WEEKEND WEB: Slow dowqn in commodities and equities
SCOTT WOODS writes his weekly assessment of the global finance scene...
Global shares fell in sterling terms, as the pound approached US$1.40, which clipped returns for UK investors. Emerging markets and Japan outperformed more developed markets.
Commodities were also weaker following a strong start to the year. Gold and Brent crude were notable decliners. Sterling wasn’t just strong against the US dollar, rising sharply against the euro as the currency faces less negative Brexit headlines than it did in the fourth quarter. Global bond prices were mixed for the week, with Gilts little changed, but US treasuries rising above the 2.6 per cent mark, as investors anticipated increasing inflation.
Shares in Carillion, the UK’s second largest construction company, were suspended as it declared insolvency, leaving employees, sub-contractors, and creditors anxious. Carillion shares had fallen from 192p in July, when the chief executive stepped down after a profit warning, to 14p. Beset by cost overruns, non-payment on a Middle East contract, and a gaping pension scheme deficit, it is being liquidated with just £29 million in cash, and bank debts above £1.3 billion. Shares in Carillion suppliers Speedy Hire and Van Elle Holdings weakened.
UK inflation fell for the first time in six months in December, which may be the start of a slowdown that will ease pressure on consumers who spent most of last year feeling the squeeze of rising prices. The decline took the rate to 3 per cent from 3.1 per cent in November, which was the fastest in more than five years. That said, with rising oil prices, lingering Brexit uncertainty may limit the recent strength of the pound, and low unemployment levels, inflation in the UK could stay well above the Bank of England’s two per cent target for all of 2018.
Source of information Old Mutual Global Investors (OMGI).
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.