We’ve moved! Click here to view our most recent content!

Set Regional Preference
Required Field*
Set geographic preferences to highlight topics of greatest interest of you, written in your base currency.


Aon Retirement and Investment Blog

Weekly Update - 04 April 2016 (UK/Europe)


  • Sample Annuity Rates. Monthly update for pricing of annuity purchases as of 29 February 2016.
  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health.


  • Global equities had a mixed week, with notable differences between regional returns. Global markets rallied early in the week, driven by dovish comments from the US Federal Reserve (Fed), before partially reversing towards the end of the week due to falling energy prices. The MSCI AC World Index rose by 0.7% in local currency terms and 0.9% in sterling terms. The US was the best performing market in both local currency (1.9%) and sterling terms (1.6%), helped by positive economic data; the manufacturing sector in particular showed signs of stabilisation. Japan was the worst performing market in both local currency (-4.0%) and sterling terms (-4.1%) as economic data disappointed and the Bank of Japan’s quarterly tankan survey indicated deteriorating business confidence.
  • UK nominal gilt yields fell across all maturities. The 10 year UK gilt yield was 3bps lower at 1.42% and the 20 year UK gilt yield fell by 3bps to 2.15%. The 10 year US treasury yield fell by 10bps, finishing the week at 1.79% as the comments from the Fed eased fears of near-term interest rate hikes. European government bond yields fell; German bund yields fell by 3bps to finish the week at 0.14% and French government bond yields fell by 7bps to finish the week at 0.39%.
  • UK real yields fell over the week. The 20 year real yield fell by 3bps to -0.92% and the real yield on the Over 5 year index finished the week 1bp lower at -0.96%. 20 year breakeven inflation fell by 1bp to 2.99%.
  • Credit spreads were mixed over the week. The US high yield bond spread over US treasury yields was 12bps higher at 705bps while the spread of USD denominated EM debt over US treasury yields finished the week 2bps lower at 406bps. The sterling non-gilt spread over government yields (based on the Merrill Lynch index) was unchanged at 151bps.
  • The S&P GSCI fell by 3.5% in USD terms over the week. The energy sector fell by 5.9% with the price of Brent crude oil falling by 2.8% to USD 39/BBL and WTI crude oil falling by 7.3% to USD 35/BBL, as Saudi Arabia commented that the country is unwilling to cut production. Industrial metals marginally rose by 0.4% over the week despite copper prices declining by 2.4% to $4,860/MT. Agricultural prices were 0.9% lower and gold prices fell by 0.7%, finishing the week at $1,212/ounce.
  • Sterling strengthened against the US dollar and the yen, but weakened against the euro. The US dollar depreciated by 0.3% against sterling, ending the week at $1.42/£. The euro rose by 1.3% against sterling, finishing the week at €1.25/£. The Japanese yen appreciated against the US dollar by 0.2%, ending the week at ¥112/$.


  • US economic data was encouraging. The jobs report revealed that nonfarm payrolls increased by 215,000 in March, below February’s increase but better than expected. Wage growth also picked up, reaching 2.3% for the year to March, but the unemployment rate ticked up slightly to 5.0%. Housing market data was also strong; the S&P/Case-Shiller 20-City house price index rose by 0.8% over January, ahead of the 0.7% growth expected by analysts. Pending home sales rose by 5.1% over the year to February when analysts had expected a small fall. The manufacturing ISM rose to 51.8 in March, a substantial jump up from February’s sub-50 reading, and beating the consensus estimate of 51.0. Lastly, the core PCE index, the Fed’s preferred measure of underlying inflationary pressures, rose by 1.7% in February, slightly below consensus but the same as the previous month.
  • In the UK, the dataflow was slightly positive on balance. The final release of fourth quarter GDP contained a small upward revision to growth to an annual rate of 2.1% from 1.9%. However, the headline grabber from the report was the estimate of the current account deficit, which ballooned to a record £32.7bn in Q4, or 7% of GDP. Such a large shortfall in trading income from abroad was quickly pounced on by politicians on both sides of the debate regarding Brexit and, whatever the arguments, it is clear that the data will be increasingly scrutinised in the run up to the June referendum and we should expect volatility in markets as a result. Elsewhere, the Nationwide house price index beat consensus expectations with an acceleration in price growth from 4.8% year-on-year to 5.7% in March. Finally, the Markit manufacturing sector purchasing managers’ index (PMI) edged higher in March to 51 from 50.8 but disappointed expectations of an increase to 51.2.
  • In Europe, the data continued to point to moderate recovery. Consumer price inflation was estimated to have remained negative in March, albeit with some slight improvement – the annual rate rose from -0.2% to -0.1%. More encouraging was core inflation (which excludes volatile food and energy components), which rose to 1% from 0.8%. In Germany, the various regional CPI reports accumulated to an overall EU harmonised inflation figure of 0.1%, up from -0.2%, beating expectations. Overall, nothing to write home about but it will be interesting to see how, or if, the data react in the coming months to the recently introduced fresh monetary stimulus by the European Central Bank.
  • Japanese economic data had a weak tone over the week. The widely watched Q1 2016 tankan survey painted a weak picture across manufacturing and non-manufacturing sectors. The large manufacturing index fell to 6 from 12, the lowest level since June 2013. The jobless rate edged higher to 3.3% in February from 3.2% in January. Consumption data was mixed; overall household spending rose by 1.2% over the twelve months to February, but retail sales over the same period rose by 0.5%, lower than the 1.6% rise penciled in by analysts. Industrial production contracted by 6.2% over February, more than offsetting January’s 3.7% rise, and the biggest contraction since March 2011.
  • Chinese economic data was also fairly positive. The Caixin manufacturing PMI for March rose to 49.7 from 48.0, ahead of consensus. This was accompanied by a rise in the official manufacturing PMI to 50.2. Lastly, the Westpac-MNI consumer sentiment index rose to 118.1 in March.

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs.Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case, nor should it be treated as investment advice. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal or investment advice. Please consult with your independent professional for any such advice. The blog content is intended for professional investors only.

Share:Add to Twitter Add to Facebook Add to LinkedIn   Print