St. James's Place News
Risk-on rally provides some relief for investors
Investors may be beginning to think that things might not be quite as bad as initially thought. Certainly as far as the eurozone is concerned, there seems increased faith that the single currency can hold together, although it seems inevitable that any solutions will be painful and slow to implement. German Chancellor Angela Merkel made welcome comments that the pledge by the European Central Bank to do whatever it takes to support the euro project was “completely in line” with the approach taken by European leaders, easing fears that Germany was not on board with the ECB’s strategy of intervening to reduce the borrowing costs of heavily indebted nations such as Spain and Italy.
The mood has helped sustain the rally in European stock markets – the FTSEurofirst 300 closed the week at a 13-month high, up 17% since the trough in early June. US stocks are up some 10% over the same period – the S&P 500 nudging towards its 52-week high; and the FTSE 100 has rallied by 11%, closing the week at its highest level since the start of April.
The Spanish and Italian bourses have been two of the best performers in the world since Mario Draghi made his commitment in late July, rising 26% and 22% respectively.
Also in this week's bulletin...
- Last week’s GDP numbers confirmed what many had long suspected – that the global slowdown is very real. The eurozone, US and Japan (who collectively account for 40% of the world’s GDP) all posted falling figures for the second quarter of 2012.
- Despite a rise in July, the expectation remains that UK inflation will drop below the Bank of England’s 2% target within a few months continues to put a strain on the sagging fortunes of savers who are relying on deposits to supplement their income.
- The search for income is attracting an increasing number of investors into the buy-to-let market, enticed by record rent levels which saw the average rent paid by private tenants in England and Wales reach £725 per month in July – nearly 3% higher than a year ago.
View this week's Market Bulletin (PDF), which contains thoughts and opinions of St. James’s Place and our range of investment managers on the key issues affecting investors.
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