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01 Jul 2016
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The S&P500 is on course to make yet another fresh all-time high when it closes later today. Meanwhile if the Dow can hold onto its current gains it will also end the day above its previous all-time closing high of 18,309 from 19th May 2015. Most of the major European indices are also picking up steam now making back a fair proportion of their post-Brexit losses. Yet despite this the German DAX, French CAC, Italian MIB and Spanish IBEX are all some way below their own all-time highs.

On this basis we’d be forgiven for thinking that the FTSE100 would still be stuck under a black post-referendum cloud. But that would be to forget the overweighting of multinationals within the UK index. There’s no doubt that the sell-off in sterling is given these internationally-focused companies a real boost. Not only should the fall in the British pound boost overseas sales and earnings, but it also makes the stock of these corporations much more appealing to foreign investors.

At the time of writing the UK100 is hovering around 6,700. This means it is just 5.6% below its 12th April 2015 record close of 7,099. OK, that’s not as impressive as the US majors but it’s still behaving better than the DAX which is still around 20% off its highest close and the Italian MIB (off 66%).
  
PM Bulletin
  
The ongoing post-referendum rally has taken many investors by surprise. But it is worth remembering that global equities are all getting a boost from the expectation of lower interest rates for longer. The US Federal Reserve looks unlikely to hike rates this year despite Friday’s blow-out Non-Farm Payroll release. Meanwhile Japan’s election results over the weekend have set the stage for further fiscal and monetary stimulus from Japanese policymakers and the Bank of Japan. On top of this the Bank of England (BoE) meets on Thursday and the consensus view is that the Bank will cut rates by 25 to 40 basis points and possibly signal further quantitative easing later in the year. All-in-all, this is a good environment for equities. But let’s not forget that these extraordinary central bank interventions have been running for eight years now and they wouldn’t be happening if the global economy was truly in good health and growing steadily on its own. So there’s good reason to be cautious, not least if central banks’ addiction to money printing finally uncorks the inflation genie. 
   
  
Disclaimer:
  

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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