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May markets in brief

Archive for the ‘Commentary’ Category

May markets in brief

Wednesday, June 12th, 2019

The calm of the previous month ended sharply as May began, with Brexit arguments rolling on, the UK Prime Minister resigning, the European elections crushing the main parties, and Donald Trump imposing tariffs on Mexico and China. There was some positive light, however, from the emerging markets, with India, Russia and Brazil seeing economic gains.

UK

The British high street took a hit this month with the loss of Jamie Oliver’s chain of Italian restaurants, Boots’ decision to review the future of 200 stores and Marks and Spencer’s decision to close an as yet unspecified number of stores. Thomas Cook also revealed a loss of £1.45bn, seeing its shares fall 40%. Overall, retail shop vacancies are at a four year high.

There was better news away from the high street with the UK economy growing 0.5% in the first quarter and the Bank of England raising its growth forecast for the year from 1.2% to 1.5%. However, it also warned that interest rate rises might become more frequent.

The FTSE 100 Index closed down 3% at 7,162 while the pound was down against the dollar, closing the month at $1.2633.

Europe

Much of the continent’s news in May covered the European elections which saw the ‘Grand Coalition’ – the Centre-Right and Centre-Left groupings – lose significant numbers to more radical parties. In France, Marine Le Pen’s National Rally party defeated Emmanuel Macron by 24% to 22.5%. While in Italy, Matteo Salvini is reportedly preparing a new ‘parallel currency’, announcing ‘I do not govern a country on its knees’. Could this be the first step in taking Italy out of the EU?

Overall, the Eurozone economy grew in the first three quarters by 0.4%, though business confidence was said to have ‘crumbled’ according to a survey of more than 1,400 chief financial officers by Deloittes. Across the Eurozone, 65% reported the level of uncertainty as ‘high’ or ‘very high,’ with the US/China trade dispute and Brexit cited as the main reasons. Both major European markets fell in May. The German DAX index was down 5% to 11,727 while the French index fell by 7% to close the month at 5,208.

US

Strong labour data convinced the Fed to keep rates on hold as the US economy added 263,000 more jobs in April, with the unemployment rate now at its lowest since 1969. In company news, Facebook announced plans to launch a cryptocurrency to rival Bitcoin, and Ford said that it would need to shed 7,000 jobs as it looked to cut costs. On Wall Street, the Dow Jones index fell in the month, ending May down 7% at 24,815.

Far East

The trade war between the US and China intensified as the US re-imposed tariffs on $200bn of Chinese goods. China retaliated on 1st June by imposing tariffs of up to 25% on $60bn of US goods.

To add to the worries of a slowdown, analysts have started to ask if ‘winter is coming’ to the booming Chinese tech sector, with electric vehicles, industrial robots and microchip production all slowing down recently. In addition, big companies like Alibaba, Tencent and Baidu have all cut jobs, with one in five Chinese tech companies now planning staff cuts.

All the major stock markets in the region were down due to the trade war. Hong Kong was the worst affected, falling 9% to 26,901. The Japanese and South Korean markets were both down by 7% to 20,601 and 2,042 respectively, while China’s Shanghai Composite Index was down by 6% to end May at 2,899.

Emerging Markets

India saw the world’s largest democratic vote with 600m voting for a new Prime Minister – the victory went to the incumbent Narenda Modi by a landslide. One of the big questions is how Modi will handle the Indian economy. In his first term, India became the world’s fastest growing economy as he cut red tape and reformed the bankruptcy laws. But his biggest gamble, banning more than three-quarters of the notes in circulation in a bid to tackle corruption, backfired badly and delivered a significant blow to economic growth.

Brazil’s economy fell by 0.2% in the first three months of the year, the first decline since 2016. Despite this bad news, the Brazilian market still managed a gain of 1% in the month, closing May at 97,030. The Indian stock market rose 2% to 39,714 but the star performer this month was the Russian market, which rose 4% to finish the month at 2,665.

We hope you have great June and are preparing for a warm summer. If you have any questions about the latest stock market news, please don’t hesitate to get in touch.

