Last week was broadly positive for markets, with the MSCI All Country World Index of global stocks rising +1.3% in GBP terms. This was led by UK Equities, as well as Emerging Market names in the Asia Pacific region. Within Fixed Income, higher risk bonds outperformed higher quality bonds.
The Bank of England’s Monetary Policy Committee met on Thursday and voted to leave the base interest rate at 0.10%, to maintain monetary stimulus for the recovering economy. Whilst these outcomes were unsurprising, there have been increased calls from members of the Committee to roll back the support for the economy sooner, citing building inflation pressures observed both in the UK as well as abroad.
An economic event of greater consequence took place on Friday, when data on US non-farm payrolls was released for July. These showed that the US economy added 943,000 jobs for the month, which was more than the 870,000 predicted by economists polled by Reuters. This data is illustrative of an economy that is recovering briskly, adding further pressure on the Federal Reserve to begin “tapering” their purchases of government bonds and mortgage back securities sooner than the market currently anticipates. Central banks across the world are walking the tightrope between ensuring the economy has adequate support versus not allowing inflation to run out of control.
