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Brewin Dolphin – Markets in a Minute Update 26/05/2020

Please see this weeks ‘Markets in a Minute Update’ from Brewin Dolphin:


Global shares mostly rallied last week on hopes of a vaccine and continued lifting of lockdowns. In the UK, the FTSE100 nudged through the 6,000 mark for the first time in three weeks, before falling back on Friday as tensions between the US and China flared up once again.

Last week’s gains*
• FTSE100: 3.4%
• Dow Jones: 1.7%
• S&P500: 1.44%
• Dax: 3.65%
• Nikkei: 1.44%
• Hang Seng: -3.4%
• Shanghai Composite: -2%

Most markets in Asia closed up yesterday and were heading up today – even Hong Kong where the Hang Seng closed up by 1% on Monday. In early trade on Tuesday, most global markets were making solid gains due to optimism caused by more easing of lockdowns.

*Data to close on Friday May 22

US/China tensions

Last week China proposed the imposition of national security laws from Beijing in the special administrative region of Hong Kong, restricting freedoms of speech and the press. This move has increased worries about threats to democracy in Hong Kong that had formerly only really been subdued by the onset of social distancing. This has caused protests from the US and threats of retaliation, as well as public protests in Hong Kong by pro-democracy demonstrators. The Hang Seng, fell last week as a result. China will vote on the proposed legislation on May 28.

Trump has promised retaliation

President Trump said he would respond very strongly to what he sees as an assault on democracy in Hong Kong. He is most likely to consider tariffs, although he will be mindful of whether that is in his interests ahead of the US election in November. One conciliatory note from Premier Li Keqiang was a continued commitment to the phase one trade deal reached last year, but we are sceptical that China can really abide by its terms.

Even so, most Asian markets rose yesterday, with the best gains in Japan, as expectations increased that the nationwide state of emergency will soon be lifted.

Stimulus news

The Bank of England has raised the prospect of negative interest rates for the first time. It has said the policy is under “active review”.

Bank of England MPC member Sylvana Tenreyro was probably the most outspoken of a number of MPC members, who coalesced around the position that negative interest rates could be considered in the UK. Tenreyro cited Europe’s experience with negative rates as demonstrating that they have a powerful effect on real activity, but nobody outside the MPC seems to agree. However, with Governor Andrew Bailey and Chief Economist Andy Haldane insisting that negative rates could be considered, we have to take them at their word, although market pricing reflects only a slim chance that negative rates could be introduced in 2021.

Premier Li Keqiang also suspended China’s growth target to facilitate a shift towards job creation as a priority. China’s GDP target had low credibility anyway, with the eventual GDP report assumed by all to be massaged to fit with the target rather than the other way around.

Stimulus news in Europe was more positive, albeit only tentatively. Progress on a €500bn aid package crept forwards as Germany reached an agreement with France that the aid could take the form of grants, funded by debt and secured on the EU budget. To finally ratify such an approach will need the consent of all members and it is expected to meet resistance from other northern European states.

Economic activity may have bottomed

Backwards looking data continues to paint a bleak picture. The UK claimant data last Monday showed the number of people claiming unemployment benefit jumped by 856,000 in April, to a total of 2.1m, according to the Office for National Statistics (ONS). This implies a jump to circa 6% unemployment when April’s official rate is released. Friday’s retail sales data indicate a decline of more than 18% in April compared to March, taking us back to activity levels last seen fifteen years ago (over which time the population has grown by about 10% or 6 million people).

However, more current “high frequency” data, such as energy consumption, road traffic etc, shows activity levels are improving. Therefore, we can take heart from the fact that we are at the nadir for economic activity and the path ahead is very likely one towards recovery from here.

Capital and income from it is at risk.
Neither simulated nor actual past performance are reliable indicators of future performance.
Performance is quoted before charges which will reduce illustrated performance.
Investment values may increase or decrease as a result of currency fluctuations.
The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

These updates from Brewin Dolphin provide a good weekly ‘snapshot’ look at the markets which is useful given the current volatility we are currently experiencing.

We try to capture a wide range of fund managers and investment experts opinions such as Brewin Dolphin to give you an overall consensus view of the current climate we are in.

Andrew Lloyd


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Legal & General Update: The role of politics in a potential second wave

This piece is cut and pasted from an investment update from Legal & General Investment Management today (18/05/2020):

  The role of politics in a potential second wave
Media and investor attention has been drawn to the experience of the so-called ‘early easers’ of lockdowns, and so far the news has been quite good. There have been some localised outbreaks, but no material evidence yet of full-force second waves of COVID-19 emerging in countries like Austria, Korea and Germany.

