Investor 91

THE INVESTOR CENTRE

xpectations that central banks

would remain accommodative

helped risk sentiment over the period.

During July,US economic data was

broadly strong; European data mostly

held rm.The Federal Reserve was

hawkish, leaving the door open for a

rate rise.The ECB was in‘wait-and-

see’mode while the UK felt the e ect

of post-Brexit uncertainty,with

sterling at a 31-year low.

Both sterling and UK equities rallied

on the appointment of Prime Minister

Theresa May. InAugust, focus was on

Fed o cials’ statements as US

economic data presented a mixed

picture. European in ation stayed

subdued; in Japan,Q2 GDP painted a

grim picture of the economy with

in ation still subdued. Prime Minister

Abe announced scal stimulus,while

the Bank of Japan made clear it will

take further easing measures if

required.The Bank of England cut

interest rates to 0.25%, expanded the

bond-buying programme and

restarted corporate bond buying.

Despite the BoE’s move into crisis

mode, economic data from the UK

was surprisingly

positive.UK

manufacturing production fell,

contrary to expectations.

ilt yields fell to new lows in July

as the fallout from the UK’s

referendum vote continued. Risk

appetite returnedmid-month after the

bounce-back in US payrolls, some

abatement in Brexit concerns, and

heightened expectations of central

bank stimulus, particularly in the UK

where the Bank of England surprised

by keeping interest rates unchanged.

InAugust,UK benchmark gilts

dipped,while yields on 10-year gilts

reached a low of 0.5%on 15August.

To address fears of an economic

slowdown, the BoE cut interest rates to

a record-low of 0.25%.Although the

cut was anticipated,QEwas

introduced earlier than expected and

the £10 billion corporate bond-buying

package surprisedmarkets,which was

additional to £60 billion of government

bond purchases. Economic data was

mixed over the month – survey data

was weak, although employment and

retail sales data were stronger.

In September, employment was

resilient. InAugust,UK Services PMI

data and UKManufacturing PMI

gures showed an increase.

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

Strong performance in the UK was

tempered by a Japanese slowdown

BLACKROCK

Index Linked Gilts

Portfolio has remained in line with

benchmark despite tough market

Central bank policy

continued tohelp risk

sentiment inmarket

Giltshit newlows as

themarket reacted to

theBrexit result

Francis Rayner

he stock market recovered from

the initial shock triggered by the

EU referendum.The swift

appointment of Theresa May as the

new Prime Minister helped limit the

immediate political uncertainty,

while the Bank of England moved to

support the UK economy with a

0.25% cut in interest rates and an

expansion of its bond purchase

programme.This contributed to a

recovery in more cyclical sectors

such as nancials, with weakness in

consumer staples and utilities.

Recent performance has been

driven by company fundamentals,

withMelrose announcing the purchase

of US ventilation and security

products group,Nortek, and Just Eat

reporting rapid revenue growth in its

half-year results, cementing its leading

position in most markets. Shire saw

strong take-up of its treatment for

dry eye disease. Sky underperformed,

and not holding HSBC andARM

impacted relative returns after the

rally in bank shares and takeover by

SoftBank respectively.

The fund holds companies with

strong cash ow generation and

international earnings.

BLACKROCK

UK & General Progressive

Strong performance was driven by

Melrose, Nortek and Just Eat

Swi Mayappointment

helpedUKmarkets to

recover fromBrexit

Luke Chappell

THE INVESTOR