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December Market Commentary

By December 2, 2015February 12th, 2019No Comments


November brought us the Chancellor’s Autumn Statement and Spending Review in the UK – and rather more tragic events abroad. Friday November 13th saw the massacre in Paris, which was inevitably followed by an escalation in the bombing of ISIS in Syria.

World stock markets inevitably fell in the wake of the Paris attacks, but overall it was a mixed month for the major world markets. For once in 2015 there were no dramatic movements, either up or down. Overall economic activity continues to be depressed, largely due to the continuing weaker demand from China. One indication of the weaker demand is the current record oil glut, which currently stands at some 3bn barrels: this seems likely to keep oil prices low well into next year.


The Chancellor delivered his Autumn Statement on November 25th: this year it also included the Government’s Spending Review, setting out the plans for spending until 2020. As expected, George Osborne confirmed his determination to deliver a surplus by the end of this parliament – and several Government departments suffered significant cuts to their budgets. There were however, no cuts to tax credits. The Chancellor had been expected to ‘trim’ the plans which had been so heavily defeated in the House of Lords: instead he performed a complete U-turn in a speech some commentators saw as ‘the end of austerity’.

In the wider economy the month had started with good news for UK manufacturing, the figures for October suggesting the sector had enjoyed its best month for more than a year. The Purchasing Managers’ Index was up significantly (from 51.8 in September to 55.5) which indicates increased confidence. Output also rose by 0.8%.

There was also good news on jobs. UK unemployment fell to a seven year low of 5.3% in the three months to September, whilst the number of people in work rose to 31.21m – 177,000 more than the April to June quarter and an increase of 419,000 on the same period last year.

UK inflation remained negative at -0.1% in October, and the Bank of England pushed the long awaited increase in interest rates even further into the long grass. The Bank said that the outlook for global growth had weakened and this had ‘depressed the risk of inflation.’ Hence no rate rises until the second quarter of 2016 – and possibly even later.

The month ended with ‘Black Friday’ – the supposed retail bonanza which would set the tills ringing up and down the national high street. Police forces warned retailers to make sure they had enough staff – obviously including security staff – to handle the expected surge of rampant bargain hunters. In the event the burly men with walkie-talkies spent the day twiddling their thumbs as the shoppers staggered out of bed and straight to their laptops to shop online. “Shoppers not prepared to stand in line,” said the BBC, reporting the remarkably obvious.

Little wonder that M&S reported sales and profits down for the six months to September, whilst Tesco boss Dave Lewis warned retailers faced a “lethal cocktail” of falling demand and higher costs.

Rather more cheerful were the good people of Wolverhampton as Jaguar Land Rover announced plans to double the size of its site near the town and hire hundreds of new workers, as it invested £450m into its engine manufacturing centre.

How was all this reflected on the stock market? With barely a whimper is the answer. The FTSE-100 index of leading shares started November at 6,361 and ended the month precisely five points lower at 6,356 – still 3% lower than the level at which it started the year.


Obviously the events in Paris dominated the European news agenda in November, and it was no surprise when a survey conducted after the attacks suggested they would have a negative impact on the French economy.

There were conflicting views of the wider European economy, as the EU suggested that the Eurozone was set for “a modest recovery” over the next two years, with growth of 1.9% this year, 2.0% in 2016 and 2.1% in 2017.

However, the left-leaning think tank The Institute for Public Policy Research suggested that high levels of unemployment and ‘under employment’ risked becoming entrenched unless there was an increase in productivity.

There was certainly no increase in productivity in Germany, as the economy slowed in the third quarter of the year. It grew by 0.3% in the July to September period, compared to 0.4% for the previous quarter. Again, the slowdown in China is largely to blame for this, as German imports grew by more than exports (although the country still recorded a €22.9bn trade surplus for September, up from €21.6bn a year previously).

The French economy also grew by 0.3% on the third quarter – although this marked an increase from the zero growth recorded in the second quarter.

In individual company news we saw the least surprising headline of the year, the BBC reporting that, ‘VW sales fall on emissions scandal’.

Despite the mixed news on the economy the German stock market enjoyed a good month in November, rising by 5% to close at 11,382. The French market was up just 1% to 4,958. Down among the economic also-rans Greece secured a deal to release the latest tranche of its bailout cash – €2bn in loans and up to €10bn of support for its banks – but still saw its stock market fall another 9% in the month to 635.


No country produces more conflicting and confusing economic data than the US. November was no exception as the world’s biggest economy (for now) continued to move away from its traditional industries.

