Investment ViewPoint - Political economics

In our Investment ViewPoint: Comment – Unrest in Egypt, we mentioned the potential for a domino effect and a fortnight later, the situation has developed at alarming pace. Since the Tunisian and Egyptian populations rose up against their governments, a wave of protests has swept the Middle East, extending to Bahrain and the North African countries of Libya and Morocco.

In Bahrain, despite some initial scuffles, the protests appear to have been resolved peacefully. However, the situation in Libya has some darker undertones, as reports of violence against protesters continue to emerge.

From an investment perspective, there are important consequences of the ongoing events in Libya. Both gold and oil prices have risen substantially and there has been a negative impact on equity markets, particularly those of some European countries with a large exposure to Libya. One example here is Italy, a country with considerable cross-investment with Libya, not least the Italian oil giant Eni, which pumps out almost 250,000 barrels a day. This accounts for almost 15% of the country’s oil production.

What does it mean for oil?

Let’s look at the reason oil is so heavily impacted by this situation. Libya is a leading oil-exporter (12th largest in the world) and is critical for European oil supplies. In fact, oil provides Libya’s largest export income.

Since the beginning of the political crisis, oil companies from around the world, including the likes of BP and Royal Dutch Shell, have started to evacuate their staff from Libya. With less people there to man the oil fields, the pressure on the Libyan oil supply chain is mounting. This drives up the oil price. When markets closed on Monday 21 February, the Brent crude oil price reached $109, a two and a half year high and West Texas Intermediate (a US oil benchmark) also jumped.

There will also be a knock-on effect on the price of gas and other natural resources.

What are the other effects??

In nervous times of uncertainty, investors turn to traditional safe havens, typically this is gold and, in this particular instance, oil.

Another effect is that investors tend to retreat from equities. This current situation is no different. On Monday, a US holiday, European equities in particular suffered as a result of news from Libya. Against a backdrop of concerns that the spike in the price of crude oil could accelerate inflation on a global scale and dent the chances of economic recovery, the FTSE Eurofirst 300 Index fell on Monday 21 February. This is a tradable Index which tracks the performance of European 300 largest companies.

The knock-on effect of a rise in oil prices can be significant. The potential increase in petrol and energy prices is obvious but there may be other consequences for consumers. In particular, the cost of goods and services rising to compensate for increasing transport prices. This in turn could send inflation higher, already a key concern for the global economy.

What are your options?

For any investor, it is absolutely key to stay on top of news as it progresses and to ensure that your portfolio is prepared accordingly.

Another is to acknowledge that although Libya is gripped by political uncertainty, this situation does present trading opportunities. The volatility in oil, gold and equities creates these opportunities for investors.

International Trader gives you access to 24/7 online equities trading, across 13 international markets, 21 exchanges and over 9,000 equities, perfect for the investor who wants to do their own international stock-picking. Please remember that the value of investments can fall as well as rise and you may get back less than you invested.

8 February 2011 - Unrest in Egypt - what does this mean for investors and the economy?

International focus has fallen on Egypt over the past week or so as unrest increases and sweeping political change looks increasingly likely.

The current uprising is predominantly driven by a young, burgeoning population reacting to what they see as a constrained social, political and economic environment. They are demanding constitutional reform.

Aside from obvious concerns for the immediate safety and wellbeing of Egyptian citizens, foreign nationals and tourists, there are also broader concerns about the political and economic impact that this situation may have in other areas. Even if the Egyptian crisis comes to a speedy conclusion, we are already seeing some short term economic effects.

Oil factor

The most immediate economic concern for the developed nations is oil, more specifically Egypt’s Suez Canal. The canal is an integral shipping channel for the transportation of oil from the Middle East to the US and Europe. Should the current unrest in Egypt disrupt the flow of shipping traffic, alternative routes would need to be used, increasing delivery times and costs. Just the potential that this may happen has been enough to see oil prices hit two year highs - the price of Brent Crude Oil rose through $100 per barrel on Monday 31 January.

The knock-on effect of a higher oil price can be significant. The potential increase in petrol and energy prices is obvious but there may be other consequences for consumers. In particular, the cost of goods and services can rise to compensate for increasing transport prices. This in turn could send inflation higher. As we discussed recently, inflation is already a key concern for policymakers (see our recent Investment ViewPoint:Comment –“Markets hit the ground running as the issue of inflation starts to rear its head”).

There are additional considerations for many UK companies. Tourism in Egypt has thrived over recent years, but the unrest has cut short many trips for UK holiday makers. UK tourism companies such as Thomas Cook Group (TCG), EasyJet (EZJ) and Ryanair Holdings (RYA), may be feeling the effects. Companies with key operations in Egypt, such as BG Group (BG.), will need to assess what the current situation means for their businesses.

