Alpha Portfolio Service Brochure
Many of you will be aware that Bristol is currently European Green Capital. To reflect this a new bus service is being run between Bath and Bristol Airport using a ‘Bio-Bus’ which is powered by bio-methane gas generated from human sewage and food waste. Locally it has been nicknamed the ‘number two’.
The BioEnergy team at the Bristol Robotics Laboratory have gone one better by designing a urinal that collects people’s pee and powers microbial fuel cells that then generate electricity. Oxfam are now looking to use this ‘wee-lectricity’ to light toilet cubicles in refugee camps. Which got us thinking. We are always exploring new technology investment opportunities, including green energy, but is someone taking the p***?
Talking of taking the proverbial, the madness in the Eurozone continues with the ECB rapidly running out of bonds that it can buy. The ECB have said they would not buy below -0.2% yield but Germany’s 5 year bonds are already -0.12%. Putting this in context, the US 10 bond year yield is over 2% and the UK 10 year bond yield is 1.7%!
Probably the last of the current series of ‘Top Gear’, after a ‘fracas’ involving Jeremy Clarkson and a producer over food. Should Jeremy Clarkson leave the BBC, he would no doubt be picked up by a rival broadcaster faster than the ECB could pick up a European bond!
Many UK fund managers were at the Cheltenham Festival last week and were probably glad to be out of the office with the first major ‘sell –off’ of the year which left the two main US indices below where they started 2015. Besides fallers at Cheltenham, there were plenty of fallers in the markets albeit biased towards the heavy weight Oil and Mining sectors.
Markets continued to watch the technical discussions between Greece and its creditors over its debt repayments with growing unease. The possible timing of the first US interest hike began to focus minds as did the strength of the US Dollar on US corporate profitability. The cautious mood was also not helped by a raft of weaker than expected data from China.
In the UK, coverage of the impending general election began to build in the financial press. Besides possible ‘Grexit’ thoughts turned to a possible ‘Brexit’ (British Exit) post the general election, even though public support for EU membership is the highest it’s been for many years.
Veteran fund manager Neil Woodford said that with ‘ the Eurozone creaking and the uncertainty around the UK’s continued membership of the EU, political risk is at the highest level I have seen in my investment career’. He added that ‘too many people have underestimated the commitment of policy leaders in Europe to try and ensure the project is successful, but ultimately I think economics has a habit of overruling politics’.
Well respected CEO of Prudential Tidjane Thiam, announced his departure to Credit Suisse and said of Europe ’Financial markets seem remarkably relaxed about a potential Grexit; they believe that either it will not happen, or it will not matter. That belief deserves to be challenged’.
The commencement of the ECB QE programme saw the Euro continue to weaken against a number of currencies and a 12 year low against the US Dollar, there is even talk now of possible parity with the US Dollar given the US interest rate cycle will be heading in the opposite direction to Europe. While it is very early days, the ECB will no doubt be pleased as a weaker currency should be inflationary while helping European exporters. This will create headwinds for UK exporters into Europe but this should be cushioned by tailwinds from Sterling weakness relative to the US Dollar. With the USA losing out in the ongoing subtle global currency war, how will the US Fed proceed with its monetary policy? The FOMC meeting on Wednesday 18th March will be key in shaping market expectations around the start and pace of US interest rates.
While ‘Grexit’ risk has overshadowed most European news at least it looks as if some progress is being made in Ukraine with confirmation that pro-Russian rebels in the east have withdrawn a significant amount of heavy weapons. Clearly progress towards a peaceful solution and eventually possible removal of sanctions would be a big help to European business and Russia equally.
In the USA, February retail sales looked slightly disappointing but this was mainly due to the harsh weather conditions which affected car sales.
In China, factory output, a good proxy for broader economic growth, rose 6.8% in the first two months of 2015 but this was below expectations, as was company capital investment, while retail sales also fell short of forecast with growth of 10.7%. Inflation picked up in February although the authorities attributed this to Chinese New Year distortion. Non-food inflation remained below 1% and with deflationary expectations due to weak domestic demand and lower commodity prices suggests the authorities are likely to continue to ease monetary policy.
Concern about the turn in the US interest rate cycle and the Chinese data also saw Brent oil drop back to below $57 while the US also reported oil stockpiles at an all-time high. The International Energy Agency warned that ‘the rebalancing of supply triggered by the oil price collapse has yet to run its course and it might be overly optimistic to expect it to proceed smoothly’. It added that ‘as yet, US supply so far shows precious little sign of slowing down’.
Finally, later this week, or to be precise, 8.40am on Friday, March 20th, the UK will see a spectacular eclipse of the Sun. This deep partial eclipse will be the first solar eclipse in Britain for over fifteen years. So it looks like its not only central bankers and investors who will be in the dark. The last major solar eclipse in the UK was in August 1999…..and we all remember what happened to the stock market a few months later. Not that we want to be doom –mongers but fresh market highs, asset bubbles and now another solar eclipse? Is Mother Nature trying to tell us something?
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