In direct contrast to the UK, the US reported gloomy news for the manufacturing sector, which grew at its slowest pace for more than two years in October. The Institute for Supply Management recorded a fourth consecutive month of declining factory activity. Blame was laid firmly at the door of the strong US dollar, which had ‘hurt exports and caused a number of job losses across the country.’

No such gloom at Facebook, which reported a big jump in third quarter profits on the back of increased advertising sales, or for the owners of the ever-popular Candy Crush. The company which makes it, King Digital Entertainment, was bought by US game company Activision Blizzard (World of Warcraft, Call of Duty) in a deal worth $5.9bn. Welcome to the new economy, ladies and gentlemen.

There was, though, one significant piece of news from the old economy as pharmaceutical giant Pfizer bought botox-maker Allergan for $160bn in a major deal for the industry.

Despite the bad news from manufacturing, there was good news for US jobs as the economy added 271,000 jobs in October – well ahead of the 185,000 economists had forecast. This increased speculation that the Federal Reserve would finally raise interest rates in the near future.

The news on jobs didn’t, however, translate into a boom for US retail: the figures for October were disappointing, stoking fears that lower retail spending in the fourth quarter could hold back economic growth – and early indications are that US consumers also went online for their Black Friday shopping, forsaking the mall for their living rooms.

Wall Street reacted to all this news with a shrug. The Dow Jones Index had opened November at 17,664: it closed the month at 17,721 for a rise of just 57 points.

Far East

Let’s start with the obvious news: Chinese manufacturing contracted for the third month in a row, and there seems little sign of an upturn any time soon.

There was better retail news as Chinese e-commerce giant Alibaba smashed all records for ‘Singles’ Day’ (held every year on 11th November) as sales increased 60% from last year to $14.3bn. In contrast the sales for ‘Cyber Monday’ in the US were just $1.35bn.

However, these good retail figures shouldn’t be taken as proof that the Chinese economy is recovering. The Japanese economy certainly isn’t, as figures confirmed that it had contracted for the second quarter in succession – thereby pushing the country officially into recession.

Despite this the Japanese stock market has continued to perform well, and shares reached a 3 month high in November. The market finally closed the month at 19,747 – up 3% in the month and 13% since the start of the year.

The Chinese market fared less well, with the Shanghai Composite rising just 2% to close at 3,445. Worryingly, the market dropped 5% in one day near the end of the month as several brokerage firms came under investigation for possibly breaking market rules. China’s biggest brokerage, Citic, apparently has an ‘error’ in its figures of $166bn. Many of us in business have known the frustration of adding up a column of figures and finding that you’re a few pence or a few pounds out. $166bn is a rather different matter…

The other two major markets in the Far East that we report on both fell in November. Hong Kong was down by 3% to 21,996 whilst the market in South Korea declined by 2%, to end the month at 1,992.

Emerging Markets

It was a mixed month for the major emerging markets. Both India and Brazil saw their markets fall by 2% during November, to 26,146 and to 45,120 respectively. Russia, by contrast, enjoyed a good month with the stock market there rising by 3% to close at 1,771.

In other news from emerging markets around the world, Argentina has a new government, with President Mauricio Macri committed to a conservative agenda of government cuts and welfare reform.

Meanwhile Morocco announced a giant solar power project to bring electricity to 1m people. The solar thermal plant at Ouarzazate will ultimately supply power for 20 hours a day, as part of Morocco’s pledge to get 42% of its electricity generation from renewables by 2020. The UK, in contrast, is committed to just 30% by the same date. Then again, there is rather more sunshine in Morocco than in the UK…

And finally…

November was a great month for the ‘and finally’ section of this Bulletin. Chinese billionaire Liu Yiqian bought Modigliani’s ‘Reclining Nude’ painting for the small matter of $170m and popped the purchase on his Amex card, thereby earning enough air miles to secure free first class travel for the rest of his life.

Even more exciting though was the news that the US Government finally looks ready to relax its decades-old ban on the import of haggis. The delicacy could be back on the menu in the US by 2017, food containing sheep lungs – a key ingredient in haggis – having been banned since 1971.

We always try and end the Bulletin on a cheerful note – so for those of you who like nothing better than a tasty sheep’s lung, Burns’ Night will be on Monday January 25th.

…By which time we hope you will have had an enjoyable Christmas and New Year. Our very best wishes for the festive season, and our next bulletin will be with you in the first week of January.