We interpret the statement as a political exercise and a chance for the Government to generate some positive headlines, but of little actual importance for the economy as a whole – although there were a few points of interest for investors.
Despite the positive figures and Osborne’s cheerfulness, we still see the UK recovery as fair to middling. Much of the growth is coming from consumer spending and construction, which can be quite fickle; it can stop as quickly as it has started.
Sustainable recovery requires businesses to start investing again, which is what will add real momentum. One does usually lead to the other, but we won’t be completely happy until investment has picked up considerably.
UK: ETF stamp duty scrapped in Autumn Statement
The Autumn Statement included a plan to abolish stamp duty paid on exchange traded funds, more commonly known as ETFs. This will bring the UK more in line with overseas competitors in April 2014, by removing the 0.5 per cent levy currently payable by the purchaser of ETF shares.
While 0.5 per cent may not sound like much, it can add up to a significant sum when compounded over the long-term. This makes ETFs a much more competitive, low-cost option for investors and will increase the competition among tracker funds – hopefully leading to lower charges all round.
Osborne also upgraded his 2013 growth forecast for the UK to 1.4 per cent, and 2014’s from 1.8 to 2.4 per cent.
While the economy has certainly gained momentum – with construction growth hitting a six-year high and the FTSE All-Share up over 12 per cent year to date – we remain cautiously optimistic due to the fragility and disparity of the current recovery; it has yet to spill over into corporate investment and could yet be derailed.
US: Q3 GDP revised up to 3.6 per cent
Third-quarter GDP growth was revised up to 3.6 per cent from 2.8 per cent in the second reading, far above market expectations of a 3.1 per cent revision figure.
Positive news, but rather hollow as it will still be fourth-quarter growth that carries the most weight, shedding light on the effect of the government shutdown and associated debt ceiling drama.
However, this once again raised market expectations of the Fed tapering QE, causing US Treasury yields to rise.
The holiday weekend saw the frenzy of shopping produce some thought-provoking statistics: online sales on Black Friday were up by 39 per cent from the previous year as shown by Adobe Systems analysis, while research group ShopperTrak put store sales growth at just 2.3 per cent.
A promising result for investors in e-commerce, or indeed auxiliary technology companies facilitating this booming trend.
EU: Unrest in Ukraine while Portugal refinances
Unrest in Ukraine has further damaged market confidence as the yield and price of insuring against Ukrainian sovereign debt rose sharply – both fundamental indicators of a deteriorating market sentiment.
While we shall not delve into the underlying turmoil, what is interesting is the vicious loop: recession and unemployment have led to unrest, which if persistent will just worsen any chance of economic growth and compound the recession in the short-term.
While many investors may have little or no direct exposure to Ukraine, the domino effect within financial markets means that ramifications could be felt far and wide.
Meanwhile there has been positivity from Portugal as a planned swap of €6.6bn in Government bonds due to mature in 2014 and 2015, for debt maturing roughly three years later, went ahead smoothly on Tuesday.
This improves the nation's short-term redemption costs and paves the way for Portugal’s re-entry into financial markets before exiting its €78bn bailout programme in June.
