March 2015

At last! A full house, ladies and gentlemen. For the first time since we started this bulletin all the major world stock markets moved resolutely upwards in February. Some by a little, some by a lot and some – step forward the UK – finally breaking through a previous high from the last century.

Whether this was due to good news or merely the absence of bad news I’ll leave you to judge at the end of the bulletin. February was the month when the world’s leaders couldn’t reach a compromise: when they were ‘miles apart’ when one side or other had stormed out of the negotiations, only for an agreement to be reached at the eleventh hour – usually at a few minutes to midnight… For the Greek debt crisis read the Ukraine ceasefire – and several other potential flashpoints around the world.

As most of you will know by now, Syriza, a far-left coalition, has recently taken power in Greece on a platform of re-negotiating the country’s debts. Negotiations rumbled on throughout February with both sides initially refusing to compromise. The problem for Greece though, was that they had to compromise, given that money was flowing out of the country and the Greek banks – despite a cash injection from the ECB – were in real danger of running out of money.

In the event an agreement was reached on a four month extension to the bail-out, so Greek finance minister Yanis Varoufakis and his German counterpart, Wolfgang Schauble, will be able to do it all again in June. The problem for Syriza will be selling the deal to the Greek public because the German government – wary of a potentially similar situation in Italy and Spain – will not give concessions easily.

Fighting continued in the Ukraine despite a ceasefire being agreed, and the key town of Debaltseve is now in rebel hands. Back on the streets of Moscow Boris Nemtsov, an opposition spokesman fiercely opposed to the war in the Ukraine, was murdered. Expect to hear more of the implications of this story in future bulletins…


As we’ve written many times in this bulletin, the all-time high of the FTSE 100 index of leading shares was 6,930, recorded on 30th December 1999 at the height of the dot-com boom. It took 15 years but this level was finally passed on February 24th with the index closing that day at 6,949. The FTSE finally closed February at 6,947 – up 3% in the month.

The news for the UK economy was mostly good during February. Unemployment fell to 1.86m and figures for January confirmed an £8.8bn surplus in the public finances – which would see the Government on course to reduce borrowing this year.

The Office for National Statistics confirmed that house prices had risen by 9.8% in the year to December – although there were the usual regional variations in that – and BT agreed a deal to acquire EE for £12bn.

UK inflation fell to a record low of 0.3% in January with lower food and fuel prices the main driver. Mark Carney, the Governor of the Bank of England warned that inflation could turn negative in the Spring, which would raise the spectre of deflation.

Meanwhile there were plenty of spectres for Tesco, which is now under investigation from the Groceries Code Adjudicator for unfairly delaying payments to suppliers, and for HSBC ,which was found to have helped clients ‘cheat the taxman of millions.’

Finally there was also bad news in the North Sea, where the oil and gas sector was reported to have lost £5.3bn last year. With one analyst suggesting that oil could fall as low as $10 a barrel the outlook is not good for that sector of the economy.


Europe seemed to be at the centre of everything in February. Obviously the negotiations over Greek debts took centre stage, but German Chancellor Angela Merkel and French President Francois Hollande were also heavily involved in trying to broker a peace deal in the Ukraine. They managed to do this but, as we’ve reported above, the words ‘uneasy truce’ are something of an understatement.

There was good news for Frau Merkel when she returned home, when it was confirmed that Germany had recorded a record trade surplus of €21.8bn in December as exports rose 3.4% in the month and imports dropped by 0.8%. This gave Germany an average monthly surplus of €18.2bn for 2014 and the economy looks well placed to profit from the continuing low level of the euro.

Germany’s overall economic growth for the fourth quarter of 2014 was 0.7% (meaning the UK can no longer claim to be the fastest growing large economy in Europe). This contrasted sharply with France, where the economy only grew at 0.1%.

Not surprisingly, business confidence in Germany is at a 12 month high: Volkswagen, for example, saw profits in 2014 climb 21% to €10.8bn. It warned of ‘tough challenges ahead’ but still expects revenue to rise by 4% in 2015.

On the stock markets the news was unremittingly good. The German DAX index was up 7% to close February at 11,402 and the French market was up 8% at 4,951. The star performer though was Greece – their market rose 22% in February as the bailout extension was agreed.


As it was in the UK, so it was in the US. On 25th February Janet Yellen, the Chairman of the Federal Reserve said that the Fed could – and would – be ‘flexible on setting interest rates.’ The markets took this as a signal that they would stay low for some time and both the Dow Jones and the Standard & Poors 500 Index went to record highs. The Dow finally finished February at 18,133 – up 6% in the month.

This was no surprise, considering the good news from the jobs market. Figures for January confirmed that 257,000 jobs had been added in the month and the numbers for November and December were also revised sharply upwards. January was the 11th consecutive month in which more than 200,000 jobs were created – the best run since 1994 and clear evidence that the recovery in the US is continuing.

…And good news was also continuing at Twitter as the shares soared on the back of a continued rise in ad revenues, which were up 97% to $479m in the fourth quarter. Of course, the company still isn’t doing anything as old-fashioned as making a profit – but losses for the quarter were ‘only’ $125m compared to a loss of $511m in the same quarter last year. Traditionalists look away now…

Far East

So much for all the talk of all-time stock market highs: we always need to remember Japan, where the Nikkei Dow peaked at 38,957 on December 29th 1989. Nothing like that level has been seen since and the index has spent plenty of time below 10,000. Nevertheless, the market hit a 15 year high in February as the trade deficit halved on lower oil prices and a strong rise in exports. The market finished February up 6% at 18,798.

There was a less dramatic rise in China – the market was up 3% in February to 3,310 – but the real headlines there were made by the trade surplus. The figures for January showed a record surplus of $60bn, up from $49bn in December and almost double the figure for January 2014. Interest rates were cut to 5.35% and inflation eased to a five year low.

South Korea also saw its trade surplus increase in January – up to $5.53bn – and the market responded with a 2% rise to close February at 1,986.

Hong Kong very nearly let us down for the full house, but fortunately the market shrugged off concerns about another round of pro-democracy protests and managed to finish February up 1% at 24,823.

Emerging Markets

Despite the continuing tension in the Ukraine and the ever-present threat of increased sanctions from the EU, the stock market in Russia has performed strongly in recent months. It was up a further 7% in February to close at 1,759 and is up more than 25% in the last six months, despite the fall in the oil price.

The Indian market did less well in February, rising by only 1% to 29,361. Nevertheless the economy continues to grow strongly, recording growth of 7.5% in the last quarter of 2014 – a faster rate of growth than that seen in China.

The real star among the major emerging markets we report on was Brazil, where the stock market rose 10% in February to 51,583. It is still well down on the 61,288 which it hit in August of last year, but at least it seems to be moving in the right direction again.

And finally…

We reported recently on the huge profits recorded by Apple. Their latest product that we’ll soon discover we can’t live without is the Apple watch. CEO Tim Cook was extolling the health benefits of the watch and, in particular, the way it prompts you to get up and move around. Ten minutes before the hour it will remind you to move. “We have a lot of people using the watch at Apple and suddenly – at ten minutes before the hour – they all get up and move,” reported Mr Cook.

As you know, all of us in the office are absolutely committed to our fitness and naturally we’ll all be buying an Apple watch. So if you ring at ten to the hour and we don’t answer the phone you’ll know the reason why…

March 2015 Market Commentary Sources

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