Domino effect

The longer term concern for the global economy is the general stability of the wider region, particularly the neighbouring Middle East. For many, the real fear is that a domino effect could develop. If Egypt’s current government collapses and political reform is introduced, it may lead to neighbouring countries following suit.

Should this spread to the major economic players, then the impact on oil prices would only be amplified. The result could well be a major shift in how global economic dynamics work.

You can track the economic news related to the Egyptian situation, and the impacts on specific companies, by logging in and visiting our online Research Centre.

Investors interested in achieving investment exposure to oil may want to consider Exchange Traded Commodities (ETCs) that are designed to track the commodity. For example ETFS Crude Oil (CRUD) is an ETC designed to track the DJ-UBS Crude Oil Sub-IndexSM. You should be aware that the price of oil can be volatile and you may incur losses if you invest in oil-related products. Investments in ETCs such as ETFS Crude Oil can go down as well as up and you may get back less than you originally invest. You should ensure that you read and understand the full simplified prospectus for such products before considering an investment.

6 December 2010 - Continental shift

You could be forgiven for feeling confused about what is going on in the Eurozone. Every day the news seems to change. Either we are teetering on the edge of an economic abyss, or politicians are assuring us that things are under control. So how should investors react to the daily news coming out of Europe?

The latest fiscal casualty was close to home. The €85bn, or £72 billion¹, bailout extended to Ireland by European finance ministers and the International Monetary Fund has helped to stabilise the situation for now, but many commentators suggest that the remedy does not go far enough. David Wighton at The Times described the bailout as “a large and expensive plaster… [when] what the patient needs is a blood transfusion”².

Ireland is not the only poorly economy. So far, Greece has experienced the most dramatic sovereign debt crisis in Europe, but several other European economies are starting to feel the pain.

Conversely, some nations are still posting strong performances. For example, Germany’s economy grew by 2.2% in the second quarter of 2010 and 0.7% in the third. As the gap between rich and poor widens, the Euro looks likely to come under an increasing amount of pressure and its future form is being called into question.

Against a brutal market backdrop, politicians remain assured of their ability to avert a disaster of apocalyptic proportions in Europe. In particular, the rhetoric from Brussels tells us to stay calm and believe in the Eurozone’s resilience.

Barclays Wealth’s economists tell a slightly different story, criticising economic optimism as “misplaced”. Signpost, the Barclays Wealth research publication, anticipates that the recovery demonstrated by nations such as Germany will likely stall, “with the second quarter probably [being] the peak of the recovery in terms of GDP growth”³.

This week, Jean-Claude Trichet and the European Central Bank announced their decision to maintain interest rates at 1%. Investors would be wise to stay tuned and watch for signs of this monetary policy having a positive impact on the region’s stability and hopes of recovery.

That said, this region still presents some options for investors with a good understanding of the potential risks involved.

For those investors who are aware of the sovereign and currency risk but still believe the region presents good investment opportunities, there are several ways to get investment exposure to the Eurozone. Among the most popular ways are using

Exchange Traded Funds (ETFs) and / or managed funds. Investors could consider ETFs such as the iShares MSCI Europe or the iShares Euro STOXX 50, or they could investigate managed funds from the 'Europe excluding UK' sector using our Fund Factsheet Search function.

If you feel more confident staying closer to home, you may be interested in our structured product, the FTSE Linked Income Note, which offers potential returns linked to the performance of the UK FTSE-100 Index.

The value of investments can fall as well as rise and you could get back less than invested.

¹The Daily Telegraph, http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8166507/Ireland-gets-72bn-bail-out-in-attempt-to-stem-contagion.html
²Ireland’s bailout is a large and very expensive sticking plaster, David Wighton, 29 November 2010 http://www.thetimes.co.uk/tto/business/economics/article2825143.ece

³Signpost, Barclays Wealth, October 2010

20 October 2010 - UK Government Spending Review – The axe has fallen

So, the axe has fallen. The question is now, how will the changes touch you?

In the Government Spending Review announced today, the coalition Chancellor George Osborne unveiled the cuts that will be made to the public sector. These will impact budgets across Whitehall, including business, work and pensions, education, defence and international development….even the Royal Family will feel the pinch! The UK waited with baited breath, uncertain of how swingeing the cuts would be.

