THE UK STOCK MARKET generated a negative return of 5.7% (FTSE All-Share Index) during the third quarter, marginally underperforming the FTSE World ex UK (£) Index which produced a negative return of 5.3%. In Sterling terms, the S&P500 Index (-2.9%) was the best performing regional equity market, although this return benefited from the strength of the US Dollar versus Sterling. In local currency terms, the S&P 500 Index fell 6.4%.
Asian and Emerging Market equities performed very poorly as commodity prices fell sharply as more evidence surfaced suggesting the Chinese economy is slowing. In local currency terms, the MSCI Asia ex Japan Index fell 14.0%, whilst the MSCI EM Index fell 12.1%. The loss in confidence also manifested itself in weaker Asian and Emerging Market currencies such that the losses for UK based investors were amplified (MSCI Asian ex Japan (£) Index, -13.9%; MSCI EM (£) Index, -14.8%).
Gilts produced a positive return (FTSE Gilts All Stocks Index, +3.1%) during the period. At the end of September, the 10 year Gilt yield was 1.8%. More speculative levels of debt (high yield) underperformed Gilts (BoAML £ High Yield Index, -0.8%).
The UK commercial property sector continued to produce positive returns, with the IPD UK All-Property Index returning 2.1% during the period under review.
Following the sharp oil price fall last year, indications that US crude inventory levels had stopped rising supported the Brent crude price earlier in the year, however signs of production growth and higher inventories drove the oil price down to $48.4 by the end of September, such that the three month move in the oil price was a negative 24%