Gifting rules and inheritance tax

Wednesday, June 5th, 2019

Following an in depth study conducted by the National Centre for Social Research (NCSR) and the Institute for Fiscal Studies (IFS), it has been discovered that only one in four people making financial gifts are aware of the risks of inheritance tax. Further to this, they found that only 45% of gifters reported being aware of inheritance tax rules and exemptions when they gave their largest gift.

A staggeringly low 8% of respondents considered tax rules before making a financial gift and most did not associate gifting with inheritance tax. When compared with the fact that over half of respondents said that they planned to leave inheritance, it’s obvious that there seems to be a gap in gifter’s knowledge.

For those who were aware of the rules surrounding inheritance tax, 54% said this influenced the value of their largest gift. This was most prevalent amongst affluent taxpayers who had assets of £500,000 or more. Respondents below this threshold had more limited knowledge of the long-term effects of inheritance tax, the seven-year rule or the annual limit on gifts.

So, where does the money go?

80% of gifters gave to individuals, with charities coming in second at around 10%. The most common beneficiaries were adult children, followed by 15% giving to parents or other family members and 14% making gifts to friends. The most popular reasons were presents for birthdays and weddings.

The data also suggested that even when individuals considered inheritance tax rulings, it did not deter them from giving the gift.

The rules

Gifts of £250 or less, totalling below £3,000 per year, are exempt from inheritance tax. Most gifts, in fact, made from one individual to another during their lifetime are exempt, unless the donor dies within seven years of making the gift. These gifts are referred to as potentially exempt transfers (PETs).

The current starting threshold for inheritance tax for a single person is set at £325,000. This amount is then doubled for married couples and civil partners, who also have the additional benefit of the residential nil-rate band, which allows for a further £150,000 of tax-free, property-based inheritance per person. This particular allowance is set to rise to £175,000 as of the 20th of April 2020.

An unsuccessful PET is taxed depending on how long the gifter has lived following the giving of the gift and is referred to as ‘taper relief.’ If a gift is given less than three years before death, the full rate of 40% is applied to the gift, tapering off to 8% if the gift was given between six to seven years before death.

However, this is not the case when it comes to transactions with a reservation of benefit. For example, if you give away your home to your children and continue to occupy it rent-free, the property is still considered as forming part of your estate immediately if the worst were to happen. An individual cannot retain possession of a chattel or property whilst making a PET.

Though it may be difficult to plan for the worst, knowing how to best mitigate the tax surrounding gifts and inheritance can help you make key financial decisions at the most opportune moments, and prevent any avoidable losses when it comes to sharing your assets with the people and organisations that matter most to you.

Make the most of diversification.

Wednesday, June 5th, 2019

Diversification is a word that seems to get tossed around a lot in conversations around savings and investment. We hear it often, but what does it mean?

Put simply, diversification is a risk management strategy that mixes a variety of investments within a portfolio. Through having different kinds of assets in a portfolio, the goal is to obtain higher long-term returns and lower the risk of any sole holding. Essentially, you are hedging your bets.

By smoothing out the risk of each investment within your portfolio, you’re aiming to neutralise the negative performance of some investments with the positive performance of others. Though your investments will only benefit when the different investments are not perfectly correlated, you want them to respond differently, often in opposition to one another, to market influences.

One drawback to be aware of, though, is that by limiting portfolio risk through diversification, you could potentially be mitigating performance in the short term.

Types of investment

Most fund managers and advisers diversify investments across asset classes and determine what percentage of the portfolio to allocate to each. Such asset classes include:

  • Stocks – shares or equity in a publicly traded company.
  • Fixed-interest securities – also known as bonds, fixed-interest securities represent a loan made by an investor or a borrower and are often used by companies, states and sovereign governments to finance various projects.
  • Real estate – buildings, land, natural resources, agriculture, livestock and water or mineral deposits.
  • Commodities – basic goods necessary for the production of other products or services.
  • Cash and short-term cash equivalents – savings, cash ISAs, savings bonds and premium bonds.

How do you make the most of it?

