THE UK STOCK MARKET generated a strong return (FTSE All-Share Index, +5.1%) during the three month period to the end of April. In Sterling terms, this performance was marginally better than other regional equity markets in aggregate (FTSE World ex UK (£) Index, +4.3%). Asian Ex Japan equities led the way, rising 7.2% (MSCI AC Asia Ex Japan); whilst American equities lagged (S&P500 Index (£) +2.7%).
Sterling strength versus the US Dollar was a surprising feature of the last three months, given the uncertainty surrounding the outcome of the UK general election. For UK-based investors, this resulted in a reduced return, as the local currency return for the S&P500 Index was +5.1%. The FTSEurofirst 300 Index returned 8.9% in local currency terms but, for the UK based investor, Euro weakness against Sterling resulted in the FTSEurofirst 300 Index return being reduced to a still healthy +5.7%.
Gilt returns were negative (FTSE Gilts All Stocks Index, -4.3%) during the three month period to the end of April. The end of January saw 10-year gilt yields fall to an all time low of just 1.33%, however by the end of April the 10-year gilt yield had backed up to 1.83% as the flight to safe havens driven by fears of a Greek exit from the Euro diminished somewhat. More speculative levels of debt (high yield) outperformed gilts materially producing a positive total return during the period (BoAML £High Yield Index returned +2.8%).
The UK commercial property sector continued to produce positive returns, with the IPD UK All Property Index returning 3.0% during the period.
Following sharp falls last year, the first indications that US crude inventory levels had stopped rising drove the Brent crude price up sharply during the three months to the end of April. The Brent crude oil price rose 26% to $66.8 during the period, although this is still some 38% below the price 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. During the period under review, the gold price fell 7.7% to $1184/oz. The flight to safety seen during the first month of the year has dissipated as the year has progressed.