are linked. The move in yields, which move inversely to bond prices, came as investors’ expectations for interest-rate increases grew. Comments by the Bank of England fanned these expectations and a rise in sterling, which hit its highest level versus the US dollar since the Brexit vote.

• The Bank of England has indicated that it may increase interest rates soon, surprising many investors who believed the central bank would refrain from doing so until late 2018. In a statement, the so-called Old Lady of Threadneedle Street said that for a majority of policy makers, ‘some withdrawal of monetary stimulus was likely to be appropriate over the coming months in order to return inflation sustainably to target’. If the central bank does indeed hike rates, it would follow its US and Canadian counterparts in starting to remove post-crisis measures to prop up the economy.

• China, the world’s largest car market, has declared its intention to cease the production of petrol and diesel cars. This follows in the footsteps of France and the UK, which have committed to ending the production of combustion engine vehicles by 2040. China accounts for some 30 per cent of the world’s car production; it produced 28 million vehicles in 2016, according to the International Organisation of Motor Vehicle Manufacturers. China also plans to broaden foreign investor access to its electric vehicle industry; US companies Tesla and Palo Alto are already eying manufacturing and production plants.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.