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Audience

Equities

Webcast

For the latest views from M&G's investment teams on the UK'S EU referendum results

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12:00PM 4 July 2016

 

9:00AM 28 June 2016 

Fund update – Equities: M&G Global Basics Fund 

Managers of M&G’s Global Basics Fund believe there has been indiscriminate selling across international stockmarkets following the UK’s vote to leave the European Union (EU). Indeed, the MSCI World index – a benchmark measure of share performance from across major markets – was down 5.9% on 27 June compared to 23 June, the day of the referendum. 

Read more

5:00PM 28 June 2016

M&G Equities update

  • We are now three trading days on from the EU referendum last Thursday and Brexit uncertainty continues to reverberate around the financial markets. Logic suggested a Brexit vote would disproportionately hit the more domestically focused, medium and smaller-sized companies the hardest, along with the financials stocks, and so it has proven. Banks and housebuilders bore the brunt of the sell-off. 
  • Today, however, saw a more upbeat tone as sterling firmed and stock markets rallied. Investors appear to be taking in their stride the UK economy’s credit rating being downgraded by all three major ratings agencies, although they had warned prior to the vote that a Brexit scenario would likely be adverse for the UK’s creditworthiness. 
  • European shares also rose for the first time since the vote, partly due to hopes of a more co-ordinated central bank response to financial market losses. Relief may be fleeting though in this increasingly volatile world as sectors and shares up today are predominantly those that fell sharply on Friday and Monday. The positive mood has continued this afternoon, with the US markets rallying on opening. 
  • Prime Minister David Cameron is meeting EU leaders at a two-day summit starting today, but the political process means there will be little clarity until at least September. Politically, there are more questions than answers – can the UK remain in the EU despite the vote, will there be a second referendum or a General Election? What the markets have to focus on, however, are the possible terms the UK may agree to leave the EU. What we can be certain of is that there will be continued uncertainty in the months to come.
  • Ahead of the referendum, there were signs of an improving outlook for the earnings of UK companies and a weaker pound should help that process, thanks to the positive translation impact, for the larger overseas earners. However, the outlook for corporate profits for smaller more domestically focused companies is less certain.
  • Elsewhere, it’s important to remember that the US and euro area economies were on a mild improving path prior to Thursday's shock vote, and could prove resilient, especially if investor sentiment does not implode. A close monitoring of policy actions and post-referendum economic data should help determine whether the ‘risk-off’ phase proves temporary or lasting.
  • Despite some recovery today, markets will remain volatile for some time, as the uncertainty associated with how developments will proceed will impact the global economic outlook most prominently in the near term through financial market turmoil. Central bank policy, however, should act as an offset and help to ensure that negative implications for global growth will be only modest.
  • In the short term, the uncertainty surrounding the UK and euro area, in terms of politics, growth and policy could mean further corrections for UK and European equities. Yet the lack of yield elsewhere may influence investor reaction.
  • Now is time for calm heads to prevail over knee-jerk reactions. For long-term investors, such volatility can present selective opportunities for those willing to take advantage of attractive valuations.

 

1:00PM 24 June 2016


Past performance is not a guide to future performance


11:30AM 24 June 2016

Equities: stock markets open down

Shockwaves from the UK’s public vote to leave the European Union (EU) reverberated in Asian markets overnight, as investors fled towards assets traditionally seen to carry lower investment risk, including gold and the Japanese yen. This shift has continued in the UK and European stockmarkets.

The FTSE All-Share Index, which reflects the performance of UK-listed company shares, was down by about 8% in the first 30 minutes of trading on Friday 24 June. The Eurostoxx 600 index, which reflects European listed company shares, likewise opened down around 5.5%.

The shares of financial sector companies and housebuilders were hit particularly hard in early stock market trading. Additionally, the trading of some European company stocks was temporarily suspended in the morning after the referendum result.

New political and economic uncertainties following the ‘Leave’ vote could result in investors having to pay higher prices – and accept lower prospective returns – for lower risk assets.

The value of investments and the income from them will fluctuate. This will cause the fund price to fall as well as rise. There is no guarantee the fund objective will be achieved and you may not get back the original amount you invested.

 

7:00AM 24 June 2016

First views on overnight market reaction from the M&G Investment teams

The biggest reaction has been in sterling, which has fallen 10% overnight against the dollar. There has been a predictable flight to safe haven currencies including the yen and swiss franc.

We won’t know until US markets open but the early indications from the overnight US Treasury bond market and Asian markets is that this is primarily a UK and European issue: yield on US 10Y treasuries has fallen 25bp which is similar to movements seen in February - a fall but not over dramatic.

European and UK markets are not yet open but we expect European equities to fall approximately 5-10%. German government bonds to rally and peripheral European bond spreads to widen. The Financials sector is likely to be hardest hit.

More fundamentally, it is too early to tell the impact on the UK and European economies because everything depends on the terms of the relationship the UK and Europe negotiate. It will be a long time before we know what leaving the EU means – the possibility of a general election can’t be ruled out, or even an EU constitutional summit to offer the UK alternative terms.

What is more important than where we are at the end of today is where we are in a month or a year’s time.

The value of investments and the income from them will fluctuate. This will cause the fund price to fall as well as rise. There is no guarantee the fund objective will be achieved and you may not get back the original amount you invested.

Cyveillance Protected

The value of investments will fluctuate, which will cause fund prices to fall as well as rise and investors may not get back the original amount invested. 
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