Now we know. The measures are the most sweeping set of budget cuts we have seen from a UK government in decades. Under the banner of “Britain stepping back from the brink” and with an underlying message of fairness and that “we are in this together”, Osborne announced the following measures:

1. State pension age will increase to 66 by 2020 (this will now affect women as well as men)

2. Job losses – an estimated 490,000 public sector jobs are to be shed

3. Departmental budgets to be slashed by an average of 19% over four years

4. £7bil in further welfare budget cuts

5. Tax the banks the maximum sustainable amount over a number of years

6. Police budget to be reduced by 4% per annum

7. NHS funding to be protected, with spending to increase year on year

8. Schools budget also to be shielded, with yearly increases planned up to 2015

With such a sweeping set of changes, investors will be eager to take into consideration that today’s announcement may hold implications for their portfolios. Will the changes, such as the retirement age, demand a fundamental revision of the way you structure your finances? Or can you continue as normal?

More broadly, what does it mean for the UK economic outlook? Does investing close to home still hold appeal or do the spending cuts mean more investors may look to international shores for their portfolios?

Clients of Barclays Stockbrokers may be interested to hear views from Michael Dicks, Barclays Wealth’s Chief Economist. A playback of Michael's immediate reaction to the Spending Review will be available from the evening of Wednesday 20 October. Clients will be able to log in and access this through the 'Comment' section under our Investment ViewPoint Connect tab.

Over the coming days we will be providing you with more information on how the government’s cutbacks might affect you.

18 October 2010 - UK Government Spending Review – How big will the scissors be?

At some point in the afternoon on Wednesday 20 October, Chancellor George Osborne will announce the UK coalition government’s Spending Review. This is the most significant piece of output yet from the fledgling government and will likely set the tone for their term in power. There has been much speculation surrounding the content of this report…will the implications be huge (some say it will feel like four budgets rolled into one), or will it turn out to be an anti-climax? The one guarantee is spending cuts, the question is how far will they go and where will the axe fall?

We will be keeping a close eye on events on Wednesday – watch this space for Investment ViewPoint reaction to the announcements as they happen, as well as what they could mean for you and your portfolio.

You will also be able to listen the reaction of Barclays Wealth’s Chief Economist Michael Dicks as he considers the implications of the Spending Review.

15 October 2010 - Yet more pension changes…..but it looks like a step in the right direction.

Those who take an interest in pensions will no doubt be aware of the changes announced in recent years. Although wholesale change was due to come into full effect from next April, restrictions are already in place to prevent the wealthy getting full tax relief on large contributions ahead of time.

In its interim Budget, the coalition government announced that they were looking for a more straightforward way to achieve the target £4m reduction in tax relief on pension contributions. Almost anything would be easier to understand than the complicated formula that the Labour government had devised. Anyone earning over £130,000 at any point was left confused as to how much they could contribute and how much tax relief they would receive.

Given difficult economic situation, it was always going to be likely that the current £255,000 annual contribution limit would be reduced, but at least it now looks as though tax relief will be easier to understand.

Whilst the full details are not yet available, (crucial to understanding the full impact) it appears that everyone will be able to contribute, or have contributions made on their behalf (e.g. by an employer) of £50,000 pa. They will receive tax relief on their own contributions at their marginal rate. This means that from 6 April 2011 someone earning £200,000 (this year they would have been limited to just £20,000 of pension contributions on which 50% tax relief was available), will be able to get 50% tax relief on £50,000 of contributions. Any unused part of the £50,000 annual allowance can be carried forward for up to 3 years, so that those who have irregular earning patterns have some flexibility.

At £50,000, this annual limit is at the top end of the figures previously mooted and the simplicity of the arrangements will be welcome. However, it will be accompanied by a reduction in the Lifetime Allowance - the maximum value that all current and previous pension savings can reach before penal taxes are incurred. This will reduce from £1.8m to £1.5m, with effect from April 2012.

Whilst the government intends to consult on measures to protect those with savings already approaching these levels, anyone with significant pension savings should take this into account when considering further pension contributions.

Changes have also been announced to the treatment of final salary pension schemes. Again these are not as draconian as had been thought possible, but would increase the probability of breaching the £50,000 annual limit and tax charges being incurred as a result. Full details will be available in due course, but the headline is that to determine the value of any increase in final salary benefits for tax purposes the increase will in future be multiplied by 16 rather than 10 at present. So members of final salary schemes may find themselves breaching the £50,000 limit with relatively modest percentage pay increases.

Concerning for some will be the potential for tax charges being incurred as a result pension benefits breaching the annual limit. The government has suggested that it is prepared to consider substantial charges of this nature being met by the pension fund rather than the individual, but nonetheless a potential concern for those in final salary schemes.

The government states that its intention through these reforms is to encourage pension savings amongst those on low and middle incomes. Given that 80% of the 100,000 people expected to be affected by these changes earn over £100,000, it looks like this will be the case. The ability to carry forward unused allowances will provide some flexibility for the self-employed, or those who receive one-off payments such as bonuses or redundancy payments.

