March Market Commentary


Last month was the month when it was almost impossible to keep up with the stories coming out of the White House. Normally as I make notes for this commentary through the month I end up – not surprisingly – with far more notes about the UK than anywhere else. That was BT – Before Trump. Now there are so many stories coming from the US – some real and some fitting the new description of ‘fake news’ – that it’s hard to find the important stories among the background noise.

What’s undeniable is that the economic initiatives from the new President and his team have been warmly welcomed on Wall Street. As we’ll see below, the Dow Jones index enjoyed a successful month – as did the vast majority of the markets we cover in this commentary.

One piece of good news in February saw the World Trade Organisation’s (WTO) Trade Facilitation Agreement come into force. The Director General of the WTO, Roberto Azevedo, called it “the biggest reform of global trade in a generation.” The move – designed to streamline customs procedures and make trade faster and easier – has been forecast to boost global trade by $1tn (£800bn) a year.


February started with a large slice of humble pie being eaten in the UK, as the Bank of England sharply raised its growth forecasts for the UK economy. Having forecast growth of just 0.8% for this year in the immediate aftermath of Brexit, the Bank subsequently raised that forecast to 1.4% in November last year. In its latest quarterly report the Bank has now increased the forecast for this year to 2%. “There have been relatively few signs of the slowdown the committee expected,” the Bank admitted.

Certainly, the growth in the UK manufacturing and services sectors continues to be strong, with manufacturing in particular having been helped by the fall in the value of the pound post-Brexit: the sector grew by 2.1% in December.

This strong performance by the UK economy was confirmed by the Government having a surplus of £9.4bn in January – up £0.3bn on the same period last year. Growth for the final quarter of 2016 was revised upwards from 0.6% to 0.7% and the Office for National Statistics also revealed export growth of 4.1% for the quarter.

Sadly, this good news didn’t transfer itself to the nation’s high street, with retail sales in January growing more slowly than anticipated. John Lewis announced plans to axe ‘hundreds’ of jobs and Anders Kristiansen, boss of New Look, described the outlook as “challenging.” With high street retailers facing imminent and hefty rises in business rates, ‘challenging’ may prove to be an understatement.

While we’re on the subject of bad news, the Royal Bank of Scotland – that’s the bank that is 72% owned by the UK taxpayer – reported its ninth consecutive annual loss, with figures for 2016 showing a loss of £7bn. The bank has now lost £58bn since it was bailed out by the taxpayer in 2008. The Co-Operative Bank also admitted defeat in its attempt to fix its balance sheet and put itself up for sale, but there was good news across the road at Barclays, where profits for 2016 tripled to £3.2bn.

But let’s finish our look at last month with the UK’s glass half-full. Apple’s boss Tim Cook met the Prime Minister and told her he thought the UK would do “just fine” outside the EU. Amazon announced plans to create 5,000 more jobs in the UK and Boeing gave a massive boost to the economy of South Yorkshire, announcing plans to open its first European commercial factory just outside Sheffield.

The FTSE-100 index of leading shares wagged its tail enthusiastically, and closed February up 2% at 7,263.


This time next month the first of the three important European elections of 2017 will have been held, with voters going to the polls in Holland on Wednesday 15th March. At the moment Geert Wilders, the anti-Islam leader of the far-right Freedom Party looks on course to win the most seats, but it seems highly unlikely that he will be able to form a Government.

Meanwhile, Marine le Pen, leader of France’s Front National looks likely to top the poll in the first round of voting in the French Presidential election, as centre-right candidate Francois Fillon comes under increasing pressure over the employment scandal concerning his wife. ‘May you live in interesting times’ as the old saying has it…

‘Old sayings’ leads us nicely to ‘Greece is in trouble.’ It seems that the Greek debt crisis and the accompanying political crisis could make a reappearance this year, with the IMF saying that Greek debt is simply unsustainable. It appears that the Greek government is unwilling to swallow any more austerity measures and there are renewed worries in financial markets over Greece’s ability to keep up to date with debt repayments.

Meanwhile, 2016 saw Germany produce a record trade surplus for the year of €252.9bn – up from €244.3bn in 2015. That is equivalent to a surplus of £215bn or nearly £18bn a month.

