Wrap up – last week

Expectations of a resolution to the eurozone crisis help overcome mixed earnings picture

Risk assets enjoyed a sharp recovery last week as risk appetite returned. Equities were generally higher, initially benefiting from a Franco-German pledge that a plan to recapitalise Europe’s banks would be agreed by the end of the month. Markets were sanguine about Slovakia initially holding up approval of the European Financial Stability Facility (EFSF) and even brushed off a downgrade of Spain’s credit rating by Standard & Poor’s. Alcoa, the first US company to report quarterly earnings, disappointed and dissection of the earnings figures for JP Morgan, the banking group, highlighted softer activity but these were outweighed by strong results from Google. By and large the market shrugged off negative news, but anchored on the positive, such as stronger retail sales in the US. Government bond yields backed up, with 10-year German bund yields back above 2%. Commodity prices rose as hopes grew that the eurozone could resolve its crisis, with the G20 meeting in Paris calling for the eurozone to act decisively.

Shaping the markets – this week

A week dominated by inflation reports

On Monday, US industrial production for September is expected to better the 0.2% increase seen in August, with automotives behind the rise. On Tuesday, China kicks off third quarter gross domestic product growth reporting, with expectations that the economy will have grown by more than 9% year-on-year. On the same day the Bank of England will cast a wary eye over September’s UK consumer price index (CPI) inflation figures, with most predicting a rise above 4.5% y-o-y due to higher utility bills. Producer price inflation in the US is expected to show a small uptick to 6.7% y-o-y in September. On Wednesday, it is the turn of the US CPI figures, with the headline rate expected to tick up towards 4% y-o-y, whilst US housing starts are expected to show a rise. On Friday, September CPI in Hong Kong may moderate but only because of a temporary public rent waiver that expires this month, whilst analysts will be looking to see if Germany’s ifo business climate survey can buck the recent downtrend. 

Finally, the European Union meets at the end of the week (23 October) in the EU Summit. There is much on the table to discuss from the size of the haircut on Greek bonds to bank recapitalisations, the ultimate shape of the EFSF and possibly new treaty proposals for the euro.

Markets in numbers

World equities

Index

% 1W

% YTD

S&P 500 Composite

1224.58

6.0

-2.6

Dow Jones Industrials

11644.49

4.9

0.6

NASDAQ Composite

2667.85

7.6

0.6

FTSE 100

5466.36

3.1

-7.4

Euro STOXX 600

238.51

2.8

-13.5

Nikkei 225

8747.96

1.7

-14.5

Hang Seng

18501.79

4.5

-19.7

Benchmark government bonds

Yield

1W /bp

YTD /bp

US Treasury – 10 year

2.23

16.3

-107.9

UK Gilt – 10 year

2.61

14.2

-89.9

German Bund – 10 year

2.16

22.8

-72.9

Japanese JGB – 10 year

1.01

2.6

-10.6

Credit indices

Yield

1W /bp

YTD /bp

IBOXX £ Non-gilts All maturities

5.22

7.6

-6.4

ITRAXX Crossover 5 Year (MID)*

754.58

-60.1

N/A

Volatility index

Index

% 1W

% YTD

CBOE PX Volatility – VIX index

28.24

-22.0

59.1

Commodities

Index

% 1W

% YTD

Brent Oil ($/Barrel)

114.20

7.6

23.1

Gold Bullion $/ Troy Oz

1671.80

1.2

17.9

Currencies

vs $

vs £

 

¥

77.37

122.2

$

1.58

Euro

1.386

1.140

Source: Datastream. * Spread in basis points. Past performance is not a guide to future performance.

Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE and authorised and regulated by the United Kingdom  Financial Services Authority) provide investment products and services.

The Henderson Horizon Fund (the Fund) is a Luxembourg SICAV incorporated on 30 May 1985 and regulated by the Luxembourg Financial Services Regulatory Authority.

Atlas JMFS Investments Services Limited (Atlas JMFS) is the Representative in Malta of Henderson Global Investors. Henderson Horizon Fund is authorised to be marketed in Malta in line with the UCITS Directive. Atlas JMFS Investments Services Limited (IS30176), 67 Level 3 South Street, Valletta, Malta is licensed to conduct investment services business by the MFSA, Notabile Road, Attard BKR3000, Malta, and is a member firm of the Malta Stock Exchange, Garrison Chapel, Castile Place, Valletta VLT1063, Malta.

The sub-funds of the Henderson Horizon Funds which have been authorised to be marketed in Malta are eight equity funds and one bond fund.

Investors should remember that the value of investments and any income derived can go down as well as up and past performance is no guarantee to future performance. Any investment decision must be made solely on the basis of the information contained in the prospectus, which is available on request from Henderson Global Investors and may be obtained from the local representative Atlas JMFS.