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 - 09 May 2016 (UK/Europe)


  • Global Retirement Update. This update summarizes recent legislative developments and trends related to retirement and financial management and highlights recently passed and pending legislation that may require employers to take action to comply with new rules or review existing plans.
  • Sample Annuity Pricing Interest Rates. This update provides sample annuity pricing interest rates as of 31 March 2016.
  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health.


  • 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 ended lower in a holiday shortened week driven by weak economic data and mixed corporate earnings reports, but falling commodity prices also contributed. The MSCI AC World Index fell by 1.3% in local currency terms but only fell by 0.3% in sterling terms due to sterling weakness. The USA was the best performing region both in local currency terms (-0.4%) and sterling terms (1.1%). Japan continued to be the worst performing region in local currency terms (-3.3%) as the strong yen hit the exporters’ stocks. The MSCI Emerging Markets Index continued to be the worst performing region in sterling terms (-2.7%) as weak manufacturing data from China hurt mining stocks and dampened investor sentiment.
  • UK nominal gilt yields fell across most maturities following other major developed markets as global growth concerns made investors risk-averse. The 10 year UK gilt yield fell sharply by 19bps to 1.42% while the 20 year UK gilt yield fell by 14bps to 2.13%. The 10 year US treasury yield fell by 4bps to 1.78%. European Government bond yields fell, with the exceptions of Spain and Portugal, as the European Commission downgraded its growth and inflation forecasts for the Eurozone. German bund yields fell 13bps, ending the week at 0.15% and French Government bond yields fell by 5bps to 0.53%.
  • UK real yields fell over the week. The 20 year real yield fell by 6bps to finish the week at -0.86% and the Over 5 year real yield fell by 5bps to -0.90%. 20 year breakeven inflation fell by 7bps to 2.93%.
  • Credit spreads widened over the week. The US high yield bond spread over US treasury yields was 24bps higher at 648bps while the spread of USD denominated EM debt over US treasury yields finished the week 12bps higher at 401bps. The sterling non-gilt spread over government yields (based on the Merrill Lynch index) was higher by 2bps at 140bps.
  • The S&P GSCI fell by 2.9% in USD terms over the week. The energy sector fell by 3.7% as the price of Brent crude oil fell by 3.3% to USD 46/BBL. Industrial metals fell by 4.5% over the week as copper prices decreased by 4.7% to $4,826/MT, amid manufacturing slowdown across the regions. Agricultural prices were 2.9% lower and gold prices fell by 0.2%, finishing the week at $1,290/ounce.
  • Sterling weakened against all the major currencies over the week. The US dollar appreciated by 1.5% against sterling, ending the week at $1.44/£ as weak UK economic data weighed over sterling. The euro rose by 1.2% against sterling, finishing the week at €1.26/£. The Japanese yen continued its appreciation against the US dollar to touch an 18-month high, ending the week at ¥107/$.


  • The heavily watched US monthly jobs report was released last week, with nonfarm payrolls increasing by 160,000 in April. Though still a healthy increase in jobs, this is the lowest increase seen since September 2015 and came in below the consensus expectation of 200,000. The unemployment rate also marginally disappointed, remaining at 5.0% when a small fall was expected. The April ISM indices were mixed; the manufacturing index fell to 50.8, which was disappointing, but the non-manufacturing composite rose to 55.7, beating the consensus estimate. Quarterly productivity growth was estimated at -1.0% over Q1, which allowed unit labour costs to grow by 4.1% over the same period. Lastly, the IBD/TIPP economic optimism index rose to 48.7 in May, punching well above the consensus expectation, boding well for some better data over the summer.
  • In the UK, the dataflow was rather disappointing. The Markit Purchasing Managers’ Index (PMI) for the manufacturing sector dipped into contraction territory at 49.2 in April from 50.7 in March. This was in contrast to consensus expectations of a rise to 51.2. Meanwhile, the service sector PMI was also weaker than expected in April, falling to 52.3 from 53.7 contrary to expectations of a smaller decline to 53.5. This had the inevitable impact on the composite PMI – it fell to 51.9 from 53.6 versus an expected 53.2. Talk of Brexit has begun to ramp up in earnest in the UK, with only 6 weeks before the referendum and some have attributed the recent economic slowdown to increased uncertainty. There may have been some impact but global factors have also had an effect.
  • In Europe, the PMIs were prominent data releases as well, although these were final revisions to earlier estimates so consensus expectations proved to be fairly accurate. The manufacturing PMI was 51.7 in April, while the services PMI was 53.1. This resulted in a composite PMI of 53, indicating moderate positive growth in Europe. The pattern was similar in Germany, where the manufacturing, services and composite PMIs were 51.8, 54.5 and 53.6 respectively. On a weaker note, Europe-wide retail sales were reported to have contracted by 0.5% in March versus expectations of a smaller fall of 0.1%.
  • It was a light week for economic releases in Japan due to Golden Week holidays, but what little data was released was not encouraging. The services PMI fell to 49.3 in April from 50.0, which pushed the composite PMI down to a two-year low of 48.9.
  • In China, the Caixin PMIs for April were the major releases last week. The manufacturing sector index fell a touch to 49.4 from 49.7 (consensus was expecting 49.8). Similarly, the service sector index fell from 52.2 to 51.8, resulting in a composite index of 50.8, down from 51.3. Chinese economic growth remains moderate but the authorities hope that the recently announced package of stimulus measures will have a positive impact on activity. We will have to await confirmation in the dataflow of this in the coming months.
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