The unfortunate nature of investment is that all winning streaks end. It’s human nature to be drawn to winners and avoid losers. But investing is much more fluid, with no particular investment reigning as champion for long. By investing only in what’s doing well currently, you might miss out on any rising stars beginning their ascent to success. You may want to jump from top performer to top performer, however more often than not, the best gains will have been and gone by the time you invest. You may even be investing prior to the asset reducing in return.

In an ideal world, you’d get high returns from your savings and investments with no risk. However, reality dictates that there must be a trade-off – high risk often leads to higher returns.

Though it is sensible to hold part of your assets in low-risk investments, such as Cash ISAs, some see value in investigating more high risk investments in order to acquire those lucrative higher returns. However, you need to make sure that you’d be happy with running the risk of making a loss.

A general rule of thumb is that the older you are, the less you’ll want to expose your investments to market risk – meaning that diversifying into more low risk investments may be the ideal approach for you in order to keep your investments secure.

There are also many ways to diversify within a single kind of investment. For example, with shares, you can spread your investments between large and small companies, UK and overseas markets and within different sectors like technology, financials or raw materials.

Finally, remember that the value of investments, and the income from them, may fall or rise and you might get back less than you invested. Always proceed with caution – diversification helps mitigate the risks but won’t remove them entirely.

“UK Tax system is unfair,” say small businesses

Wednesday, May 15th, 2019

The British Chamber of Commerce (BCC) conducted a tax survey throughout January and February of 2019 that produced some interesting findings. The survey covered more than 1,000 businesses across the UK, 96 per cent of which were SMEs with fewer than 250 employees; 68 per cent of the businesses were in the service sector and 32 per cent in manufacturing.

Undertaken to discover how fair respondents believed the UK tax system to be in a number of different situations, the results show that faith in the integrity of the system aren’t exactly high. 58 per cent of respondents felt that businesses like theirs were not treated fairly by the tax regime. 6 per cent of respondents did not believe that tax rules are applied fairly across all sizes of business by HMRC. Smaller businesses are more likely to hold that view, at 70 per cent, but it’s still the view held by the majority of medium and large businesses, at 59 per cent.

When asked whether they agree that HMRC applies tax rules fairly regardless of where a business is based geographically, 64 per cent of respondents did not agree. The trend of smaller businesses being more likely to feel this way continues, with 67 per cent of small businesses believing this, as opposed to 59 per cent of medium and large.

It isn’t just how fairly the rules were applied that come under fire in the results of this survey, however. The quality of service that the HMRC provides, and the support they offer to ensure that businesses remain compliant, is considered insufficient by 51 per cent of small businesses. This figure still sits at 42 per cent for medium and larger companies, with an overall average of 49 per cent of respondents finding it unsatisfactory.

As the tax system becomes ever more complex, firms are suggesting that sufficient support needs to be provided to ensure that they can keep up with regulations and remain compliant. The BCC are taking this call one step further, and pushing for the HMRC to take action by providing the same level of investment into support and tax advice for businesses as it puts into tax avoidance work.

Head of Economics at the BCC, Suren Thiru, sees it like this; “HMRC must step up efforts to provide better support to smaller businesses to get their tax right, rather than simply pursuing and enforcing penalties. This should include matching investment in frontline HMRC help towards SMEs, with their work on non-compliance and tax evasion. More also needs to be done to address the escalating burden of upfront costs and taxes to provide firms with much-needed headroom to get on and invest, train their staff, and compete on the global stage.”

Auto-Enrolment changes put pressure on SMBs

Wednesday, May 15th, 2019

April 2019 saw the increase of minimum contributions to auto-enrolment pensions from 5 per cent of wages to 8 per cent. With employers now required to contribute 3 per cent, rather than their previous 1 per cent, the Federation for Small Businesses (FSB) has warned that this could put “substantial” pressure on small businesses.

The Institute of Fiscal Studies (IFS) has reported an increase of workplace pension participation amongst small business employees of around 45% as a result of auto-enrolment. That means that businesses who employ between 2 and 29 workers will be seeing a significant extra cost towards pension schemes. These costs aren’t necessarily as daunting for larger businesses, but in the words of Mike Cherry, National Chairman of the FSB, “The costs involved for smaller employers are substantial, in terms of both expenditure and indeed their time, as they have grappled with finding a good provider and setting up whole new systems. Now that the 3 per cent rate has hit, the burden will be greater still.”