…And it was Germany’s success rather than any worries about Greece which held sway on Europe’s stock markets. The German DAX index was up 3% to end the month at 11,834 while the French index rose 2% to 4,859. Blissfully unworried about any economic woes, the Greek market rose 6% to 646.


As mentioned in the introduction, February was a month where there was so much news coming out of the US that it was difficult to sort out what was relevant. By and large, though, the pertinent news seemed to be good news for the US economy. 227,000 jobs were added in January and both the Federal Reserve and legendary investor Warren Buffet made encouraging noises about the health of the economy.

“Measures of consumer and business sentiment have improved of late” said the central bank as it opted to keep interest rates on hold for now – although most experts are predicting a rise in the near future.

In company news, Apple returned to growth thanks to the success of the iPhone 7 and posted its highest ever quarterly revenues – $78.4bn – in the final quarter of 2016. Meanwhile, there was less good news for Facebook, which lost a $500m virtual reality legal case, but it remains on course for 2bn users – 27% of the world’s population.

The Dow Jones index had a good month, breaking through the 20,000 barrier and ending the month 5% higher at 20,812. Clearly the market is anticipating the new President’s ‘phenomenal’ tax plans, aimed at boosting business and easing the tax burden on America’s middle classes.

Far East

February was a turbulent month in the Far East, largely for political reasons, as North Korea conducted another missile test, with the missile flying 300 miles towards the Sea of Japan. President Trump assured Japanese Prime Minister Shinzo Abe that the US “stands behind Japan, its great ally, 100%.”

North Korea added fuel to the fire later in the month, apparently assassinating Kim Jong-un’s half-brother, Kim Jong-nam, in Malaysia by using a super-toxic nerve agent.

Meanwhile, the chairman of Toshiba was forced to resign after the Japanese conglomerate revealed details of a $3.4bn loss for the year and Lee Jae-yong, Samsung’s heir apparent, has been arrested in South Korea on bribery charges.

It wasn’t a good month for the Hong Kong and Shanghai Banking Corporation – or HSBC as we now call it – either, with profits down 62% to $7bn thanks to a string of one-off charges, including the sale of its operations in Brazil.

Fortunately the Far Eastern stock markets managed to shrug off the bad news, with three of the four major markets posting modest rises. China’s Shanghai Composite index was up 3% to 3,243: the Hong Kong index rose 2% to 23,741 and the market in South Korea finished the month up 1% at 2,092. Japan’s stock market was more or less unchanged, ending February at 19,119.

Emerging Markets

As we’ve reported previously, Brazil was last year’s stand-out performer among the stock markets we cover in this Bulletin, and the market there shows no sign of slowing up this year. It rose another 3% in February to 66,662 and is now up by more than 10% in the first two months of the year. It was also a good month for the Indian market, which rose 4% 28,743 where it is up very nearly 8% in January and February.

There was less good news for the Russian stock market: it fell back by 8% in February, closing the month at 2,036. There must be real worries in Moscow about the prospect of Marine le Pen winning the French presidency: 40% of Russia’s foreign currency reserves are held in euros, and a win for le Pen cannot do anything other than threaten the future of the euro.

And finally…

February was notable for two economic and production crises which shook the Western world to its foundations.

In the United States there was a shortage of bacon – which in a country where a stack of pancakes with bacon and maple syrup is a fundamental start to the day was nothing short of a calamity. Online panic set in after US Department of Agriculture data showed reserves of frozen pork belly – from which bacon is cut – to be at a record low. The industry was quick to deny that supplies were in danger of running out, but the headline writers were having none of it. ‘Aporkalypse Now’ screamed one newspaper.

Meanwhile, the UK was reeling from a shortage of lettuce. Supermarkets were forced to ration iceberg lettuce – and broccoli – due to adverse weather conditions in Spain. Purchases were limited to three iceberg lettuce per customer. Inevitably prices rocketed, with one supermarket increasing the price of a lettuce from 42p to £1.19 – meaning that lettuce easily outperformed all the leading world stock markets in February…


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