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December Market Commentary. When you realise that the ‘Italian 10’ trending on Twitter refers not to Antonio Cassano’s goal against Northern Ireland but to the yield on the Italian 10 Year Bond, then you know the European debt crisis – and the consequent turmoil on the world stock markets – remains alive and well.

November was the month when Italy overtook Greece for the number of times it was in the same sentence as the word “crisis.” Silvio Berlusconi stood down as Prime Minister and – as had happened in Greece – the technocrats moved in to implement austerity measures which would hopefully balance the books and help to bring stability to the eurozone.

In the UK the Chancellor delivered his Autumn Statement against a backdrop of gloomy economic forecasts and a public sector strike.

Meanwhile, on the other side of the world President Obama was intent on setting up a Pacific free trade area, whilst at the same time telling China how to manage its currency.

For the majority of the month world stock markets performed poorly. Only four markets managed overall gains in November; Pakistan, Ireland, Mexico and Venezuela. As could have been expected, Greece was the biggest loser with the index there down 18% in the month. However, markets staged a spectacular rally on November 30th (the Dow Jones, for example, had its biggest one day gain since 2009). This was in response to an injection of liquidity from the US and other central banks and meant that overall many markets finished the month little changed.


November in the UK was dominated by George Osborne’s Autumn Statement. The day before the Chancellor delivered his speech the Organisation for Economic Co-operation & Development had forecast that the UK was on course for a ‘double-dip’ recession, something that the Chancellor was at pains to refute.

But with UK Government borrowing due to hit £127bn in 2011/2012 and an extra £112bn of borrowing now being needed over the next four years, savings clearly had to be made. The axe duly fell on the public sector, with a 1% cap on pay rises from Spring 2012 and an anticipated 710,000 public sector job losses by 2017. Don’t expect this to be the last time your children have a day off school…

Worryingly, the CBI survey of business confidence in November showed a sharp fall from the one carried out in August, with 70% of those surveyed less confident than they’d been three months previously. Two in every five businesses had either frozen recruitment or were laying off staff, with business leaders citing weak consumer demand, instability in financial markets and – inevitably – the eurozone crisis as reasons for the loss of confidence. Another cause for concern was the fact that youth unemployment in the UK hit the one million mark in November.

Having started the month at 5,544 after a healthy rise in October, the FTSE spent most of the month in retreat, only to bounce back on November 30th to finish virtually unchanged at 5,505.


Again, the month in Europe was dominated by the debt crisis. Although there are rumours of civil servants (and teams of corporate lawyers) burning the midnight oil to assess the implications of breaking up the euro, for now most commentators accept that saving the currency is the favoured course of action.

Spain joined Greece and Italy in a change of government, with the centre-right Popular Party of Mariano Rojay claiming a decisive victory.

European stock markets followed the general pattern – meandering downwards for virtually all of the month, only to rally on the final day. Germany’s DAX index was typical – it started the month at 6,141; dipped well below 6,000 at one point and then finished at 6,088, a fall of less than 1%.


The key date for the US economy in November was Friday November 25th. The day after Thanksgiving is known as ‘Black Friday’ as it is the day when retail outlets supposedly move out of the red and into the black.

Up to 40% of US retail sales take place in November and December, and 152 million Americans were expected in the shops over the Thanksgiving weekend. According to the National Retail Federation sales were up 16% on the previous year with shops raking in $52.4bn over the four day weekend.

If your glass is half-full then this clearly shows that US consumer confidence is once more on the rise. Those for whom the glass is half-empty will see a different headline; ‘Spending on imported consumer goods widens US trade gap.’ Only time will tell…

As above, President Obama outlined plans to set up a trans-Pacific free trade area at a regional summit in Hawaii. Significantly the 21 countries involved in these talks account for 44% of world trade. Not for the first time Obama urged China to let the yuan rise, suggesting that it is currently undervalued by 20-25% which clearly gives China a major trading advantage.


Japan reported a 1.5% rise in GDP for the three months to the end of September, suggesting that the economy is starting to recover from the earthquake and tsunami. While Japan is still vulnerable to the strength of the yen and global economic problems, it does seem that the worst of the damage inflicted by Mother Nature has been overcome.

It was business as usual in China with another hefty trade surplus, but India reported a slowdown in GDP growth, caused by higher borrowing costs and the eurozone crisis. To put things in perspective however, India’s GDP growth slowed to 6.9% for the three months ending in September. What wouldn’t George Osborne give for such a slowdown?

And finally…

Our next monthly review will be published in the first week of January, so this may be an appropriate time to wish you a Happy Christmas and a peaceful and prosperous New Year. And rest assured that whatever happens in the global markets in 2012, we’ll keep you in touch.

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