But with 70 per cent of UK workers employed by small businesses now on workplace pensions as a direct result of auto-enrolment (first introduced in 2012), employees seem to consider it as an attractive prospect. They too have seen an increase in their minimum contributions, from 3 per cent to 5, and so sacrificing a higher portion of their monthly wages has been accepted as a move that does come with its own benefits. Predictions from investment firm Hargreaves Lansdown state that in real terms, the average employer will see £30 of their monthly wages go towards their pension pot which, on average, results in total pension savings increasing by around £55,000.

Employers, on average, are predicted to now contribute £55 a month to the average employee’s pension pot, an increase from the pre-April figure of £37. These increases aren’t all bad news for employers however; Guy Opperman, Minister of Pensions, sees them as the opposite. “Automatic enrolment has been an extraordinary success, transforming pension saving and improving the retirement prospects of more than 10 million workers already. The increased cost on employers has been phased in over time so firms have had the opportunity to adapt. Pension contributions are a valuable employee benefit which firms use to attract and retain good people. This is true of small and large firms alike.”

April markets in brief

Wednesday, May 8th, 2019

April was, on the whole, a positive month for global stock markets. All major stock markets gained over the month, with the notable exception of China. The thawing of Chinese-American trade relations and the expectation of a recovery of growth in China has meant that global markets saw a largely buoyant month overall.

UK

Despite the political turmoil at the beginning of the month, there was plenty of good news. The EU agreed to a flexible Brexit extension until 31st October, taking some of the pressure off firms who would be hit hard by a ‘no deal’ scenario. The manufacturing PMI jumped to 55.1, its highest reading in a year and Britain’s labour market remained in fine form, with unemployment staying at 3.9% and basic wages rising 3.4% year on year. The FTSE rose by a buoyant 2%, up at 7,418.

Europe

The continental markets enjoyed a strong month. However, there were some worrying signs for the French and German economies. French President Macron finally agreed to cut taxes following the Yellow Jacket protest which have caused widespread disruption across the country. Worryingly, French public debt is soaring – the country is on course to overtake Italy as the world’s fourth most indebted country.

The news was also concerning in France’s eastern neighbour. Germany’s growth forecast has been slashed to 0.5% and the country’s usually robust car industry looks like it could suffer over the coming years. Worrying news indeed for Europe’s strongest economy.

These dark clouds on the horizon did little to hinder the countries’ stock markets. The German DAX was up 7% in April to end at 12,344 and the French stock market was up 4% to 5,586.

US

The first two months of the year showed some worrying signs in the American economy, prompting many to fear a coming recession as the government shutdown and cold weather hit economic data. However, the March labour report helped to calm these fears somewhat. 196,000 jobs were added in March and year on year wage growth stands at 3.3%. On Wall Street, the Dow Jones index enjoyed a healthy month, rising by 3% to close the month at 26,593.

The Far East

After being hit hard by heightening trade tensions with America, the Chinese economy appears to be en route to recovery. Official manufacturing figures indicated a boost in activity and overall production rose from 5.3% to 8.5% in March, compared to a year previously. The Chinese economy grew by 6.4% in the first three months of the year, slightly higher than predictions.

As we previously mentioned, China’s Shanghai Composite Index didn’t gain over the month, and dropped 13 points back to 3,078. The other major Far Eastern stock markets enjoyed a strong month. The market in South Korea was up 3% to 2,204 and the Hong Kong index rose 2% to 29,699.

Whatever you’re doing in May, we hope you have a pleasant month and enjoy the (hopefully!) warmer weather. If you have any questions about the latest stock market news, please get in touch.

The UK is struggling to save; what are the implications?

Wednesday, May 8th, 2019

study found in 2018 that one in four adults have no savings. Many residents in the UK wish that they had cash to save, however high monthly outgoings and debt clearance seem to take priority. Saving for the little curveballs that life throws your way is a good way to maintain a sound mind, but poor money management and large monthly payments can get in the way. So is this issue localised to the UK, or is the struggle to save an international issue?