That said, those countries all had manageable caseloads when paring back their restrictions – unlike the US, where active cases per capita are running around five times higher than they were in the early-easing countries at the time they began to unlock. Some American states that are relaxing stay-at-home guidance run serious risks of a secondary outbreak, especially with no contact tracing in place.

Looking deeper into the US, we see further evidence that the country should not be treated as one when it comes to the virus’s spread. Hospitalisation rates, which acted as a good leading indicator in Italy, are coming down in New York and New Jersey. But in much of the rest of the country, they are both high and consistent, implying those states have not passed their COVID-19 peaks even as they start to unlock.

Interestingly, the level of mobility in each state – an indicator of how serious lockdown measures are – is highly correlated with Trump’s vote share in the 2016 election, with the most Republican states the least locked down. Conversely, lockdown levels and hospitalisation rates show no relationship whatsoever, so it is politics, not epidemiology, that’s dictating the US approach to the restrictions.

What does unlocking mean for markets? The initial reaction may be positive as it means economic activity returns, but we believe such optimism is overdone. Unlocking will be slow and individuals will be reluctant to return to their previous lifestyles any time soon. To that extent, ending restrictions not only poses a risk of a second virus wave, but a market risk, too, as investors are disappointed by the slow speed of economic recovery.

J P Morgan also flagged up the management (or lack of it) of coronavirus in the USA as a potential issue/significant risk in their market update last Wednesday afternoon.

Steve Speed


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Jupiter Coronavirus Update

Interesting input from the Jupiter Independent Funds Team below received on Friday evening 15/05/2020:

Jupiter Independent Funds Team

Data this week revealed the extent to which the government’s response to Covid-19 has left its financial projections in tatters. UK GDP in the first quarter declined by 2%, and in the month of March alone by 6%, but both only include one week of the lockdown. Second quarter figures to the end of June are likely to be closer to those projected by the Bank of England and The Office of Budget Responsibility, both of which see the economy shrinking by around 25%-30% over those three months. 

As cash flows to the Treasury reduce significantly (PAYE, business rate and VAT deferrals for companies, reduced duty income from fuel sales, air fares and property transactions, lower VAT receipts from retailers etc) but outgoings increase rapidly (e.g. the furlough and business interruption loan schemes), the Chancellor’s estimated 2020 budget deficit has blown out from £55bn at the time of the Budget in early March to £340bn and possibly even up to half a trillion pounds only 9 weeks later. The current furlough scheme to cover the 80% of the salaries of 7m employees (capped at £2500pm per person) costing £14bn per month is already more than the £12.5bn the Chancellor initially set aside in the Budget for his total Covid-19 lifeboat plan.  

We crossed the Rubicon last week in another sense too: that was the point at which more than 50% of the UK’s adult population became financially reliant on the state, either as public sector employees, or because they’re on benefits, or, now, they’re beneficiaries of the furlough scheme. The public sector has a vital role to play in society, however as harsh an observation as it might be particularly in current circumstances, that sector is not economically productive. The private commercial and industrial sectors create economic wealth and generate growth: it becomes an uphill struggle for any economy to grow when only a minority of the population is able to contribute to wealth creation (which, in circularity, includes the ability to pay for public services).

Labour’s manifesto pledge in the 2019 election to nationalise Royal Mail, the utilities, rail companies and BT’s Open Reach, and paying out PFI contractors in public services, was forecast to cost £450bn over 5 years. That would have incurred structural, long-term debt which they planned to recoup principally through higher taxes. Our present predicament which has arrived in relative terms in the blink of an eye is of the same order of magnitude but with the additional substantial headwind of a thumping great recession, the biggest in nearly a century. Within the constraints of the virus, it is not difficult to see the economic and political imperative to get the nation back in to productive employment. The Chancellor must ensure that the substantial debt the government has taken on is temporary, or at least transitory, and not structural. The longer the debt sits on the government’s balance sheet, particularly in the absence of recovery or growth, the greater the risk the international ratings agencies which assess governments’ creditworthiness take a dim view of the prospects. In that event, our national debt faces the possibility of being downgraded which immediately pushes up the cost of financing, not only for the government itself but also companies and individuals (e.g. for mortgages, car financing and credit card interest), all when the economy is least able to afford it. It is easy then to create a downward spiral. There will be difficult choices to make about how best to reduce the debt burden including cost savings and tax. But ultimately, the best way is to recover and restore growth. The state has made significant interventions to protect livelihoods as well as lives; it must now ensure that it is equally willing to let go again to ensure as far as possible that the debt burden is indeed transitory and not structural. With Labour and the Unions urging a New Social Contract, repaying the ‘debt to society’, it may be easier said than done. Time will tell!

