This week we cover the latest UK inflation numbers, three more key pieces of news out of the US, EU and UK and an update on some of our investments.
UK inflation, as measured by the Consumer Prices Index, surprised as it hit a one year low on 18 April. With wages increasing by 2.8% in February year-on-year, UK consumers should be feeling better off. However, while the lower inflation reduces the likelihood of a rate hike in May, any signs of rising real incomes, combined with stronger earnings growth and stronger spending, will increase the case for interest rate hikes by the Bank of England.
UK retail sales fell by 1.2% in March, with the cold weather and two snow falls in March partly blamed for the weak data. Expectations had been for a 0.5% fall due to the weather. The weather affected food stores and non-food stores (-0.6%), clothing retailers (-0.7%), household goods stores (-0.2%) and other stores such as jewellers and bookshops (-1.8%). Petrol sales were the worst affected though falling 7.4%. Offsetting the negative numbers were online stores, while gifts for Valentines Day and Easter helping to drive sales for both physical and online stores.
Angela Merkel dealt a blow to Emmanuel Macron on his plans for the future evolution of the EU monetary fund. While endorsing the idea of the European Stability Mechanism becoming a regional version of the International Monetary Fund, she flagged that this change would require amendments to the EU’s underlying treaties and should remain under the purview of the individual member governments, rather than move to be directly controlled by the European Commission. The main fear in Germany is that the proposals would ultimately lead to more cash being paid in by German taxpayers to support the weaker European economies.
Having held fire on any comments during his first year of his presidency, Donald Trump’s recent comments about the Federal Reserve’s (Fed) policy of raising rates risks unsettling markets. Taking to Twitter, the President denounced China and Russia for devaluing their currencies as being unacceptable while the US “keeps raising interest rates”. Fed officials insist they would not be swayed if they come under any political pressure, but that heat could be turned up quite quickly given the increasingly vocal comments by Trump’s officials who do not seem to believe that inflation is present in the US.
The UK, US and European 7IM Equity Value Funds (ECF), which sit in many of the firm’s risk rated portfolios, as well as being distributed as region specific funds, turned three years old this month.
The celebrations sees the UK fund benefitting from its focus on traditional value stocks, the US from its underweight in the technology sector and the European (ex UK) fund seeing performance driven from across all the strategy’s model components, with value stocks continuing to perform well.
The Emerging Market EVF turns three in July 2018. Please note that these funds and are included for information purposes only and not intended to be a recommendation. Please consult an adviser before making a decision to invest.
THREE ANNOUNCEMENTS DUE THIS WEEK
27 Apr –EU Business Confidence (Apr) // 27 Apr –UK GfK Consumer Confidence (Apr) // 27 Apr –US GDP Growth Est. (Q1)
SOURCES: BLOOMBERG, REUTERS, 7IM
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