November saw the G20 group of world leaders meeting in Canberra. The summit was notable for the new sport invented by the great and good: a bizarre game of musical chairs in order to avoid being photographed sitting next to Vladimir Putin!
Not to be outdone in the social pariah stakes, David Cameron turned Cassandra, warning the world leaders that we were all doomed if we didn’t sort out the problems in Europe, China and ‘anywhere else I can think of’ – as well as finding a cure for Ebola. As you’ll see below, there was certainly plenty of doom and gloom waiting for the Prime Minister when he touched down in the UK.
Fortunately, world stock markets failed to pick up on Mr Cameron’s depressing message, and all but one of the 11 major markets we report on in this bulletin rose in November: the exception was Hong Kong, where the market fell by exactly one point during the month.
More importantly, there was a lot less gunfire, tear gas and pepper spray in November. All the flashpoints we’ve previously mentioned continued to simmer, but in the main tension replaced outright bloodshed.
However depressing he’d found Australia, David Cameron’s mood must have darkened further when he came home. He immediately ‘threw the kitchen sink’ at the Rochester and Strood by-election, only to see it won by former Conservative MP, Mark Reckless, who became UKIP’s second Member of Parliament.
New powers were wheeled out for the Scottish Assembly and they immediately brought calls for greater powers for England: the Prime Minister now has to deliver the ‘English votes for English laws’ he promised or face a backlash from the electorate next May and serious grumbling from his backbenchers in the interim.
There were mixed signals for the UK economy in November as Chancellor George Osborne prepared to deliver his Autumn Statement on December 3rd. Growth in the service sector slowed, although that does mean there is now little prospect of an interest rate rise before the middle of 2015. Inflation rose to 1.3%, apparently due to the release of new computer games in the run-up to Christmas (what happened to the good old days when bread and milk were the main determinants of inflation?).
George Osborne would no doubt have welcomed the news that government borrowing fell to £7.7bn in October – down £0.2bn on the same period last year. However, if you look at the longer April to October period, borrowing is up by £3.7bn: as we commented recently, with so many low-paid jobs being created, the Government is simply not receiving the tax revenue it anticipated.
At least Christmas is coming! Possibly anticipating this, consumer spending rose by 4.3% in October although business spending fell in the same period, perhaps indicating caution ahead of the New Year.
Sainsbury’s was the latest supermarket group to take a hit as they cancelled plans for new shops and simultaneously wrote off £297m. Like-for-like sales were down 2.1% on a year ago and shares fell 5%. Chief Executive, Mike Cooper, said the next two years would be ‘challenging’ – a sentiment no doubt echoed in the Tesco boardroom.
The FTSE enjoyed a good month, rising by 3% to finish November at 6,723 – however, it is still 26 points below the level at which it closed 2013.
First Scotland, now Catalonia. November saw the unofficial poll in Catalonia on independence, with 80% of those voting opting for independence. However, the Government in Madrid apparently has no plans to bow to voters wishes, so expect the rumblings to continue.
There were more rumblings in Brussels and Berlin as Europe continues to worry about deflation. The rate of inflation in Germany slowed to 0.5% and further south there was even worse news as the Greek official statistics agency unveiled inflation of minus 1.7% in October, with Greek industrial production falling by 5% in the month. There’s every possibility that Greece could shortly be knocking on the door of Europe’s financial A&E department again. To further muddy the waters, sentiment in Italy seems to be turning back to leaving the Euro and reviving the Lira as the only way to right the country’s economic wrongs.
To counter all this, European Commission President, Jean-Claude Juncker, unveiled a giant €315bn investment plan to kick start Europe’s economy. At its heart is a €21bn investment fund to provide loans for infrastructure projects – with the rest of the money apparently coming from private backers. Critics swiftly pointed out that private backers were very unlikely to provide the bulk of the money, so I’m afraid it’s as you were.
Fortunately, the two main stock markets were rather more positive in November, with the German DAX index up 7% to close within touching distance of the 10,000 barrier at 9,981 and the French CAC40 index up 4% to 4,390.
To no one’s surprise, the mid-term elections saw the Republican Party take control of both the US Senate and Congress, effectively making President Obama a lame duck for the last two years of his term in office. So unpopular has Obama become that many Democrats specifically asked him not to help with their campaigns.
The US was battered by once-in-a-generation snowstorms in November, and maybe this impacted on the mood of shoppers over the Thanksgiving weekend. The Wall Street Journal reported that sales were down 11% on the previous year, with total sales for the four days estimated at just over $50bn – apparently each American shopper spent an average of $380.95.
Fortunately, the US economy is not solely dependant on retail spending and grew faster than expected in the July to September quarter. An earlier figure of 3.5% growth was revised upwards to 3.9% to give the US its strongest two consecutive quarters of growth for a decade, so not all bad news for the President.
Wall Street chose to concentrate on the positives, rather than the retail figures, and closed November 3% higher at 17,828.
November was the month when China was buddying-up to everyone, signing a free trade deal with South Korea and also having what were described as ‘icebreaker’ talks with Japan. Churlishly, the BBC reported that the first meeting between Chinese leader, Xi Jinping, and Japanese premier, Shinzo Abe, showed ‘little sign of warmth.’
Not much warmth for Mr Abe at home either as he decided to call a general election to seek a further mandate for his policy of Abenomics: everyone except Mr Abe was surprised by the move and at the moment it seems unlikely that he’ll receive the backing he is seeking. Quite where this will leave Japanese economic policy is open to debate.
As reported above, Hong Kong was the only one of the world’s major stock markets not to move ahead in November, closing the month one point down at 23,987. China’s Shanghai Composite Index had an excellent month, rising 11% to 2,683 whilst the Japanese market – seemingly not worried by the imminent general election – rose 6% to 17,460. The South Korean market had a much more modest rise, ending November 1% up at 1,981.
As we’ve reported several times, the Indian stock market has been this year’s star performer, and it rose another 3% in November to close at 28,694. The market is now up 36% in 2014 – however, growth in the third quarter did slow to 5.3%, down from 5.7% in the second quarter.
The Russian market was also up by 3% – for once enjoying a month with no further threat of economic sanctions. The MICEX index finished November at 1,534.
There was a more modest rise in Brazil, with the stock market up by less than 1% to 54,669.
In a world of varied investment options and a million ways to spend your money, it was interesting to see some ‘unique’ investment wisdom this month. Apparently the key to successful investment is… hats.
This was the only possible conclusion to draw when a South Korean speculator paid €1.9m for Napoleon’s hat – apparently the one he wore at the Battle of Marengo in 1800. One investor who feels like he is staying ahead (sorry) of the game.