We are living in interesting (challenging) times now but the future, how we recover and what society will look like are being impacted on by this pandemic and the response of our politicians and the people.  Hopefully, society will be fairer in future.

Jupiter Independent Funds Team manage the Merlin range of funds. 

Steve Speed


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Brewin Dolphin Update: Markets in a Minute

Brewin Dolphin emailed their weekly market update on Tuesday evening (05/05/2020) as below:

Some recovery but volatility expected to continue. These weekly market updates from Fund Managers Brewin Dolphin give you a quick update on the markets. We are giving you a range of updates from different Fund Managers at this time to give you some context and understand the markets from a consensus point of view.

Andrew Lloyd


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Brewin Dolphin Update: Markets in a Minute

Brewin Dolphin Update: Markets in a Minute

Brewin Dolphin emailed a market update on Tuesday evening (28/04/2020) as below:


As a Discretionary Fund Manager Brewin Dolphin offer a range of Managed Portfolio Services in the UK.  In keeping with our blogs over the last 6 weeks or so we seek to provide a wide range of input so that you can understand a variety of commentary and see consensus views.

Steve Speed


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The Great Glut: A historic supply and demand shock in the oil market

The Great Glut: A historic supply and demand shock in the oil market

JP Morgan posted a great article earlier this week about the current oil situation (see below);

Rising production and collapsing demand due to the COVID-19 pandemic is creating an unprecedented glut in the oil market. As a result, we are currently witnessing a pronounced supply and demand shock that has driven oil futures below zero for the first time.

At the current pace of production, the world will run out of storage for oil by the middle of the year compounding the imbalance in the market and adding to the pressures faced by producers to slash prices to sell their inventories. As a consequence, energy stocks have been the worst performer year-to-date in global equity markets, while credit spreads of sub-investment grade energy companies have widened dramatically, signaling increasing concerns about the solvency of the sector.

The major oil producing countries, known as OPEC+, have now agreed to cut production starting in May to try to avert the crisis. But will their action be enough to balance the oil market? And what are the implications for investors?

An unprecedented drop in oil demand

The COVID-19 pandemic has led to the implementation of rigorous measures globally to contain the spread of the virus. Travel restrictions, social distancing and stay-at-home orders have reduced global oil demand by an estimated 5.6 million barrels per day (mb/d) in the first quarter of 2020 compared to the same period last year. With the full force of the containment measures expected to continue into May the situation in the oil market may deteriorate further in the near term.

Peak destruction in oil demand is expected in April and May, with an average decrease of 20mb/d. Even in a scenario where global COVID-19 containment policies are gradually lifted by the end of May, the U.S. Energy Information Agency (EIA) is estimating a loss of oil demand in 2020 between 5.2mb/d to 9.3mb/d. To put this number into perspective, in 2009 – the year of the last global recession – oil demand decreased by 0.8mb/d.

Exhibit 1 shows that almost 58% of global oil demand is derived from fuel for transportation. The impact on demand, and thus the oil market, is significantly worse than in normal recessions because of the widespread implementation of travel restrictions, which has reduced global air traffic by 30%. Quarantine measures have also caused a significant drop in road traffic, by roughly 40%, leading to a large drop in demand for petrol and diesel.

% of total oil demand

Source: British Petroleum, J.P. Morgan Asset Management. Data shows an estimate of global oil consumption by sector for 2020 from the BP Energy Outlook 2019. Data as of 31 March 2020.

Storage capacity issues in the U.S. created a previously unknown experience of a negative price in the oil futures market. Futures for the month of May 2020 fell sharply as producers effectively paid others to take their oil inventories. Halting production is not feasible for some producers since it could permanently damage their oil fields. Giving, or paying others to take, away their oil for one month may have been the preferred option for the long run health of their business.

Record deal to cut production

The imbalance in oil markets came to the fore in early March, when Russia and Saudi Arabia couldn’t agree on production cuts. In fact, quite the opposite took place as Saudi Arabia, in retaliation, started a price war by giving rebates on their crude oil exports and announced an increase in production starting in April. However, the steep fall in oil demand and rapidly rising inventories have now convinced the world’s top producers to reverse course.

On Easter Sunday, the members of the Organization of the Petroleum Exporting Countries (OPEC) and the main non-OPEC oil producing countries (known as OPEC+) agreed to a historic cut in production to contain the oil glut. Oil production will be cut by 9.7mb/d beginning on 1 May. After that, the group will taper the cuts in July by 2.1mb/d and in January 2021 by another 2.0mb/d. The remaining 5.6mb/d cut will be in place until the agreement expires in April 2022. To put the cuts into perspective, Exhibit 2 shows the main oil producers and their level of current production.

