Weekly Market Update 2019 06 10

Donald Trump Visits

Last week saw US President Donald Trump arrive for a state visit to the UK to commemorate the 75th anniversary of the D-Day landings. The visit was closely watched for clues on the future relationship between the UK and the world’s largest economy. However, given that Theresa May is now not the Prime Minister, it is difficult to say that there were any meaningful discussions between the two sides. Nevertheless, there were positive signals from the President that will embolden those who are willing to leave the EU without a deal, with the hope that a quick trade deal with the US will fill the void. A deal with the US would be highly valuable, although any agreement would likely take some time to organise and is filled with many hurdles such as the NHS and food standards.

US Employment Growth Slows

US non-farm payrolls showed that only 75,000 jobs were created in May. This, along with downward revisions to previous months, adds to the evidence that there is some slowing in the US economy. The good news is that the unemployment rate remained at a low of 3.6%, suggesting that there is still some tightness in the labour market. Nevertheless, the low employment figures and weak inflation mean that the Federal Reserve is increasingly likely to favour an interest rate cut later in the year. The market is anticipating that there will be 2-3 rate cuts by the end of the year; however, the Federal Reserve is yet to signal that it intends to do any.

Woodford Suspends Income Fund

Star fund manager Neil Woodford sent shockwaves through the UK investment world last week by announcing that his flagship UK Equity Income fund was suspending dealing until further notice. The manager has been fighting a flow of redemptions on the back of poor performance and negative media coverage, which has accelerated over the last several weeks. The nature of some of the unquoted holdings in the fund has meant that to ensure an orderly sale of assets, further redemptions have been halted. The suspension even impacted the online stockbroker Hargreaves Lansdown which had been heavily promoting the fund, resulting in a share price fall of over 15%.

Market Data

Index Open Close Change % Change
FTSE 100 7161 7259 98 1.37%
S&P 500 2752 2843 91 3.31%
Dax 11726 11953 227 1.94%
Cac 40 5207 5278 71 1.36%
Nikkei 225 20601 20774 173 0.84%
UK 10 Year Gilt Yield 0.89 0.81 -0.08 -8.99%