As we learn more detail, we will provide updates in the coming days.

Ernst & Young Pension update

14 September 2010 - All change down under

Our far-flung friend Australia has finally emerged from a political deadlock that has extended almost three weeks past their snap elections on 21 August. Much like the period of political machinations experienced in the UK earlier this year, before our hung parliament was announced, candidates have spent the past few weeks vying for the support of independent MPs.

With the backing of a handful of Green and independent MPs, Julia Gillard now has the 76 seats she needs to form a Labour minority government.

There are interesting implications for investors here. It is unlikely that a minority government will be able to push through any radical policies and from an investment perspective, this removes some of the perceived political risk associated with the region.

In particular, there are some markets that will heave a sigh of relief. The previous Prime Minister, Kevin Rudd, had proposed a 40% super tax on the mining sector; a policy move that was met with outrage from investors. In the interests of making a diplomatic gesture, Julia Gillard tried to calm investors with a lower rate of 30%, but remains adamant that she will go no lower.

This government could prove welcome for operators in the Australian mining sector and potential investors. The mining tax was a deterrent for foreign investors and the prevention of such a tax should boost investment in the Australian Stock Exchange.

There have also been bold political and economic promises. Tony Abbott, the leading liberal candidate, has promised to cut debt by a third, were he to take the reins (which looks unlikely); whereas Gillard has sworn that she will return the budget to a surplus in 2012/13.

Recent economic announcements also push Australia in a positive direction on the investment barometer. Australia’s central bank left its key cash rate unchanged at 4.5%; an upbeat drum for investors to beat.

For Barclays Stockbrokers clients, it is well worth keeping an eye on events as they develop, for the political happenings in Australia will have a real impact on the country’s investment potential.

For investors looking to gain investment exposure to Australia then the iShares MSCI Australia, an ETF designed to track the MSCI Australia index, could be worth considering. Bear in mind that investment into ETFs can fall as well as rise and you may get back less than you invested.

09/09/2010 - No news is still news…

At today's meeting of the Bank of England's Monetary Policy Committee (MPC), the decision was taken to maintain the base rate at its current level of 0.5%. The MPC's call to hold rates static was widely anticipated, a case of no news is still news. Most commentators have indicated that they feel it will still be some time before rates start to move higher again. With the inflation threat ever looming in the present economic climate, the current sentiment seems to be shifting in the opposite direction, even towards thoughts of further quantitative easing measures. As the Bank of England looks likely to hold interest rates at their current low levels until well into 2011, the challenge facing investors in trying to earn an income from their investments is magnified. In our latest Investment ViewPoint: Analysis, we consider the different strategies available to investors looking to earn a crust from their investments.

1 July 2010 - Markets back in focus as sporting distractions fade

After a relatively quiet period for the markets and as the World Cup in South Africa reaches the quarter finals, economic events have come back into focus. Markets wobbled on Tuesday 29 June on the back of worries that the European Central Bank (ECB) is being too rapid in scaling back its support to Eurozone banks.

The ECB news was further exacerbated by fresh concerns over China’s growth rate. The US based Conference Board indicated that the recently introduced leading Chinese economic index showed an upward shift of just 0.3% in April, well behind the initial forecast of 1.7%. This heightened fears of a slow down in Chinese growth and the knock on effect that would have on economies across the globe. The Conference Board added further fuel to the fire as it announced that US consumer confidence had decreased to 52.9, from 62.7 in May, once again well below expectations.

Amid these news flows, major markets endured a turbulent trading session with all developed market indices suffering losses on Tuesday. In the UK, the FTSE 100 index fell 3.1%, to close below 5,000 and across the English Channel, both French and German markets suffered similar losses, with the CAC40 and the DAX falling 4% and 3.3% respectively. Wall Street fared no better in the later trading session with the Dow Jones closing down 2.65% at 9,870.3 points.

In currency markets, the Euro tumbled to a 19 month low against sterling and an eight year low against the Japanese Yen.

Conferences for the G20 and also G8 are key fixtures on the economic calendar, particularly in the aftermath of the credit crisis as these forums were seen as instrumental in enabling a consistent strategic global response. Reaction to the recent G20 summit in Toronto has been less than enthusiastic. The agreement reached by participants to halve economic deficits by 2013 appeared at first to be a strong commitment. However, sceptics were quick to highlight that for most, this falls within the threshold of the deficit cuts already committed to. This makes it no more than a validation of targets each nation had already planning to achieve.

Here in the UK, most investors are already familiar with new Chancellor George Osborne’s austerity budget and this was specifically referenced in the final G20 output. Banks were the other main area of focus for the G20, with the summit participants agreeing to focus on achieving new minimum capital level requirement in time for their next summit in Seoul, South Korea, scheduled for November.

