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Market and Economic Update – December 2015

Once adjusted for currency moves, global equity indices delivered a positive return for sterling-based investors, driven primarily by a stronger US dollar. Emerging markets were relative laggards as weak commodity prices and concerns over a pending US rate rise depressed prices. Meanwhile in fixed income, diverging expectations for Central bank monetary policy saw US Treasury yields rise marginally, whilst those in the Eurozone declined

Gareth Lewis Gareth Lewis
17 December 2015

Expectations of further European Central Bank quantitative easing came as the US Federal Reserve (the Fed) appeared ready to move in the opposite direction, after a strong job creation report suggested conditions might be in place to enable the Fed to lift rates in December, in spite of mixed data from industrial production and retail sales.

A December rate rise in the US?

  • In the US, the latest noises from the US Fed Reserve continued to suggest that a rate rise was on its way in December. On the data front strong US jobs data was the big story in the month, with the unemployment rate down to 5% as non-farm payrolls were ahead of forecasts – adding over 270,000 jobs in October. Wages were also up in October, rising 2.5% year on year.
  • The end of the month also saw an upward revision to third-quarter GDP growth, which was revised up from 1.5% to 2.1% annualised. However, there were mixed data elsewhere, with industrial production down -0.2% month on month and November’s ISM manufacturing reading down to 48.6 – its lowest reading since 2009.
  • US retail sales were also weaker in October, as the increase in the savings ratio suggested that consumers may have been waiting for Black Friday and Cyber Monday sales.
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