11 February 2015

Market comment: A return to calmer waters

Given, the rather dusty response received by Germany and France’s leaders over possible cease fire plans in Ukraine, continuing bad news coming out of Syria and adjacent regions in the Middle East and increasingly strident noises emerging from the new Greek prime minister, it is, perhaps, remarkable that markets are as calm as they are


Not so very long ago, our own FTSE 100 Share Index came close to breaching its all time high of more than 15 years ago. Some of the steam has run out of the market, but there is no sign of a serious reversal of sentiment. If investors feel able to co-exist with all the geo-political uncertainties that surround us, then perhaps it is time to look at those issues that should be of a more direct influence on the direction of markets.

This is a time of the year likely to give us a fair amount to get our teeth into. Amongst the highlights, if that’s the right description, will be the Bank of England’s quarterly inflation report, due to be published shortly. Expectations for the rise in the cost of living this year are likely to be lowered, due in main to the fall in the price of oil. There may well be a warning of potential deflation, but overall the drop in prices is more likely to help our growth prospects than to hinder them.

Economic data from the US and Europe may also help to paint a picture of how the global economy is faring. So far all the indications are that Europe is continuing to slow, despite the promise of quantitative easing, while the US is maintaining slow but steady progress. There are signs, though, that the fall in the price of oil is starting to impact on shale oil development – not that this is likely to lessen the benefit to consumers and business that cheaper fue l and energy costs are delivering.

There is also a steady stream of major companies reporting their full year results to give us a feel for life in the corporate sector. Amongst these are two Swiss banking giants, UBS and Credit Suisse, where the main focus of attention will be on just how painful Switzerland’s decision to end pegging its franc to the euro was for them. Mining leviathan Rio Tinto will also provide an indication on how this troubled sector is coping with the Chinese slowdown. Investors will have much to take into account as winter draws to a close.


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