So, has the football lull been a mask for the calm before the storm or are we experiencing some minor road bumps in the long haul journey to full recovery? Keep track of market events and movements by logging into our Research Centre.

23 June 2010 - Emergency Budget Investment ViewPoint

Yesterday saw the Chancellor deliver the most eagerly anticipated budget of recent times. This budget is also probably the first one where the public has been softened up in advance of the painful measures..

The current economic climate and a budget deficit forecast to be £149 billion by the end of this year, means that tough measures are necessary. Chancellor George Osborne has opted to administer 80% of the pain via cuts in public expenditure and the remaining 20% in tax rises. The Chancellor hopes that these measures combined will help to rebalance the books by 2014/15.

In summary, the key areas likely to impact private investors are:

Rise in Capital Gains Tax (CGT) from 18% to 28% for higher rate taxpayers. The change is effective from midnight on 22 June 2010; however, CGT will remain at 18% for basic rate taxpayers.

CGT exemption remains at the current level of £10,100 for the current tax year. This is expected to rise in line with inflation thereafter
VAT will rise from 17.5% to 20%, effective from 4 January 2011
The level at which basic rate tax is incurred, will rise by £1,000 to £7,475 from April 2011
The link between the basic state pension and earnings is to be restored from April 2011

More detail will undoubtedly emerge over the coming days, providing depth to the headlines, but we have outlined the key take-aways for private investors at this point. An in-depth analysis of the emergency budget, prepared by Ernst & Young, will be available in the on our website from today.

If you wish to protect your investments from the higher rates of CGT, consider making your full annual contributions to ISA, which allow you to protect £10,680 pa from CGT. You might also consider putting your long term retirement savings into a SIPP, in order to receive a tax rebate of up to 50% and to protect growth and income from tax*.

Find out more about the Barclays Stockbrokers and the SIPP from Barclays Stockbrokers.

Please note that Barclays Stockbrokers is unable to provide tax advice. Tax rules can change at any time. If in doubt you should consult a tax adviser who will be able to assess the best course of action available to you.

* Please note that the 10% dividend tax is deducted at source and can not be reclaimed.

28 May 2010 - What's the score at home and away?

In the aftermath of the UK general election and the Greek sovereign debt crisis, volatility in both the UK and European markets has continued apace in recent weeks. In this week’s Investment ViewPoint comment, we look at some of the activity driving market sentiment, both at home and away.

What is happening at home?

Public spending cuts?

As we await the emergency budget on 22 June, our new Chancellor, George Osborne has made clear that unless the UK tackles its huge public debt, the economic recovery could be derailed. Other countries with large deficits, including France and the USA have already taken action to make savings this year, in order to restore confidence and sustain economic recovery.

Osborne has announced plans to cut government spending this financial year and these savings will to be used to reduce the budget deficit from where it currently stands, at an unprecedented £156 billion.

An independent Office for Budget Responsibility (OBR) has been established on an interim basis, to make an assessment of the state of the public finances and the economy ahead of the emergency budget. It will also launch a report on “skeletons in the closet”, examining every spending decision taken since 1 January this year, to ensure that they are consistent with the Government’s priorities and good value for money.

A change to the tax system?

The UK Government’s: “Programme for Government” document, released this week, suggests that the emergency budget will reveal changes to our tax system. Capital Gains Tax (CGT) limits look set to be revised, though the timing and nature of such changes are yet to be specified.

Rumours suggest that we might see a decrease in the annual allowance for CGT; though perhaps more likely is a change in policy to bring Capital Gains rates in line with Income Tax rates.

We shall discover the detail behind this on 22 June, but in the meantime, it is wise to be prepared and organise your investments to maximise tax efficiency. You still have time to act and ensure you are making the most of our and tax shelters, so you can avoid paying unnecessary tax on your investments.

UK markets

FTSE 100 graph

With the FTSE 100 closing below the key psychological level of 5000 on 25 May, some market commentators have suggested that stocks are looking cheap and that there is value in the UK market. If you share this view, you could consider an Exchange Traded Fund (ETF) that tracks the UK market such as the iShares FTSE 100 or iShares FTSE 250.

Bear in mind that the value of ETFs can fall as well as rise and you may receive back less than you invested.

What is happening away?

Continuing fears of European contagion
European markets continue to react to the slew of Eurozone news, which is largely centred on the introduction of austerity measures to tackle burgeoning budget deficits. Concern is mounting that the fiscal tightening will impact the already weakened Euro, amid worries that that budget deficits could cause the weaker Euro zone countries to default. The very real risk of a double dip recession remains, which would further damage public finances across the whole Euro zone.

