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 - 03 May 2016 (UK/Europe)



  • The DC Decumulation Challenge: A Global View.  While the growth and development of defined contribution plans vary from market to market, every country and plan provider is challenged with how best to guide plan participants in converting their accumulated plan savings into income that will support them in retirement. This webinar will consider the objectives and typical trade-offs involved, and provide a truly global view into how different countries are approaching this challenge, and provide real-time insights from our global Aon Hewitt Thought Leaders and clients on how they are thinking about and taking on this challenge. This webinar will provide food for thought that will help you navigate the optimization of plan features that efficiently address decumulation, from plan design through to retirement readiness. Register today by selecting the session you would like to attend.


  • Global equity markets fell over the week driven by weak US GDP growth data and disappointing corporate earnings reports. The MSCI AC World Index fell 1.6% in local currency terms and 2.4% in sterling terms. Developed Asia Pacific ex Japan fell the least in local currency terms (-0.7%). After two weeks of outperformance, Japan was the worst performing region in local currency terms (-5.0%) as the Bank of Japan (BOJ) disappointed investors by keeping monetary policy unchanged, which renewed yen strength. The UK was the best performing region in sterling terms (-1.1%). MSCI AC World Asia Pacific ex Japan was the worst performing region in sterling terms (-3.2%).
  • UK nominal gilt yield moves were marginal over the week, rising very slightly at shorter maturities and falling no more than a couple of basis points at longer maturities. The 10 year UK gilt yield remained unchanged at 1.60% while the 20 year UK gilt yield marginally fell by 1bp to 2.28%. The 10 year US treasury yield fell by 7bps to 1.82% on the back of a dovish statement by the US Federal Reserve and weaker than expected economic growth data. The majority of European government bond yields rose with the notable exception of Spain and Portugal. German bund yields rose 5bps ending the week at 0.28% and French government bond yields rose by 9bps to 0.57%.
  • UK real yields were broadly unchanged over the week. The 20 year real yield fell by 1bp to finish the week at -0.80% and the over 5 year real yield was unchanged at -0.85%. 20 year breakeven inflation fell by 3bps to 3.00%.
  • Credit spread moves were mixed over the week. The US high yield bond spread over US treasury yields was 5bps lower at 624bps while the spread of USD denominated EM debt over US treasury yields finished the week 8bps higher at 389bps. The sterling non-gilt spread over government yields (based on the Merrill Lynch index) was lower by 4bps at 138ps.
  • The S&P GSCI rose by 3.6% in USD terms over the week. The energy sector rose by 4.4% as the price of Brent crude oil rose by 3.9% to USD 47/BBL, whilst WTI crude oil rose 7.5% to $46/BBL. Brent crude oil is now higher than at the start of the year. Industrial metals rose by 1.2% over the week as copper prices increased by 0.4% to $5,064/MT. Agricultural prices were 3.2% higher and gold prices rose by 4.1%, finishing the week at $1,292/ounce.
  • Sterling weakened against the yen and the euro. However, it continued to appreciate against the US dollar. The US dollar depreciated by 1.6% against sterling, ending the week at $1.46/£. The euro rose by 0.3% against sterling, finishing the week at €1.28/£. The Japanese yen appreciated sharply against the US dollar by 4.2%, ending the week at ¥107.00/$ following the BOJ’s monetary policy decision.


  • US first quarter GDP grew at an annualised rate of 0.5%, disappointing versus the consensus estimate of 0.7% and significantly down from 1.4% in Q4 2015. This was the worst quarterly growth rate in two years. March durable and capital goods orders also both disappointed versus their respective analyst estimates, with durable goods growing by 0.8% and capital goods growth remaining flat. Meanwhile, the core PCE index, the Federal Reserve’s preferred measure for assessing underlying inflationary pressures, rose by 1.6% over the year to March, slightly down from the previous month but in line with analyst forecasts. The Markit services Purchasing Managers’ Index (PMI) rose to 52.1, just beating analysts’ forecasts in April, and bringing the composite PMI index up to 51.7. Lastly, consumer confidence fell to 94.2 in April from 96.1 when a much smaller fall was expected.
  • In the UK, first estimates of GDP growth figures were released for Q1 2016; growth was in line with analysts’ expectations at 0.4% for the first three months of the year, but was down from the previous quarter’s growth of 0.6%. A construction slowdown and fall in industrial output were behind the decline in growth, but the service sector grew 0.6%. On an annual basis, the economy was estimated to have grown by 2.1% over the 12 months to March. In further disappointing news, business optimism and consumer confidence fell over April. In the housing sector, mortgage approvals dropped slightly from 73K to 71K when they were expected to rise, while the Nationwide House Price Index saw prices grow 4.9% over the 12 months to April, down from 5.7% the previous month.
  • There were many economic data releases in the Eurozone over the week. The first quarter GDP estimate was released and was slightly more encouraging than in the US and the UK. The economy grew by 0.6% over the three months to March, double the previous quarter and ahead of estimates of 0.4%. Growth on an annual basis was 1.6%, in line with Q4 2015. Inflation is still struggling to gain any clear momentum; headline inflation is estimated to have fallen to -0.2% in April, with core inflation falling by 0.3% to 0.7%. The unemployment rate fell from 10.4% to 10.2%, which was slightly better than analysts had expected but the rate still remains high relative to the majority of developed economies. Industrial confidence improved, as did confidence in the service sector with the overall business climate indicator edging up, despite not quite reaching the level economists predicted.
  • Japanese economic data had a mixed tone over the week. Japan technically entered deflation as CPI inflation was -0.1% over the year to March, following yen strength. Core CPI, which excludes fresh food and energy, rose 0.7% over the same period, slightly lower than the analysts’ expectations of a 0.8% rise. The unemployment rate edged lower to 3.2% in March and the job-to-applicant ratio further rose to 1.30. Industrial production expanded by 3.6% in March, ahead of the consensus estimate of 2.8%. However, consumption data was weak; retail trade fell by 1.1% over the twelve months to March and household spending fell by 5.3% over the same period, in contrast to the 1.2% increase seen the previous month. Lastly, small business confidence fell to 47.8 from 48.8 in April, below economists’ expectation of 48.5.
  • In China, industrial profits rose by 11.1% over the year to March, well above the 4.7% fall seen the previous month. On the other hand, consumer sentiment fell to 117.8 in April from 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