Monthly Returns

UK Industrial Strategy Launched

Jack Turner, Research Analyst

This week, we flag the launch of the UK’s Industrial Strategy, highlight economic news out of the UK, the Eurozone and China, as well as give the heads up on three data publications due this week.

 week at a glance

With UK GDP growth revised down (again) by the Office for Budget Responsibility, and since companies continue to hold off on long term investments due to the uncertainty linked to Brexit, the UK Government is stepping in to “boost the productivity and earning power of people throughout the UK” through its Industrial Strategy. It’s focused on four sectors where it believes the UK can take a lead. Questions will come though as to how successful this could be, not least given the track record of such government strategies in the past.


NEWS

UK UPDATE

The first Autumn Budget was delivered by the Chancellor of the Exchequer with a focus on property rather than pensions. Leaving the annual and lifetime allowances for pensions alone, and also not changing ISA allowances, the government will instead aim to increase home ownership levels for younger generations. It perhaps recognises that buying a home will ensure that millennials end up in retirement with little in the way of savings, and no home equity will increase any dependency on the basic state pension. Measures included waving stamp duty for most first time buyers, initiatives to increase the supply of homes, and additional taxes hitting buy-to-let landlords who hold property through a company.

 

EU UPDATE

The region’s economies continued to power ahead in November, led by Germany, as jobs growth and new manufacturing orders reached 17-year highs, according to the latest HIS Markit Purchasing Managers’ Indexes. These levels were reached despite the strength of the Euro. The findings of the surveys show that inflation is also beginning to make a mark, which will please the European Central Bank that has struggled with its inflation target of just under 2% and has had to extend its loose monetary policy until at least September 2018.

 

CHINA UPDATE

Confidence among the county’s sales managers and steel producers waned in November, matching the mood among international investors. The sales managers’ survey by the London-based World Economics Ltd. saw its reading fall to 51.5, the lowest in 13 months, and the S&P Global Platts China Steel Sentiment Index edged down to 31.93 this month from 33.61 in October. Meanwhile sentiment among small businesses improved, according to the Standard Chartered Plc’s Small and Medium Enterprise Confidence Index, which picked up to 56.1 this month from 55.2 in October.


PORTFOLIO ACTIONS
The decision to increase the weighting of the FTSE 100 portfolio holdings across all risk profiles has allowed 7IM to:

  • Allocate more money to global equity markets at valuation levels lower than through individual international markets given synchronised global growth continues to move higher
  • Support portfolios should the value of Sterling fall back following its recent period of strength
  • Express a view on potential foreign exchange moves while leaving existing currency positions unchanged

The changes saw 7IM add 1% to its most cautious risk profile, 2% to the moderately cautious, 3% to the balanced profile and 5% to the moderately adventurous and the adventurous risk categories. The allocations came at the expense of gold and European equities.


THREE ANNOUNCEMENTS DUE THIS WEEK
29 Nov Eurozone Business Confidence // 29 Nov – US Q3 GDP Growth 2nd Est. // 30 Nov – UK GfK Consumer Confidence

SOURCES: BLOOMBERG; REUTERS; 7IM.

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