Wrap up – last week   

FOMC meeting, US bank stress test results, Greek rating upgrade, UK on negative outlook

·         Global stocks reached fresh highs last week as hopes for the US economy and improving sentiment towards the US banking sector supported risk appetite. At the Federal Open Market Committee meeting on Tuesday, the US Fed kept policy on hold and gave a more optimistic outlook for the economy. The accompanying statement made no mention of any further planned monetary easing. The meeting followed strong data on February retail sales which were up 1.1% month-on-month, ahead of analysts’ expectations. Further positive news came with the release of the US bank stress test results, which caused a rally in financial stocks. All but four (including Citigroup) of the 19 banks tested passed the test. Most of the 19 largest US banks are now allowed to distribute more capital to shareholders in the form of dividends and share buybacks.

Meanwhile, Fitch, the ratings agency, upgraded Greece’s sovereign rating from ‘restricted default’ to ‘B-‘. The agency considers the Greek private sector involvement (PSI) to have been successful and that Greece’s debt profile has significantly improved. The new €174bn bailout of Greece cleared its last European hurdle on Wednesday after national and parliamentary approvals were completed in all Eurozone countries. The approval releases the first €39.4bn in aid to Athens. Fitch also joined Moody’s in placing the UK’s AAA credit rating on a negative outlook. In the UK, unemployment remained stable at 2.67m people in the three months to January and public sector job losses slowed. The unemployment rate was unchanged at 8.4%, compared to 8.3% in the US and 10.7% in the Eurozone.

Shaping the markets – this week

UK CPI, The UK Budget, Eurozone PMIs and US housing stats

This week is fairly light on data releases. Tuesday should reveal positive news on February’s UK CPI number, which is expected to fall to 3.2% from 3.6% year-on-year as the January 2011 VAT rise to 20% falls out of the comparables. On Wednesday, UK Chancellor George Osborne will present the Budget. It is expected that he will predict the 2011/2012 deficit to be £122bn, a slight improvement on the current target of £127bn. On Thursday, expect a fall of 1.1% month-on-month in UK retail sales ex auto fuels after a strong sales season between November and January. Elsewhere, Eurozone PMIs should show an increase in manufacturing reflecting the success of the second Longer-Term Refinancing Operation (LTRO) and stronger data in the US. France’s INSEE business indicator should reveal a small increase on Friday due to an improvement in financial market conditions.

In the US, data on Tuesday and Wednesday will reveal the state of the housing market with the release of housing starts and existing home sales respectively. Gains in both are likely due to the combination of a mild winter and ongoing recovery. Thursday’s jobless claims report should show a fall, which would be consistent with an improvement in hiring conditions. In the emerging markets, investors are likely to focus on central bank meetings in Thailand and Colombia, plus Brazilian inflation data on Thursday and retail sales on Friday.

Markets in numbers

World equities

Index

% 1W

% YTD

S&P 500 Composite

1404.17

2.4

11.7

Dow Jones Industrials

13232.62

2.4

8.3

NASDAQ Composite

3055.26

2.2

17.3

FTSE 100

5965.58

1.3

7.1

Euro STOXX 600

272.40

2.6

11.4

Nikkei 225

10129.83

2.0

19.8

Hang Seng

21317.85

1.1

15.6

Benchmark government bonds

Yield

1W /bp

YTD /bp

US Treasury – 10 year

2.30

26.1

42.3

UK Gilt – 10 year

2.36

28.5

38.3

German Bund – 10 year

2.04

24.3

21.1

Japanese JGB – 10 year

1.04

8.4

5.6

Credit indices

Yield

1W /bp

YTD /bp

IBOXX £ Non-gilts All maturities

4.92

21.0

-4.4

ITRAXX Crossover 5 Year (MID)*

536.69

-36.0

-213.7

Volatility index

Index

% 1W

% YTD

CBOE PX Volatility – VIX index

14.47

-15.4

-38.2

Commodities

Index

% 1W

% YTD

Brent Oil ($/Barrel)

124.81

-1.2

15.3

Gold Bullion $/ Troy Oz

1654.88

-3.2

5.1

Currencies

vs $

vs £

 

¥

83.36

132.1

 

$

 

1.58

 

Euro

1.317

1.203

 

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.