We at Raymond James Barbican are saddened to hear of the passing of Her Majesty, Queen Elizabeth II. The Queen was the longest ever reigning monarch in Britain and will be deeply missed. King Charles III, aged 73, is now the oldest monarch to take the crown.
It has certainly been a week of change in the UK; Tuesday saw Ms Liz Truss overcome Rishi Sunak and become the UK’s new prime minister. Ms Truss is the UK’s 56th prime minister and its third female leader. One of her first significant acts as PM was to announce plans to tackle the energy price crisis and by Thursday it was revealed to the UK population that the average household would pay no more than £2,500 annually for its gas and electricity bills. This will be effective from the start of October and the price guarantee will last for two years. The plan is expected to cost tens of millions and will be funded by more government borrowing. Newly appointed Chancellor Kwasi Kwarteng is due to detail the plan and expected costs in his fiscal statement later this month.
News from Frankfurt also filtered out as the European Central Bank raised interest rates by 75bps to a total percentage of 1.25%. This is now a record hike designed to combat inflation that has reached double digits in many European countries. This interest hike follows the similar increase made by the US Fed, and investors now expect this move to add pressure on the Bank of England as policymakers will review the UK’s monetary policy next week. Christine Lagarde, the president of the ECB, followed this move with hawkish commentary stating the central bank was prepared to further hike rates in order to tackle rising inflation and bring it down to its 2% target.
It would not feel like a normal weekly update without mentioning the Nord Stream 1 between Russia and Germany. Last weekend the Nord Stream pipeline was unexpectedly closed for maintenance, and it was announced on Monday that the pipeline would not resume flows. Germany feel that Russia are no longer a reliable supplier and have assured domestic businesses and households that although energy rationing is likely, they have filled 85% of the storage reserves in order to survive the winter period. The Kremlin has since said the resumption of gas supplies is completely dependent on Europe lifting its economic sanctions against Russia, aiming to create discord within Europe.
Uncertainty in Europe’s markets have not stopped car manufacturer Volkswagen from listing a minority stake in Porsche for what could be one of Europe’s biggest IPO’s. With the share sale, the Porsche group would be set to regain direct influence over what used to be a family enterprise before they were forced to sell the sports-car business to VW 13 years ago. VW shares rose 3% by mid-afternoon on Tuesday, with VW hoping to yield funds that would finance ambitious plans in the electric car market and ground-breaking new digital features.
In Shanghai’s major container port of Yangshan, operations were suspended early this week as typhoon Hinnamnor approached the east China coast. This led to excessive winds and rains in China however the greatest damage was done in South Korea as the typhoon battered the southern part of the country. Approximately 12,000 houses and buildings have been destroyed, with flooded roads and landslides.
Rising inflation, Interest rates & energy crisis are just some of the issues challenging investors currently. Despite this we continue to focus on long-term opportunities, while ensuring there is sufficient diversification in portfolios to help protect against some of the known (and unknown) risks highlighted here.
Nathan Amaning | Investment Analyst, Raymond James, Barbican
Risk warning: With investing, your capital is at risk. The value of investments and the income from them can go down as well as up and you may not recover the amount of your initial investment. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.