Overview – August 2014
Global equities rose in August amid generally positive economic data from the US and hopes that the European Central Bank (ECB) would implement fresh stimulus measures in view of the slowdown in industrial activity in the eurozone. At the time of writing, the ECB announced that it will purchase private sector credit, including asset-backed securities and covered bonds. However, worsening tensions in Ukraine pared gains. Developed markets performed largely in line with their emerging counterparts.
Among developed markets, US equities led gains. Sentiment improved after second-quarter GDP was revised upwards from 4% to 4.2%, mainly on an increase in investment and a reduction in imports. As well, US payrolls increased in July, led by professional and business services, and manufacturing.
Japan was a laggard, however, as industrial output and private consumption disappointed, while exports struggled to gain momentum despite the weaker yen. July core consumer prices at 1.3% also raised questions on whether the Bank of Japan can achieve its 2% inflation target by the year-end.
Looking at emerging markets, Brazil was the best performer as opinion polls suggested an increasingly competitive presidential race. Marina Silva, who was thrust into the race following the death of her former running mate Eduardo Campos in a plane crash, has narrowed incumbent Dilma Rousseff’s lead in the October elections. With the country falling into recession in the first half of the year, president Dilma’s hopes for re-election could be further dented.
The UK Investment Trust Team
Aberdeen Asset Management