Politics
drowned out important economic news, with the Pan-European electorate taking
the opportunity to deliver a message of disapproval and discontent to Europe’s
political elite over the handling of European affairs over the past years. I
sincerely hope that this will not drive the EU back into national parochialism,
but rather give the political leadership the wake-up call they need to utilise
the European potential for the greater good of its peoples rather than continue
to bicker and drive apart.
Enough of
politics - more important from my perspective were the latest data releases in
the UK and China and the calming of bond markets. In the UK news of resurging
business investment brought one of the signals the Tatton investment team had
been waiting for since the end of last year. To us it is confirmation that this
economic upturn is more broadly based than the much talked about housing and
debt financed consumer demand. UK companies finally investing their cash piles
to the tune of £33bn over the past year and thereby reaching pre-recession
levels is a very encouraging sign that this expansion has further to go.
Business investment is a very important component in the creation of GDP and UK
companies have both the money and are long overdue for investment into modern
productive capital. There is still room for further improvement given
investment levels weren’t at particularly satisfactory levels back in
2007/2008, but the trend is there and has encouraging upward momentum.
China’s forward
looking industrial production data improved markedly last week and confirms our
view that China is less of a concern than many observers deduced from the
frictions in its financial system and overheating housing markets.
Last but not
least bond markets appeared to come around to the central banks’ policy setters
way of thinking that interest rates and in their wake longer term yields will
rise far more gradually than anticipated, because the global economy is
likewise only quite gradually expanding during this economic cycle.
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