Written by Ashwin Gurung
Last week was a negative week for global equities, as the MSCI All Country World Index of equities fell by -0.7% in GBP terms. While the index performed well in local currency terms, returning +0.3%, a stronger Pound Sterling reduced returns when converted to GBP. Meanwhile, it was a positive week for fixed income, with the Bloomberg Global Aggregate GBP Hedged Index delivering a +0.5% return in GBP terms, as interest rates declined.
In the UK, mergers and acquisitions activity continues to rise, with both domestic and overseas companies targeting UK-listed businesses they see as attractively priced. Last week, Aviva had a bid for Direct Line rejected, while US private equity firm Fortress Investment Group offered £338m to acquire Loungers, a café and restaurant chain. Australia’s Macquarie also joined the activity, bidding for UK-listed waste management firm Renewi. On the other hand, Just Eat announced plans to delist from the UK stock exchange by year-end and trade exclusively in Amsterdam, citing “administrative burden, complexity, and costs,” as well as “low liquidity and trading volumes.” This highlights the challenges the UK government faces in restoring its reputation as a business-friendly hub. Nonetheless, we continue to see significant value in the UK market, both on an absolute basis and relative to other regions.
In the US, incoming President Donald Trump announced plans to impose 25% tariffs on imports from Mexico and Canada, along with an additional 10% tariff on imports from China. This move impacted companies that rely on cross-border trade. However, investors welcomed the appointment of Trump’s new Treasury Secretary, Scott Bessent who is a veteran hedge fund manager and who is expected to prioritise economic stability and inflation control with a more balanced approach to tariffs. The Federal Reserve’s preferred inflation gauge showed a 0.3% increase from the previous month in October 2024, in line with expectations.
Meanwhile, in France, the government coalition is facing collapse after Prime Minister Barnier received strong opposition to his latest budget proposal. Barnier had planned to reduce the country’s debt by €60bn through spending cuts and tax increases but has now backed down on a proposed electricity tax hike. Marine Le Pen, leader of the far-right National Rally, is expected to back a no-confidence vote, which could lead to the government’s collapse.
In Japan, the Japanese Yen strengthened over the week due to increased demand for safe-haven currencies amid rising geopolitical risks. Higher-than-expected inflation, with the Tokyo-area core consumer price index (CPI) rising 2.2% on a year-over-year basis, also supported the Yen, raising expectations of another interest rate hike by the Bank of Japan. While the stronger Yen was positive for GBP-based investors, it had a negative impact on Japan’s export-driven industries. The MSCI Japan index ended the week flat in GBP terms.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 2nd December 2024.
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