Across the pond

Households in the US are currently able to save 6.5% of their disposable income, down from the previous figure of 7.3% after estimates were made by Trading Economics. However, earlier in 2018 a report was made, finding that 40% of US adults don’t have enough savings to cover a $400 (est £307) emergency.

The current UK savings figure sits at 4.8%, one of the lowest since records began in 1963. The Office for National Statistics has come up with an even lower figure of 3.9%, which actually is the lowest recorded. Further to this, a report was also made by the Financial Conduct Authority in 2017 that millions of UK residents would find it difficult to pay an unexpected bill of £50 at the end of the month, and little has changed since then.

Closer to home

In France and Germany, the savings ratio sits at 15.25% and 10.9% respectively, that’s triple the UK’s value for France and over double for Germany! The Managing Director of Sparkasse bank points to cultural idealsas the main influencers for the high German saving rate, saying that: “Saving is seen as the morally right thing to do. It is more than simple financial strategy.” This stance seems typical for the country that’s home to the first ever savings bank, opening in Hamburg in 1778.

Why do we not save as much as we used to?

The idea of saving for a rainy day in the UK may not be totally lost but for many, the rainy days are happening as we speak. Another reason relates to the tendency of UK households to borrow more money in order to maintain lifestyle choices. For all quarters in 2018, households were net borrowers, drawing on loans and savings to fund spending and investment decisions.

Comments have been made referring to current Brexit uncertainty as a reason for the change, alongside rising rental prices and increased costs of living. Whether this new change in spending and saving is wholly due to current cultural or economic factors is yet to be confirmed. Another case has been made for poor interest rates making it a less lucrative option for savers to save.

Be it cultural or economic, it is undeniable that the country has lost faith in the ethos of saving their pennies. In the end, as more and more studies come to light, it seems that only time will tell.

Equity release is popular but is this a good move?

Wednesday, May 1st, 2019

Equity release is no longer the niche lending area it once was. More and more homeowners over 55 are choosing to release cash tied up in their homes and there are few signs of this trend subsiding.

Lending in 2018 increased by 27% compared to the previous year and is now nearly double what it was in 2016. It’s likely that the UK’s growing elderly population, where many don’t have the pension security of generations past, is partly behind this expansion. The growing variety of equity release products on the market could also be a factor. Newer products mean that homeowners are able to gradually release money from their property, rather than taking it as a lump sum.

Is it a risky option?

Equity release doesn’t exactly have a squeaky clean reputation. There have been past accusations of mis-selling and there are occasions where relatives find themselves receiving less inheritance than they might have expected.

Because of the way interest accumulates over the years, people can end up owing a large amount of money that is paid back from the value of the property when a person dies or goes into care.

Whether equity release is a suitable solution really depends on a person’s individual financial and personal circumstances.

As well as getting sound financial advice beforehand, it’s always best to be open with loved ones about releasing equity from your property. Two in three complaints to the Financial Ombudsman about equity release come from relatives of people who have died or gone into care. It can save a lot of upset later on to be open about releasing cash from a property when you do it, rather than further down the line.

The bottom line is that equity release can play a crucial role in supporting a full retirement, alongside pensions, savings and other assets, for the right homeowner. Since homes are most people’s largest asset, it makes sense to at least consider how this asset can be used to fund retirement. Downsizing in later life is another way of releasing money from your home. If you have any questions about ways you can increase your financial security in later life, please get in touch with us directly.

DB pension protection following the British Steel debacle?

Thursday, April 25th, 2019

The treasury has made a promise that since the mismanagement of private pension transfers from the British Steel Pension Scheme (BSPS), the FCA will make an effort to “stamp out bad practice.” So what exactly happened, and what comes next?