Million barrels per day (mb/d)

Source: EIA, Refinitiv Datastream, J.P. Morgan Asset Management. 2020 and 2021 data using dotted lines are J.P. Morgan Asset Management estimates based on announced cuts. Data as of 15 April 2020.

Despite the historic size of the announcement it is only a partial step towards the drop in oil consumption as the world’s major economies grind to a halt. An immediate rebalancing of the oil market was never realistic since many higher cost non-OPEC producers would have avoided a large share of the required production cuts. Oil inventories will therefore continue to rise in the short term, likely putting further pressure on storage capacity and oil prices over the next couple of months.

If producers stay compliant to the agreement, and if the major global economies start to ease containment measures form mid-year then fuel and oil demand should start to rise and oil market fundamentals could improve in the second half of the year. However, there remains a large ‘if’.

Even if virus containment measures ease in the coming weeks, the world is going to be awash in oil for some time – economies may be slow to get back up and running to a pace that would warrant a strong increase in demand, especially when it comes to international travel.

What does this mean for investors?

Equity and credit investors in energy can expect a couple more difficult months ahead, with fundamental headwinds and challenging newsflow. Corporate earnings will likely have further to fall and preserving liquidity will remain a main task for the time being.

While sectors such as airlines, logistics and selected industrial (such as chemicals) traditionally benefit from low energy prices, they also face bigger challenges on the demand side of their businesses. Low oil prices will also put pressure on commodity-exporting emerging markets, such as Russia, the Middle East and Latin America. However, this benefits importers in Asia, especially India, whose current account deficit position could benefit from cheaper oil.

It is often in challenging times like these when the foundations of the next upswing are laid. The weak players are dropping out and exploration companies are significantly reducing their capital expenditure. Today’s cancelled projects will be missed in three years’ time. So, companies that survive the “Great Glut” may be able to look forward to a more balanced oil market in the next five years than they have experienced in the previous five.

A good update from JP Morgan giving us an insight to the current oil situation. JP Morgan have great technical and market resources available to them and continuously provide useful insights.

Hopefully now we’ll see a drop in prices at the pumps!

Andrew Lloyd


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Market Outlook and Economic Viewpoint

Market outlook and Economic Viewpoint

Market outlook and Economic Viewpoint below from Royal London’s perspective just arrived by email today (20/04/2020).

Market outlook, Trevor Greetham, Head Multi Asset Funds, RLAM

“Sustained recovery in markets will probably have to wait until there is more confidence regarding the coronavirus being under control globally, shuttered parts of the world economy are re-opened and consumer confidence rises from its lows as people are allowed to return to work. We expect our Investment Clock model to reflect this situation by moving quickly from disinflationary Reflation, with weak growth and inflation, and to Recovery as global growth recovers. We intend to make full use of our active tactical asset allocation risk budget to add to equity exposure when we judge the time is right.

Our investment process has weathered difficult markets in the past and we added significant value over the 2007-9 Global Financial Crisis. We believe a disciplined and active approach to both risk control and tactical asset allocation will be crucial in portfolios, as markets respond to the current crisis and policy responses being implemented.”

RLAM Economic Viewpoint

Even while the UK has just extended its lockdown, policymakers in a number of countries elsewhere in Europe are starting to ease social distancing measures or are planning to do so in coming weeks. What that means for their economies isn’t completely straightforward, but – taken at face value – allowing more economic activity to take place boosts GDP and employment. However, while policymakers continue to do their best to limit the damage to businesses and households so that the economy can fire up again, the strength of the recovery will – to a large degree – also depend on how confident people are that the virus (and a second wave of lockdowns) is no longer a threat, as well as depending on what is happening in other countries.

In the meantime, a wealth of recent data is making clear how big the challenge is for economic policymakers and how deep this downturn is. Jobless claims numbers in the US remained awful this week, with another week of initial jobless claims above 5 million. Many data series for March and April have now hit record lows or declined by record amounts. This week, that included the biggest one month fall in US industrial production since 1946 and a record plunge in the broad definition US retail sales measure. In China, data this week showed Q1 GDP fell some 9.8% QoQ, awful by any country’s standards, let alone China’s.

Economists do not expect consumer or business behaviour to instantly jump back to what it was once social distancing substantially eases, especially without an effective treatment and or vaccine for COVID-19. China data shows retail sales, for example, lagging the recovery there. The IMF this week forecast that the global economy will shrink by 3% in 2020, i.e. worse than 2009. However, central bank support for the economy, markets and governments has continued to step up over the last week or two, including an important expansion of Federal Reserve facilities. Fiscal packages continue to be announced, France being one of the latest economies with new expanded budget plans. Such policymaker support is essential for prospects of economic activity returning to pre-crisis levels over a few quarters, rather than several years as was the case during the financial crisis.

