-
US stock markets were firmly focused on the likely future path of US interest rates last week, causing them to
oscillate strongly.
- Google – Demand for Google surged as it was announced that the stock will be included in the S&P 500
Index. The stock was up nearly 8% on the week.
-
Bristol Myers Squibb – The stock rose over 11% after the company settled a patent dispute with a Canadian
drugmaker over its Plavix blood-thinning treatment.
-
Technology Stocks – Microsoft fell after announcing that the finished consumer version of its Vista operating
system would not be available until next year. This is seen as a blow to PC makers .Gateway and HP both fell.
-
European stocks recorded a succession of four-and-a-half year highs on a continuing wave of bid and
merger activity.
-
Alcatel – The French telecommunications equipment maker hit a two-year peak after news that merger talks with Lucent Technologies were back on. Previous negotiations between the two companies broke
down in 2001.
-
BMW – The German carmaker enjoyed another good week, rising nearly 9%, after describing business in the
first quarter as “superb”.
-
Schering – The German drugs group rose nearly 5% after Bayer made an 86 per share offer for the company, trumping an earlier €77 per share offer by Merck.
-
Prudential – The life assurer lost 5% after rival Aviva withdrew its bid, but reserved the right to make an
offer if another rival offer appeared.
-
Eurozone bonds stronger - Eurozone bonds rose 0.5% during the week, following US bonds upwards on Friday in the wake of very poor numbers for sales of new homes in the US during February.
-
Global growth continues to be healthy despite high oil prices and higher global interest rates. Consensus expectations are that global GDP will expand by 3.5% in 2006, similar to last year’s rates.
-
Investors expect official US rates to peak close to 5% from the current 4.5% level. The strength of economic activity and inflation data over the next few months will be key in this regard.
-
Following the most recent ECB rate hike to 2.5%, investors expect rates to pass the 3% mark by year end .Moderate inflation and pension fund liability matching should continue to offer some support to longer-dated bonds.
-
Equity markets remain reasonably supported by a strong earnings’ background and favourable valuations relative to bonds; high oil prices and tighter liquidity conditions from higher interest rates should constrain the upside to markets.The gradual ending of super-easy money policies in Japan may cause some further jitters in both equity and bond markets.
-
Currently, the funds are slightly overweight in both bonds and equities versus the manager average. Sectorwise, the funds are overweight industrials and financials while underweight some of the defensive areas, like utilities .Geographically the funds are underweight Ireland and North America and neutral in the UK. Europe, Japan and the Pacific Basin remain overweight.