Members of the (Defined Benefit) BSPS were given the choice to transfer to a new scheme, sponsored by Tata Steel UK but with lower indexation, or to go into the Pension Protection Fund (PPF), the UK’s pension lifeboat fund which cuts benefits by 10% for those who are yet to retire. 83,000 of the scheme’s 122,000 members opted to transfer to the new BSPS with reduced benefits (but higher payments than those that transferred to the PPF) but roughly 2,600 members requested a transfer from the (DB) BSPS to private arrangements.

The advice that these 2,600 people received is under fire for being unsuitable, with several firms subsequently being barred from undertaking pension transfer business. In fact, the regulator found only 48.1% of the advice that it investigated could be considered suitable.

That’s where the FCA comes in. The Financial Conduct Authority is a financial regulatory body operating independently of the UK Government. It’s financed by charging fees to members of the financial services industry. Specifically, it regulates financial firms (both retail and wholesale) which provide services to consumers and thereby maintains the integrity of the financial markets in the United Kingdom.

Officially, its role includes: “protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.” But what’s changed to help curb the chances of this happening again? In the words of John Glen, the Economic Secretary to HM Treasury; “The new rules on pension transfers provide advisers with a framework to better enable them to give good quality advice, so that consumers can make better informed decisions”

As for your pension, most DB schemes, as well as the defined portion of hybrid pension schemes based in the UK, are eligible for protection, however there are some exceptions. If you’re unsure about your scheme, the Pension Protection Fund provides a full list of qualifiers and conditions at https://www.ppf.co.uk/your-scheme-eligible.

April Market Commentary

Wednesday, April 3rd, 2019

Introduction

We have commented before on the difficulty of ‘hitting a moving target.’ Sometimes in writing this commentary you run the risk of what you write being overtaken by events, and that has never been more true than this month. In the short time between us publishing notes and you reading them it is possible that the Brexit section will be different.

Given the fact that Brexit continues to dominate the news headlines it’s tempting to think it is the only important story. Nothing could be further from the truth. There were clear signs that the US/China trade dispute might be moving to an end, and it was an interesting month in the US with clear pointers to a sea-change in the car industry – something that has worldwide implications.

In the UK we had Chancellor Philip Hammond’s Spring Statement, the usual gloom from the high street and continuing good news on employment.

World stock markets had a reasonably good month, buoyed by hopes of an agreement between the US and China. We have also taken a look at the performance of all the major markets in the first quarter of 2019. Let’s look at all the detail…

UK

There was, of course, the usual round of gloom from the UK retail sector. Debenhams issued a profit warning – failing to meet forecasts it made just two months ago – and Sports Direct boss Mike Ashley duly contemplated a £61m bid for the company. As of April 1st, the Debenhams board appears to have secured refinancing to fend off Mr Ashley’s amorous advances, but you suspect it is only a matter of time…

More widely the high street suffered its worst February for ten years with sales down 3.7% and John Lewis paid its lowest bonus to staff since the 1950s. What was once Staples and is now Office Outlet went into administration. There was also a very clear sign of things to come from the traditional high street travel agent as Thomas Cook announced plans to close 21 shops and cut 300 jobs.

Elsewhere in the UK there was the usual mixture of good and bad news…

Chancellor Philip Hammond delivered his Spring Statement: he made his opposition to a ‘no deal’ Brexit very clear, promising a £26bn ‘deal dividend’ if agreement was reached with the EU.

But despite the undeniable uncertainty, the UK economy continued to turn in some impressive figures as unemployment fell to its lowest level for 45 years and 32.7m people were in work. Figures from the Office for National Statistics showed that the economy had grown by 0.5% during January – more than double economists’ predictions of 0.2% – with the important services sector up by 0.3%.

Toyota announced that it would build its new hybrid car in Derbyshire – a welcome shot-in-the-arm for the UK car industry which saw manufacturing fall for the 9th month in a row. The BBC also reported that UK manufacturers were cutting jobs at a ‘record pace thanks to Brexit uncertainty’ as companies stockpiled raw materials ‘at a record pace’.

There was also bad news in the housing market, with prices in England falling by 0.7% in the first three months of the year, compared to the same period last year. This was the first fall since 2012, but Nationwide’s survey showed that rises in Northern Ireland, Wales and Scotland meant that the average price of a house across the whole UK was still increasing. UK inflation in February inched backed up to 1.9%, with increases in the cost of food and wine contributing.

