THE UK STOCK MARKET generated a negative return of 8.6% (FTSE All-Share Index) during the three month period to the end of August, marginally underperforming the FTSE World ex UK (£) Index which produced a negative return of 8.2%. In Sterling terms, the S&P500 was the best performing regional equity market (S&P500 Index, -6.7%).
Asian and Emerging Market equities performed very poorly, with commodity prices falling sharply as more evidence surfaced suggesting the Chinese economy is slowing. In local currency terms, the MSCI Asia ex Japan Index fell, -15.8%, whilst the MSCI EM Index fell, -12.6%. 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, -19.3%; MSCI EM (£) Index, -18.2%).
Gilts produced a marginally positive return (FTSE Gilts All Stocks Index, +0.1%) during the period. At the end of August, the 10 year Gilt yield was 2.2%. More speculative levels of debt (high yield) underperformed Gilts (BoAML £ High Yield Index, -1.0%). The UK commercial property sector continued to produce positive returns, with the IPD UK All-Property Index returning 2.5% during the period.
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 $54.2 by the end of August, such that the three month move in the oil price was a negative, -17%.