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 - 19 September 2016 (UK/Europe)


  • Knowledge is the key to good benefits governance. This article, first published in European Pensions, authored in the UK by Aon Hewitt’s international retirement and investment practice, explains the benefits of good governance within companies’ global benefits programmes.


  • Global equity markets edged lower in the week, as uncertainties around central bank policies globally and a fall in energy prices overshadowed the market. The MSCI AC World Index fell 0.6% in local currency terms. However, sterling weakness pushed up the returns in sterling terms to 0.5%. MSCI USA was the best performing and the only region which returned positive returns in both local currency (0.6%) and sterling terms (2.0%), supported by the Information Technology sector. Japan was the worst performing region in local currency terms (-2.6%), as investors awaited the outcome of the Bank of Japan’s (BOJ) monetary policy meeting next week. Developed Europe ex UK was the worst performing region in sterling terms (-1.5%).
  • UK nominal gilt yields fell at the short end of the curve, but rose at longer maturities. The 10 year gilt yield rose marginally by 1bp to 0.87% and the 20 year gilt yield rose by 4bps to 1.44%. The 10 year US treasury yield rose by 3bps to 1.70%. European government bond yields were mixed. German bund yields fell by 1bp to finish the week at -0.06% while French government bond yields rose by 1bp ending the week at 0.24%.
  • UK real yields were mixed over the week. The 20 year real yield rose marginally by 1bp to finish the week at -1.69% while the Over 5 year real yield fell by 1bps, also finishing the week at -1.69%. 20 year breakeven inflation rose by 4bps to 3.13%.
  • Credit spreads rose over the week. The US high yield bond spread over US treasury yields ended the week 17bp higher at 527bps. The spread of USD denominated EM debt over US treasury yields finished the week 16bps higher at 346bps. The sterling non-gilt spread over government yields (based on the Merrill Lynch index) rose by 2bp to 121bps.
  • The S&P GSCI fell by 2.2% in USD terms over the week. The energy sector fell by 3.7% as the price of Brent Crude oil fell 5.5% to USD 46/BBL, driven by comments from the International Energy Agency (IEA) on elevated inventory levels. Industrial metals rose marginally by 0.5% and copper prices rose 3.4% to finish the week at $4,772/MT. Agricultural prices rose 0.5% while the gold price fell 1.7%, finishing the week at $1,311/ounce.
  • Sterling depreciated against all major currencies over the week. The US dollar appreciated by 1.4% against sterling, ending the week at $1.31/£. The euro appreciated by 0.9% against sterling, finishing the week at €1.17/£. The Japanese yen appreciated by 0.5% against the US dollar, ending the week at ¥102.26/$. 


  • In a mixed week for US economic data, initial jobless claims were virtually unchanged (over the week ending 10 September) at 260k beating analysts' expectations of a small rise. Consumer price inflation (CPI) in August was 1.1%, 0.1% ahead of expectations and up from 0.8% in the previous month. While this is still below the Federal Reserve's target of 2.0%, the upward trend is expected to affect the likelihood of any short term interest rate hikes. Core inflation (which excludes volatile energy and food prices) was 2.3%, similarly 0.1% ahead of expectations. Real average weekly earnings growth over the 12 months to August fell to 0.4% from 1.2% in the previous month. In the industrial sector, while output growth was slightly weak in August (-0.4% on the month versus 0.6% previously), the forward looking and closely watch Philadelphia Fed index of activity was much better than the expected reading of 1 in September, actually rising to 12.8. this indicates that, while US growth momentum has slowed, it is still unlikely that we will see a recession there.
  • In the UK, there were no major surprises amongst the data released. Inflation figures for August were in line with the consensus; CPI was 0.6% in August, unchanged from the previous month. Core CPI over the same period was 1.3% and again, unchanged from the previous period. Retail price inflation (RPI) was 1.8% in, down from 1.9% in the previous month. The change in the number of jobless claims increased by 2.4k, surpassing analysts' estimates of a rise of 1.8k. This comes following a fall of 3.6k in the previous month. Despite this, the claimant count rate (number of people actually claiming unemployment benefit) was unchanged at 2.2%
  • It was a quiet week for Europe in terms of data. CPI figures were finalised and unchanged for August. Industrial production did not fall as much as analysts were expecting at -0.5% (versus -0.8%). This followed an increase of 0.7% in the previous month. In Germany, the ZEW expectations survey (a leading indicator for economic sentiment) showed consumers were losing confidence in Germany's economy as the index undershot analysts expectations of 2.5 points and remained unchanged at 0.5 points from the previous period. This is well below its long-term average of 24.1 points.
  • Japanese economic data had a weak tone in a light week for economic releases. Industrial production contracted by 4.2% (revised down from -3.8%) year on year in July. According to preliminary estimates of Machine tool orders, it remained in contraction territory for the 13th consecutive month, falling by 8.4% over the twelve months to August.
  • It was a strong week in China as the data showed signs of economic growth acceleration. Industrial production marginally beat expectations by 0.1% and came in at 6.3%, the fastest pace since March and up from 6.0% in the previous month. Similarly retail sales over the year also beat expectations, increasing by 0.4% to 10.6% at the end of August. Foreign direct investment which shrunk in July, rebounded more than expected by 5.7%. The data came as somewhat of a relief to investors, who are looking to China for any signs of global growth slowdown.
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