What did the UK’s FTSE 100 index of leading shares make of all this confusion? It had a good month, rising by 3% to 7,279 where it is up by 8% for the first quarter of 2019. The pound fell slightly, ending March 2% down at $1.3036 – however, it is up by 2% for the first quarter of the year.

Brexit

Yet again, all the really important news regarding Brexit came at the end of the month as Theresa May brought her Withdrawal Agreement back to Parliament for a third time on 29th March – the day on which the UK should have left the EU – only to see it defeated yet again. The margin this time was 58 votes, with the DUP once again refusing to support it.

There were plenty of high profile Brexit supporters, such as Boris Johnson and Jacob Rees-Mogg, who did support the WA. They feared the only option left was to accept a bad deal or risk losing Brexit altogether – but in truth the Prime Minister never looked likely to do enough to convince either the DUP or 25 die-hard Brexit MPs.

So where does that leave us now? On Monday 1st April there will be another series of indicative votes as MPs look for something they can agree on. The Prime Minister has no control over this and – having promised to stand down if her deal passed – she will face plenty more calls for her immediate resignation as her deal lies in ruins.

If nothing is agreed – such as a further extension to Brexit – then the UK will leave the EU on 12th April. Depending on your point of view we will ‘crash out’ with no deal, or we will move to trading on World Trade Organisation terms. The situation is further complicated by European elections, due to be held in late May: if the UK is still in the EU then it must send MEPs to Brussels.

Europe

The news in Europe was not good. March began with the revelation that EU manufacturing was facing its worst downturn for six years. The European Central Bank was once again forced to act, offering banks cheap loans to try and revive the Eurozone economy.

But will it get any better? For decades there have been three basic facts of life about cars: cars were driven by people, they were owned by people (or the companies that employed those people) and they were powered by internal combustion engines. Now all of those are under threat and the implications are serious and wide-ranging. The German economy has been the engine powering Europe for the last 10 to 20 years. As countries like Italy have had a decade of virtually no growth, Germany has produced a remorseless balance of payments surplus.

The German car industry employs more than 800,000 people: it accounts for around 20% of the country’s exports. If car production switches to driverless cars made in the Far East and/or California, then the implications for Europe are severe.

So, given their less than cordial relationship with the EU of late, it was no surprise to see Italy roll out the red carpet for Chinese Premier Xi Jinping. We have written previously about China’s ‘Belt and Road’ initiative and – with worries about the German car industry and the French economy stagnating – why wouldn’t the populist government in Italy look to closer ties with China? Despite the concerns of her European neighbours the upside for Italy is clear – a flood of Chinese investment and greater access to Chinese markets and raw materials.

Meanwhile in the Netherlands a new populist, anti-immigration party led by Thierry Baudet – inevitably dubbed the ‘Dutch Donald Trump’ – became the largest party in the Dutch Senate. With European elections due in May we can certainly expect to see far more Eurosceptic MEPs returned – which perhaps explains why the EU would prefer the UK not to take part in those elections…

On European stock markets the German DAX index had a very quiet month, rising just 10 points to 11,526. The French market did better, rising 2% in March to 5,351 where it is up by an impressive 13% for the year to date. The German index is up by 9% for the first three months of 2019.

US

It’s interesting to note that as the German car industry faces its biggest-ever threat, most of my notes for the US section of the Bulletin also concern their car industry. But it is not the traditional players like Ford and Chrysler – rather it’s the new kids on the block: Tesla, Uber and Lyft.

March got off to a bad start in the US as figures showed that the US had created just 20,000 jobs in February, well below expectations of 180,000 and the lowest figure since September 2017 when employment was impacted by Hurricanes Harvey and Irma. It was therefore little surprise later in the month when the Federal Reserve announced that it does not expect to raise interest rates for the rest of this year, voting unanimously to keep the US interest rate range between 2.25% and 2.5%.

