Daily Market Monitor - 2 December 2008
Latest news (9am, London)
After a week of rising share prices, the new week started in a much less positive mood as fears about global recession dominated markets again. The US, UK and European markets fell sharply yesterday, and Asian markets followed this downward trend as markets traded earlier today.
Manufacturing activity in the Eurozone, UK, Australia, Russia and China has sunk to record low levels, while in the US it has fallen to its lowest level since 1982. The oil price has continued to fall back, to almost $45 per barrel as OPEC announced it has no new plans to cut production. The oil price had reached over $140 per barrel this summer.
However, weaker economic news has also raised investors’ confidence that there will be further cuts to benchmark bank borrowing rates to help stimulate economic activity.
Government bond prices rose and yields fell on the same news. Investors in bonds prefer low inflation (inflation erodes the value of the future stream of interest payments), and low cash interest rates also make bond yields more attractive as a source of income.
Yesterday’s returns
| Market | Close as at
1/12/08 |
% change
1/12/08 |
|---|---|---|
| US: Dow Jones | 8149.1 |
-7.70 |
| US: S&P 500 | 816.2 |
-8.93 |
| US NASDAQ | 1398.1 |
-8.95 |
| MSCI Europe | 858.1 |
-5.27 |
| UK: FTSE All Share | 2027.2 |
-5.00 |
| UK: FTSE 100 | 4065.5 |
-5.19 |
| Germany: DAX | 4394.8 |
-5.88 |
| France: CAC 40 | 3080.4 |
-5.59 |
| Netherlands: All Share | 368.1 |
-6.47 |
| Italy: S&P MIB | 18736.0 |
-6.25 |
| Switzerland: SMI | 5527.6 |
-4.97 |
| Spain: IBEX 35 | 8510.5 |
-4.49 |
| Sweden:OMX | 607.1 |
-5.40 |
| Japan Nikkei | 8397.2 |
-1.35 |
| MSCI Asia Pacific ex Japan | 265.8 |
-0.55 |
| Hong Kong: Hang Seng | 14108.8 |
1.59 |
| Singapore Straits | 234.4 |
-2.21 |
| MSCI China | 37.9 |
2.54 |
Source: Datastream
Looking further ahead
Whilst it is reassuring that the world's central banks and governments are taking decisive steps to confront the crisis in markets, it is likely that conditions will remain uncertain for the foreseeable future and we certainly don’t rule out sharp swings (up or down) in share prices.
Our fund managers are monitoring the current situation closely. For long-term investors, these events could represent a buying opportunity – since many good quality companies are seeing their share prices punished irrespective of the underlying strength of their businesses or their long-term potential.
It is important in this environment to remember your long-term investment goals. Equities will always be subject to short-term market volatility but, historically, this has not affected their ability to outperform other types of investment over the longer term. It is those investors who sit tight through these roller-coaster rides who have been most rewarded in the past over the long term.
This update is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Schroders has expressed its own views and opinions in this document and these may change. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.
Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Services Authority.