What is the latest for key Euro zone members?

Greece – has started drawing on its €80 billion bail-out fund and made a start on tackling its domestic issues, announcing tough action on matters such as tax evasion. This has triggered a wave of public sector strikes and violence on the streets of Athens

Spain – the government won backing for its austerity programme by a single vote, as it bids to address its budget deficit and restore market confidence. The rescue of Spanish bank, CajaSur, by the Spanish central bank raised concerns as such a rescue has only happened once before. Further market jitters were sparked by the announcement that four Spanish savings banks had plans to merge
Italy - budget cuts of up to €24 billion over the next two years were approved
Germany – propose to extend their recently introduced short selling ban to cover all stocks and Euro currency derivatives not intended for hedging.

It is not all bad news; whilst the relentless news flows have had a negative impact on market sentiment, this does not rule out investment opportunities. Many believe the bad news has left European share prices undervalued, resulting in their share prices trading at significantly lower levels than comparable businesses in other parts of the world.

If you agree with this view, there are a number of ways you can gain exposure to the wider European market, such as investing in a European focussed fund. Use our to search for funds in the “Europe excluding UK” sector, such as Neptune European Opportunities, Blackrock European Dynamic or Standard Life European Equity Growth.

You should bear in mind that fund performance is not guaranteed, funds should be considered as mid-to-long term investments, their values can fall as well as rise and you may receive back less than you invested.

12 May 2010 - As the mists start to clear

Almost one full week after the UK election, the picture starts to clear and David Cameron has been appointed the new Prime Minister of the UK. He takes over “a political system in need of reform” and has stated his intention to form “a full coalition” between his Conservative party and the Liberal Democrats, led by Nick Clegg who will now assume the role of Deputy Prime Minister. Volatility continues and first thing this morning the FTSE-100 initially opened 40 points lower, but recovered quickly suggesting that markets realise the hard work starts now in tackling the UK’s economic and political problems. In this Investment ViewPoint, we continue our analysis of the market’s reaction to the developments in Westminster.

Leading up to the election, we saw the FTSE-100 fall from a high of 5,553 on Friday 30 April to hit a post-election low of 5,073 on results day, Friday 7 May before closing the week at around the 5,123 mark, losing 2.6% in Friday’s trading session alone – the worst weekly performance in 18 months. By the time markets closed on Monday afternoon the FTSE-100 had recovered more than 5% as markets digested the rescue package agreed by the European Union over the course of the weekend. Tuesday then saw the FTSE give up some of these gains, closing down 53 points at 5,334. It really has been a roller-coaster ride this week for the UK’s main equity index!

If you are looking to achieve enhanced returns from the UK markets over the next few years, then you may wish to consider our latest Structured Product. Our 3 Year FTSE 100 Supertracker Issue 2 offers the opportunity to achieve enhanced returns from the UK markets over the next three years albeit that your capital is at risk; you could get back less then you invested even if you hold it until the end of its term.

But you will need to hurry – this issue is only available until midday on Friday 14 May.

Similarly, if you are looking for an investment opportunity but feel nervous about the current market conditions, perhaps now is the time to add the expert services of a professional fund manager to your portfolio. Barclays Stockbrokers’ Funds Market gives you the chance to find your perfect investment partner, offering a wide range of funds managed by some of the top managers in the business, and a host of tools and research to help inform your investment decisions. The value of funds can fall as well as rise and they should be seen as a medium to long term investment.

Remember, Barclays Stockbrokers does not give advice. If you are in any doubt as to the suitability of investments mentioned in this Investment ViewPoint, please seek professional financial advice.

07 May 2010 - UK wakes up to a hangover

Friday 7 May and the long awaited general election is finally over. No more live television debates or endless campaigning by the respective Party leaders. And while the final votes are still being counted, the UK faces up to the prospect of the first hung parliament since 1974.

“So is a hung parliament really bad news for the UK economy?” “How will this result impact markets and what do the wider global economic events mean for my portfolio and current investment strategy?” These are the key questions being asked by our clients and in our first post-election ViewPoint, we discuss these, taking a snapshot view of last nights result while also reviewing significant activity in the global bond, equity, currency and commodity markets.

The global economic landscape

It is too early to tell what impact, if any, a hung parliament will have on the UK economy. Markets have a habit of pricing in anticipated news and a hung parliament has been the expected outcome by most commentators for a while. However the UK election is only one of a number of factors influencing global markets and trading by clients at Barclays Stockbrokers. Yesterday’s historic fall in the US coupled with continued unrest in the Euro zone and companies striking black gold in the Falklands Islands have grabbed the economic headlines, overshadowing the election impact from a market perspective and driving a number of trading trends on Barclays Stockbrokers platforms.

