MONTHLY MARKET INSIGHT

SEPTEMBER 2013 KEY TOPICS TO WATCH (SEP)

Eurozone ECB announcement (5th) US Non Farm Payrolls (6th) US FOMC meeting (17th -18th) UK BoE minutes (18th) UK GDP Q2 Actual (26th) US Housing and mortgage data Syrian conflict escalation German presidential election (22nd) Eurozone continued PMI growth

U.S. FUNDAMENTAL OVERVIEW

It is impossible to objectively give a summary about the US fundamental outlook without mentioning the ongoing debate over Fed quantitative easing (QE) tapering. Over recent months this subject has evolved from speculation into a full statement of intent to start reducing the $85billion QE programme before the end of the year. There is a belief that this will start from September, however it is more likely that the September FOMC meeting (Sep 17-18) will see the release of the overall plan, which may still feature some leeway to accommodate for further confirmation of key inflation and unemployment metrics. These figures have been unconvincing with low quality and inconsistent job creation and inflation that has only just met 2% targets. The method of tapering is still hotly debated with a split rate of tapering, starting with treasury bonds moving onto the more sensitive Mortgage Backed Securities at a later date likely. This is due to the inherent weakness shown in housing based indicators in Q2. Removing an inflationary factor for housing stocks and overall consumer wealth could exacerbate the decline in the Dow seen in August and see an element of contagion to other areas of the economy. There are now fewer Fed detractors who believe that the scale of economic recovery that would legitimately end the QE programme has not materialised or has not been sustained over a long enough time period. Fewer detractors tapering a done deal politically regardless of the economic situation.

DOW JONES (AUG 2013)

15,800.00 15,600.00 15,400.00 15,200.00 15,000.00 14,800.00
14,600.00 14,400.00 14,200.00

Aug 1 Aug 2 Aug 5 Aug 6 Aug 7 Aug 8 Aug 9 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 19 Aug 20 Aug 21 Aug 22 Aug 23 Aug 26 Aug 27 Aug 28 Aug 29 Aug 30

FTSE 100 (AUG 2013)

6,750.00 6,700.00 6,650.00 6,600.00 6,550.00 6,500.00 6,450.00 6,400.00
6,350.00

There has been sustained confidence in manufacturing confidence with August PMI figures nearing yearly highs. Global market demand conditions remain uncertain with consistently poor orders for US durable goods showing that PMI confidence is yet to fully materialise. August consumer confidence has also increased to the highest level in two years; buoyed by positive stock earnings growth in Q2 and reflected in steady July retail sale increases all of which could have a positive impact on Q3 GDP. US Equities still remain in an overbought state and current technical analysis creates confluence with the fundamental picture, leading to an assumption that a significant market correction (downward) is due.

6,300.00 6,250.00
6,200.00

Aug 1 Aug 2 Aug 5 Aug 6 Aug 7 Aug 8 Aug 9 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 19 Aug 20 Aug 21 Aug 22 Aug 23 Aug 26 Aug 27 Aug 28 Aug 29 Aug 30

DAX 30 (AUG 2013)

8,500.00 8,400.00

EUROPEAN FUNDAMENTAL OVERVIEW

The Eurozone is under constant political pressures from bailout nations that can emerge almost sporadically especially around bailout repayment time. These negative pressures on Euro bourses have been diminished for the time being as the Eurozone has taken the first steps in recent months towards a sustainable recovery. Although August saw a slight retraction in growth rates, the key economic indicators for Germany (often regarded as the powerhouse of the Eurozone) are still broadly improving with this has reduced uncertainty regarding the German elections (Sep 22) with Angela Merkel likely to serve a second term. Germanys resurgence is due in part to the recovery of other European nations who are key trade partners. The Eurozone as a whole showed a rebound from 6 months of contraction with Q2 GDP predicted at 0.3%. Italy, Netherlands and Spain still showed contraction with Italy experiencing its longest recession in history. No doubt this is influenced (in Italy and Spain at least) by the crippling unemployment situation that threatens the long term recovery of the Eurozone beyond 2013. The UK has also seen key economic indicators improve over the course of 2013 adding to the European resurgence. Although aided by a QE programme that is set to continue until unemployment is below 7%; manufacturing, retail and service growth have been particularly strong. QE comments from the US and UK have weighed upon the FTSE in August, however the decline is not as sharp as the US owing to the positive data from the UK and to an extent the Eurozone. This article does not constitute as investment advice.

8,300.00

8,200.00

8,100.00

8,000.00

7,900.00

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