You can see from Trevor Greetham’s input he is waiting for opportunities to arise as markets recover and refers to the (useful) experience of 2007 to 2009 Global Financial Crisis.

Royal London run a significant proportion of pension assets and are key in the company pension scheme market in particular. Their default investment proposition is strong.

Steve Speed


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Brewin Dolphin – Scam Warning Blog

Brewin Dolphin have put this guidance in an article on their website. Unfortunately, criminals see the current crisis as an opportunity. Please take precautions and keep your cash and invested assets safe.

With the entire world focused on coronavirus (Covid-19), fraudsters are taking advantage of the situation to target potential victims.

These scams can take many forms and could be about pensions transfers or high-return investment opportunities.

Scammers are sophisticated, opportunistic and very likely to target the vulnerable. Typically, scammers use fraudulent emails, phone calls, text messages or social media posts to offer help to customers by suggesting their service or product provides a ‘safe haven’ for money, investment opportunities ‘too good to miss’ or even expert medical guidance.

Using coronavirus as a cover story, criminals can also attempt to persuade recipients to disclose personal or financial information or click on links that may contain malware.

To help protect yourself you should:

  • Reject out of the blue offers
  • Beware of adverts on social media channels and paid for/sponsored adverts online
  • Refrain from clicking on links or opening emails from senders you don’t know
  • Avoid being rushed or pressured into making a quick decision
  • Call back existing providers who call you unexpectedly
  • Refuse to give out personal details (bank details, address, existing pensions or investment details) to unexpected callers or online requests

Remember, we, your bank, the FCA or the police will NEVER ask you to transfer money or move it to a safe-haven account.

To be safe, follow the advice of the Government and UK Finance led “Take Five to Stop Fraud” campaign. If you suspect a scam, call Action Fraud straight away on 0300 123 2040.

We endorse the protective measures outlined above by Brewin Dolphin. If you think your invested assets are at risk (lost, stolen or misplaced passwords?) please let us know immediately. We can instruct pension, investment and product providers to increase security measures.

Steve Speed


Team No Comments

J.P. Morgan – Market Update

J.P. Morgan – Market Update

Please see below yesterday’s (08/04/2020) market commentary update from J.P. Morgan Asset Management who have great technical and market resources available to them:

We will continue to deliver market commentary from leading fund managers from around the country.

In the meantime, please keep safe and healthy.


Carl Mitchell – DipPFS

IFA and Paraplanner

9th April 2020

Team No Comments

Royal London Asset Management Economic Viewpoint

Investment input hot off the press from Royal London Asset Management this afternoon (06/04/2020):

RLAM Economic Viewpoint

Although there has been some encouraging news from countries where the growth in new cases has been slowing, it is clear from incoming case numbers that we are still some way off being able to contemplate easing social distancing measures in Europe, let alone the US. In the meantime, therefore, levels of economic activity remain well below pre-crisis norms.

Data has underscored the challenge facing policymakers. Over the week, the latest US weekly initial jobless claims number showed another a record jump of more than 6 million. Benefit claims have risen sharply in the UK too and incoming March survey data reflects a large hit to business activity and confidence in Europe and the US.

Economic activity data in China has improved as social distancing measures have eased and March business surveys show significant improvement. However, business surveys generally ask firms whether activity has increased or decreased, not by much. That is important in the current context where the level of economic activity is likely still significantly below pre-crisis levels. Export-related components of the surveys still signal contraction, consistent with weak global demand now holding back China’s recovery.

Meanwhile reminders that things aren’t normal, and that social easing can’t be unwound in one easy move while there is reinfection risk, came in the shape of some reversals of social easing (e.g. cinemas shutting again and lockdown being re-imposed in Jia county). In the US unemployment numbers this week highlight the scale of the challenge policymakers face in trying to limit the long-term economic damage from this crisis.

The good news is that policymakers globally continue to step up and introduce measures that improve the likelihood of economic activity being able to pick up robustly once social distancing measures ease. Again, we’ve seen measures designed to keep the financial system working (e.g. Fed’s announcement this week of a repo facility for overseas central banks), limit damage to household finances (e.g. the direct wage subsidy scheme announced by Australia at the start of the week) and keep viable businesses afloat. Other highlights included a 50bps rate cut in Canada late last Friday and a policy easing message from Chinese authorities.

Royal London are one of the key Workplace Pension providers in the UK offering innovative strong default investment options with ongoing governance.

Steve Speed