Firstly taking a look at the UK, government bonds dropped and sterling fell this morning as exit polls and results in all point towards a hung parliament with the Conservatives the largest party. Generally speaking a hung parliament is not good news as it maintains the uncertainty stalking UK financial markets. With no clear winner and therefore no clear mandate for a government to drive the strategy to tackle the budget deficit it potentially leaves the UK market open to further volatility. That said, some commentators, including our own Barclays Wealth analysts do not think that a hung parliament would necessarily stifle fiscal decision making, so uncertainty remains. This morning the FTSE 100 was down 63 points at 5198.7 on yesterdays opening with shares also taking a tumble. However market dips such as this can create opportunity - if stocks hit artificially low prices trading opportunities can arise for clients looking to capitalise on stocks they see as ‘weak and cheap’. Sector news is also an obvious influence. Looking at the top ten trades on the Barclays Stockbrokers platform yesterday, five of these companies were from the oil and gas producers, and mining sectors. Rockhopper Exploration Plc was the fourth heaviest purchased stock as the company became the first to find oil off the Falklands Islands in a discovery that could be beneficial to the new British Treasury. Rockhopper’s(RKH) share price jumped 56 ½ to 94p following the announcement of the discovery. With Desire Petroleum(DES) also exploring in the North Basin it is perhaps no surprise to see them as the sixth heaviest purchased stock.

Across the Atlantic, in the US the Dow Jones Industrial Average dropped by more than 1,000 points in yesterday’s session, the largest intraday drop in its history. A ‘trading glitch’ appears to be partly responsible but a sell off as a result of continued sovereign debt ‘contagion’ fears developing across Europe also sent traders scrambling for the sell button. In Europe concerns on the austerity measures being adopted by Greece do not appear to be abating. Despite the support being provided by the European Union and International Monetary Fund the Euro has continued to fall against the US dollar. On Monday 3 May EUR/USD started the week at around 1.3325 but over the course of the week it fell to as low as 1.2560 before rallying over the last 24 hours currently trading at 1.2729. As you would expect EUR/USD was the heaviest traded currency pair on the BARXdirect: FX platform as clients take a flight to quality and the safer haven of US dollars.

So, the general feeling in the markets is clearly one of uncertainty. Comparisons are being drawn with the financial crisis from 2008 with concerns that the sell off may escalate as investor panic sets in. However it is worth considering that the economic landscape now is different. When the financial crisis hit, global economies had not anticipated the extent of the problems they were faced with and recession rapidly followed. Current events are taking place against a back drop of global economic recovery and 18 months experience of markets in turmoil so the context is different. That said, it remains to be seen how markets will move next.

If you believe the UK recovery is set to continue and are seeking investment opportunities to capitalise on this then you may wish to consider our latest Structured Product. Our 3 Year FTSE 100 Supertracker Issue 2 offers the opportunity to achieve enhanced returns from the UK markets over the next three years whilst having some level of security on the downside. Though, with this investment, you might get back less than you invested even if you hold this to maturity and you may get back less if you sell it early.

Similarly, if you are looking for investment opportunity but feel nervous about the current market conditions, perhaps now is the time to add the expert services of a professional fund manager to your portfolio. Barclays Stockbrokers' Funds Market offers a wide range of funds managed by some of the top managers in the business, and a host of tools and research to help inform your investment decisions.

Remember, Barclays Stockbrokers does not give advice. If you are in any doubt as to the suitability of investments mentioned in this Investment ViewPoint, please seek professional financial advice.

The value of with all these investments can go down as well as up and you may get back less then you invested.

30 April 2010 - Pre-election market fever, it’s all Greek to me…

As 6 May draws closer, it is almost impossible to miss the salacious General Election press coverage. Popular topics include the ever changing opinion polls and subsequent possibility of a hung parliament. From an investment perspective, the focus is trained on the elected government’s likely impact on the economy. Proposed action as to how each party will tackle the national budget deficit is a dominant talking point, amid the general speculation surrounding the anticipated changes depending on who is in charge after the election.

Despite election stories hogging the limelight, this week’s news that ratings agency Standard & Poor's (S&P) had cut the credit rating for three euro zone member states grabbed the headlines. First came the announcement that Portugal had been cut two grades to A-, amid concerns about its public finances. Minutes later Greece's credit rating was slashed right down to junk (BB+) level, the first time such a fate has befallen a euro zone country. A day later Spain was downgraded from AA+ to AA.

The downgrading of a country's credit rating means that the ratings agency deems it to be a riskier place to invest and consequently increases the interest rate investors will charge the county’s government for loans. The lowest grade - junk - means a country actually loses its investment grade status.

