European markets fall in early trade

20th January 2016


Further falls in the oil price and fears over slowing global growth have sent European markets down this morning.

In early trading London’s FTSE 100, Germany’s Dax and the Cac-40 in Paris were all down around 3% in early trading.

Further falls in the oil price and fears over slowing global growth have sent European markets down this morning.

Mark Dampier, head of investment research at Hargreaves Lansdown says: “The bears are in the ascendancy and all news seems to be interpreted as bad. Markets seem to think China is heading for a meltdown rather than a slowdown but I don’t see it that way.

“The fall in the oil price is more about excess supply than it is about demand and is effectively giving the UK consumer and economy a multi-billion pound tax cut.

“Investors should be taking their opportunities to add to their portfolios during these times. It requires a little bravery, however over the longer term, an entry point around 20% cheaper than the highs of April 2015 should look like a good deal in years to come.”

Meanwhile, investor confidence has dropped to its second lowest level since July 2013.

Lloyds Private Banking Investor Sentiment Index shows investor sentiment falling throughout December to 4.55%. Only September 2015 (3.23%) recorded lower levels of investor confidence during this time, which was driven by the initial concerns about the slowing of China’s economy and the impact of currency devaluation.

Over the last month, the actual market performance of all ten asset classes declined. Commodities were worst hit with a huge drop in performance of 8.6%.

Sentiment towards all individual asset classes also declined month-on-month, with the exception of UK property and gold. These two asset classes bucked the trend with small rises in sentiment of 1.88% and 2.04% respectively.

When comparing the year-on-year changes in sentiment, only UK property has increased its positive position, with a substantial 12 percentage point rise over 12 months, taking it to a very high level of 50.05%. Eurozone equities have also improved levels of sentiment in this time (rise of 9.06%), but sentiment towards this asset class remains extremely negative at -33.75%.

In contrast, emerging market equities have fallen out of favour. Last month they were regarded positively with a sentiment of 6.04%, whereas this month, the sentiment turned negative to -5.75% (a fall of 11.79%). Sentiment towards the asset class also fell 15.11% year-on-year, the biggest fall across all the asset classes.

Despite their 10.7% growth in actual market performance, Japanese equities are still failing to impress the UK investor; the sentiment reading of -14.31% is the poorest since its record low in this survey, also registered in September 2015.

Markus Stadlmann, chief investment officer at Lloyds Private Banking, says: “Investors are feeling particularly gloomy at the moment, with asset class performance dropping off as we start 2016.

“Given declining market performance and falling levels of sentiment, it is surprising to see sentiment towards bonds also falling. But, by sticking to familiar investments like property and gold; some investors might be missing the potential opportunity offered by lower risk fixed income assets such as bonds.”

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