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THE INVESTOR CENTRE
I
nApril andMay, European equity
markets were among the top
performers of developing markets.
Eurozone’sQ1GDPgrowthwas robust,
whileApril’s PMI reading was up.The
ECB’s expansion of the quantitative
easing programme boosted consumer
sentiment and business con dence.
In the US, growth was revised up to
0.8%,while consumer spending rose
by 1% inApril.New home sales also
rose by 16.6%.The US Federal
Reserve’s (the Fed) actions came into
focus,with investors becoming more
con dent that the Fed would proceed
with a June rate hike.Nevertheless,
the Fed Committee decided to
maintain Federal funds rates at current
levels following an unusually weak
payrolls report for May and citing risks
to global economy, including Brexit.
In the UK, growth was a ected by
disappointing industrial production,
compounding concerns about the
UK’s economic outlook.
In Japan,theBank of Japan’s decision
not to expand its monetary stimulus
took a toll on investor sentiment,with
Japanese equities falling inApril,while
the yen strengthened. InMay, Japanese
markets were supported from stronger
than expected economic data.
G
ilt yields had been in decline since
the start of the year but
rebounded inApril, re ecting the
strengthening in risk sentiment that
started in the rst quarter.However,
from lateApril, gilt yields resumed
their downward trend in response to
disappointing data from the US and
China, lowered growth and in ation
forecasts in Europe, and increasing
nervousness ahead of the UK’s
referendumon EUmembership.
The UK economy continues to
performwell overall,with robust
activity and low unemployment,while
in ation has shown some signs of
moving higher.However, the overhang
from June’s referendumhas proved a
near-termheadwind.Growth already
declined in the rst quarter as rising
uncertainty weighed on activity.Other
data, such as theApril services PMI,
hinted further at slowdown.
The Bank of England voted
unanimously throughout the quarter
to hold the bank rate at 0.5%.There
had been some expectation inMay that
one o cial, and potentially two,might
have voted to cut the interest rate.
The fund has generally been
positioned in line with the benchmark
over the period.
Nimish Patel and Eleanor de Freitas
BLACKROCK
Core manager: Global Equity
Global markets remain cautious prior
to Brexit announcement
BLACKROCK
Index Linked Gilts
Portfolio in line with benchmark
despite turbulent marketplace
US boostedbyhigher
growth gures and
consumer spending
UKeconomycontinues
toperformwell despite
near-termheadwinds
Francis Rayner
T
he uncertainty created by the
UK’s vote on membership of the
EU led to increased market volatility
in the UK stock market and in sterling.
This quarter, the portfolio bene ted
from positive market updates from
caterer Compass,where its US
division continues to growwell,Auto
Trader,which beat expectations for
revenue growth and BritishAmerican
Tobacco,which demonstrated strong
operational performance with positive
volume growth. Sky andRELXsu ered
from the recent market nervousness
despite Sky’s success in winning the
German Bundesliga rights.
Given the binary nature of this vote,
we have been reluctant to aggressively
position the fund for one particular
outcome.Our research team has
prepared scenario analysis for
companies in each sector of the UK
market with a view to assisting
objective decisions should a newmenu
of share prices be presented to
investors following the result.Howwe
respond in the fund will depend on
what happens to share prices in the
coming weeks and months.
Our investment approach is to focus
on companies that bene t from
sustainable competitive advantages.
BLACKROCK
UK & General Progressive
Compass, AutoTrader and British
American Tobacco post strong updates
EU referendum
uncertaintyhas led to
volatility inmarkets
Luke Chappell
THE INVESTOR
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