THE UK STOCK MARKET generated a negative return of 1.6% (FTSE All-Share Index) during the second quarter, significantly outperforming the FTSE World ex UK (£) Index which produced a negative return of 5.4%. In Sterling terms, the FTSE All-Share Index showed that the UK was the best performing regional equity market.
In local currency terms, both the MSCI Japan Index and the S&P 500 Index generated positive returns of 5.2% and 0.3% respectively. However, Sterling strength against the Japanese Yen and the US Dollar, following the conclusive UK general election resulted in much reduced returns for UK based investors (MSCI Japan (F) Index, -2.7%; S&P 500 (£) Index, -5.4%).
Gilts produced a negative return (FTSE Gilts All Stocks Index, -3.4%) during the second quarter. At the end of March, the 10 year Gilt yield was 1.58%, however it rose to 2.02% by the end of June. More speculative levels of debt (high yield) outperformed Gilts producing a positive total return during the period (BoAML £ High Yield Index, +0.3%).
The UK commercial property sector continued to produce positive returns, with the IPD UK All-Property Index returning 2.2% during the period.
Following sharp falls last year, indications that US crude inventory levels had stopped rising supported the Brent crude price. The oil price rose 15.4% to $63.6 during the quarter, although this is still some 45% below where the price was a year ago. The oil price has fallen significantly over the past year as it became clear that OPEC were not going to cut production in the face of growing US oil production and lower than expected demand from China.