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 - 12 September 2016 (UK/Europe)


  • Aon Trustee Checklist.  Making a decision - any decision - is hard. Making the right decision is even harder. But, if we have all the facts, expertise, and experience at our fingertips, we are fine - right? Maybe not. Trustee boards are faced with multiple ideas competing for investment, and once these decisions have been made, multiple tasks competing to be implemented first. So where should you begin? This Trustee Checklist was developed by the UK investment consulting practice to aid in decision-making. 
  • Global Invested Capital Market.  The concept of a world market portfolio features prominently in many financial theories and models and serves as an important foundation of our asset allocation work for our clients. This research provides information on each asset’s share of the invested capital markets and is a good starting point for investors considering the appropriate allocation to the asset.  
  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. A French version is also available.


  • Global equity markets ended lower as equities fell sharply at the end of the week, reversing gains from earlier on in the week. Investors were disappointed due to inaction by the European Central Bank (ECB) on the monetary stimulus front and hawkish commentary by a US Federal Reserve (Fed) representative. The MSCI AC World Index fell 1.4% in local currency terms and 0.8% in sterling terms. The MSCI AC Asia Pacific ex Japan was the best performing regional index both in local currency (1.4%) and sterling terms (2.2%). Developed North America was the worst performing region both in local currency (-2.4%) and sterling terms (-2.0%) after hawkish comments from the Boston Fed President and due to weak economic data.
  • UK nominal gilt yields rose across all maturities, following other major developed markets. The 10 year gilt yield rose sharply by 13bps to 0.87% and the 20 year gilt yield rose by 17bps to 1.39%, reflecting developments in monetary policy expectations. The 10 year US treasury yield rose by 8bps to 1.67% on the prospect of an interest rate hike as early as September. European government bond yields rose across the region as the ECB kept its monetary policy unchanged. German bund yields rose by 5bps to finish the week at -0.05% and French government bond yields rose by 3bps, ending the week at 0.23%.
  • UK real yields rose over the week. The 20 year real yield rose by 9bps to finish the week at -1.71% and the Over 5 year real yield rose by 7bps, finishing the week at -1.68%. 20 year breakeven inflation rose by 8bps to 3.09%.
  • Credit spreads were mixed over the week. The US high yield bond spread over US treasury yields ended the week 1bp higher at 510bps. The spread of USD denominated EM debt over US treasury yields finished the week 7bps lower at 330bps. The sterling non-gilt spread over government yields (based on the Merrill Lynch index) fell by 1bp to 119bps.
  • The S&P GSCI rose by 1.9% in USD terms over the week. The energy sector rose by 2.8% due to the increase in Brent crude oil prices, which rose sharply by 4.3%, ending the week at USD 49/BBL on the hopes of an output freeze. Industrial metals marginally fell by 0.7% as copper prices were flat at $4,615/MT. Agricultural prices rose 1.6% and the gold price rose 1.2%, finishing the week at $1,334/ounce.
  • Sterling depreciated against all major currencies over the week. The US dollar appreciated by 0.4% against sterling, ending the week at $1.33/£. The euro appreciated by 0.8% against sterling, finishing the week at €1.18/£. The Japanese yen appreciated by 1.4% against the US dollar on the back of better than expected Japanese economic data, thus ending the week at ¥102.73/$.


  • In a quiet week for US economic data, what little data were released were disappointing. The non-manufacturing ISM index fell to 51.4, a post crisis low, from 55.5 in August despite expectations that it would remain fairly flat. The IBD/TIPP economic optimism index fell to 46.7 in September, again disappointing the consensus. The labour market conditions index fell by 0.7 in August, offsetting part of July’s 1.3 rise when analysts were expecting no change. Lastly, wholesale trade sales fell by 0.4% over July, once again failing to meet analyst estimates of 0.2% growth.
  • The UK dataflow was generally better than expected and indicated that there has been limited impact on the economy from the EU referendum result. The Markit/CIPS service sector purchasing managers’ index (PMI) rose sharply in August from 47.4 to 52.9, which beat the consensus expectation of a rise to 50. This also pushed the composite PMI, which combines the individual manufacturing and services PMIs, to a 5 month high of 53.6 from 47.6, again beating the consensus by a wide margin. Meanwhile, the trade deficit narrowed to -£4.5bn in July from -£5.6bn in June but analysts were looking for a bigger move to -£4.2bn. Underlying this was a fall in imports and a rise in exports, likely as a result of the sharp fall in sterling. Of course, it is too early to tell whether this impact will persist. Finally, there was less sanguine news from the British Retail Consortium’s (BRC) like-for-like retail sales report for August. It showed that the annual growth rate was negative at -0.9% compared with a consensus expectation of an increase of 1.4%.
  • In Europe, the dataflow was a little on the downbeat side. The Markit Eurozone service sector PMI was revised down a touch to 52.8 in August from the initial estimate of 53.1, which meant that there was also a downward revision to the composite index, from 53.3 to 52.9. There was a similar story in Germany, where the service sector PMI was revised down to 51.7 from 53.3 and the composite PMI was revised down to 53.3 from 54.4. German industrial production growth was also weaker than expected, falling by 1.2% in the year to July, compared with the prior month’s growth rate of 0.9% and the consensus estimate of 0.2%. However, there was some good news from the Eurozone retail sales figures, which beat the consensus and grew at an annual rate of 2.9% in July.
  • Japanese labour cash earnings rose at a stronger than expected pace of 1.4% over the year to July, sharply higher than the 0.4% increase penciled in by analysts. Q2 2016 GDP data was revised upwards to 0.7% (QoQ annualised) as business spending fell less than earlier estimates had approximated. The adjusted current account balance fell to ¥1,448bn in July from ¥1,648bn. Meanwhile, the August Economy Watchers survey revealed an optimistic view with the outlook component rising to 47.4, ahead of consensus. The current conditions component rose to 45.6 over the same period. However, the services PMI fell to 49.6 in August from 50.4, entering into contraction territory and dragging the composite PMI down to 49.8 from 50.1.
  • China’s Caixin services PMI rose to 52.1 in August and export growth rose to 5.9% (in CNY terms) for the twelve months to August, ahead of consensus expectations. Similarly, import growth rose, to 10.8% over the same period. This left the trade balance little changed, at 346bn in CNY terms. Lastly, CPI inflation fell sharply to 1.3% over the year to August, a 50 basis point reduction in inflation relative to the previous month.
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. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.

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