Facebook suffered its longest ‘down’ time for more than ten years as the company’s main social network plus Instagram and message-sharing were all down for 14 hours. Meanwhile Levi’s – a company that has been around for rather longer than Facebook – returned to the US stock market and saw its shares leap by 32% on the first day of trading.

But the really interesting news was in the car industry as ride-sharing app Lyft made its stock market debut valued at $24bn (£18.5bn), making it the biggest IPO since China’s Alibaba. However, that figure will be dwarfed when Uber comes to the market, with early indications that the ride-sharing company – which is still losing billions of dollars – will be valued at around $120bn (£92bn). With the news that Tesla is also on course to outsell BMW and Mercedes in the US, there are very clear warning signs for the traditional car industry – and for the places it is based and the people it employs.

On Wall Street the Dow Jones index had a quiet month: it finished March up just 13 points at 25,929. It is, though, another market which has done really well in the first three months of the year, rising by 11% since 1st January.

Far East

March ended with real optimism about the US/China trade talks, so it was no surprise to see China’s stock market up by 5% in the month.

At the beginning of March there was much less optimism, and some continuing tension as China temporarily stopped customs clearance for Tesla’s new M3 car.

The trade dispute had certainly taken its toll as figures revealed that Chinese exports in February suffered their biggest fall for three years – down nearly 21% on the previous year.

Unsurprisingly, the Chinese government looked to domestic demand to counter this, unveiling a raft of tax cuts. China’s de facto number two, Li Keqiang, warned that the country faced “a tough struggle” as he laid out plans to bolster the economy. Opening the annual session of China’s parliament, he forecast slower growth of 6% to 6.5% this year, down from the 2018 target of 6.5%. He duly unveiled plans to boost spending with tax cuts totally $298bn (£229bn).

Meanwhile the soap opera around Chinese telecoms company Huawei rumbled on as the US told Germany to drop the company, warning that any deal to let Huawei participate in the German 5G network could ‘harm intelligence sharing.’ Huawei continued to deny that their products posed any security threat, and had the last laugh as figures for 2018 showed that their sales had passed $100bn. Total revenues were 720bn yuan ($107bn £82bn) with profits up by 25%.

The Shanghai Composite Index’s 5% rise meant that it closed March at 3,091 where it is up by an impressive 24% for the year to date. The Hong Kong Market was only up 1% in the month to 29,051 but is up by 12% for the first quarter of the year. The Japanese and South Korean markets turned in much more subdued performances, falling by 1% and 2% to end the month at 21,206 and 2,141 respectively. For the first three months of the year Japan is up by 6% and South Korea by 5%.

Emerging Markets

March was a relatively quiet month for the Emerging Markets section of the Bulletin with two of the major markets we cover unchanged in percentage terms. The Brazilian stock market closed the month down just 169 points at 95,415 while the Russian market managed a gain of just 12 points to 2,497. However both markets have done well in the first quarter of the year, with the Brazilian market up by 9% and Russia up by 5%.

It was a much better month for the Indian stock market, which rose 8% to close March at 38,673. It is up by 7% for the first quarter of the year.

And finally…

Gloucestershire pensioner Stephen Mckears was baffled. Every night he left a few things out on his workbench (in his garden shed, where else) and every morning they were neatly back in their plastic tub.

It wasn’t Mrs Mckears doing some late night cleaning and neither was it a friendly neighbourhood ghost. So what was it? Questioning his own sanity, Stephen set up a camera in his garden shed with the help of a neighbour.

He discovered that a mouse was tidying his workbench. Whatever Stephen left out, the mouse duly tidied away in the plastic tub. “I’ve started calling him Brexit Mouse,” quipped Stephen, “As he’s stockpiling things for Brexit!”

Sadly, all too many of us are addicted to the occasional McDonald’s and, to help us with our choice, the chain has just spent $300m (£227m) on an Israeli technology company that specialises in artificial intelligence. According to McDonald’s CEO Steve Easterbrook “It [the AI] can know the time of day and it can know the weather” thereby helping the chain serve the right food for both the time of day and the weather.

Now call us old-fashioned but we wonder whether you really need to spend over £200m to know that you should take the breakfast menu off at three in the afternoon.

Maybe we’re wrong…