S&P said its decision to cut Greece’s rating was based on its latest assessment of the political, economic and budgetary challenges that the Greek government faces, suggesting that its weak long-term growth prospects make it less credit-worthy.

The euro and global markets tumbled on the back of the downgrade announcements, as concerned investors feared that the loss of confidence in Greece might spread to other weak euro zone economies and could ultimately derail the economic recovery. The FTSE 100 fell 4.4% (257points) between Monday 26 April and Wednesday 28 April, wiping out most of the gain it had seen since rallying in mid-March.

However, emergency talks with the EU and IMF raised hopes for a quick bailout of Greece, along with the prospect of a positive jobs report in the US; which boosted Asian markets in early trade on Friday, following rises on Wall Street and in Europe.

Whilst the UK has, so far, maintained its AAA rating, unless the government takes drastic action to cut borrowing, concern is growing that Britain could be heading towards the same fate as Greece, Portugal and Spain. The Institute for Fiscal Studies has stated that the political parties' plans for addressing this key issue are thin on detail.

Whatever the election outcome and even if jittery market conditions persist in the short term, there will still be investment opportunities in the coming months, it is simply a case of finding them.

Support service investment opportunities?

The key economic objective for the new government has to be a focus on reducing Britain’s record-breaking budget deficit. A popular pre-election theme is the need to cut public sector costs and one way to do this is through outsourcing some back-office functions.

Outsourcing is an attractive option for a government looking to cut costs, as outsourcers strive to maintain or improve service levels. Their other key advantage is that they can provide these services at a lower cost than if such functions were kept in-house. This means that companies that provide outsourcing have the potential to be in demand post election and hence could be an investment opportunity to consider.

Such companies can be found in the ‘Support Services’ sector of the FTSE and include names such as Serco (SRP) and Mitie (MTO).

Healthcare investment opportunities?

With an ageing population, the NHS and long-term care remain hot topics for the political parties striving for an election victory. When the US evaluated its health reforms, the result was the government taking a greater role in healthcare funding.

Improving the current structure in the UK will be tough for a government that needs to cut costs. Part of the solution is likely to be a growing reliance on the private sector to ease the growing burden of government NHS funding.

This is good news for Healthcare companies including pharmaceutical and medical device suppliers – companies such as GlaxoSmithKline (GSK) and Shire (SHP) and others in the ‘Pharmaceuticals and Biotechnology’ sector could be further investment opportunities to consider.

Enhanced returns from the UK markets

Whilst we have seen increased market volatility as investors digest news surrounding the election build-up and the credit rating downgrades of Greece, Portugal and Spain; recent figures have shown that the UK economy is still on the gradual road to recovery. With jobs numbers also suggesting that unemployment is finally falling.

If you believe the UK is in recovery and are seeking investment opportunities to capitalise on this then you may wish to consider our latest Structured Product. Our 3-Year FTSE 100 Supertracker Issue 2 can offer you the opportunity to achieve enhanced returns from the UK markets over the next few years whilst having some level of security on the downside. Though, with this investment, you might get back less than you invested.

Find out more about our 3-Year FTSE 100 Supertracker Issue 2

Remember, Barclays Stockbrokers does not give advice. If you are in any doubt as to the suitability of investments mentioned in this Investment ViewPoint, please seek professional financial advice.

31 March 2010 - Budget 2010 and election countdown

One week after the budget was announced by the Chancellor Alistair Darling, we review what have been the key headlines across the markets and investment community alike and assess how the budget has been digested. In what could possibly have been this Chancellor’s last ever budget, market commentators where keen to see if there would be any big surprises coming out of his investment battle box in the run up to a much anticipated 6 May general election. We also take a step back through time and review the performance of markets in previous battles for 10 Downing Street and see if this holds any insight for the coming 12 months.

The market response has been relatively muted since the Chancellor’s budget announcement with just an eleven point change on FTSE opening levels from Wednesday 24 March to Wednesday 31 March. This is perhaps to be expected given the relatively uneventful budget and an overall mood of uncertainty continuing ahead of the general election and a potential hung parliament. All eyes now turn to the election campaign calendar and some key dates. With the exact timing of the election at the Prime Minister’s discretion, the latest possible date is 3 June. However with current consensus of a general election being held on 6 May it suggests that an announcement will be made in the next couple of weeks. The battle lines have now been drawn and in the subsequent week from the budget announcement we have started to see a shift in engagement from the political parties with the prospective Chancellors taking to the stage via Monday night’s live televised debate. We now enter into a pivotal period for markets and investors alike as portfolios and trading strategies are reviewed to take account of the changing political and economic landscape. You can keep track of these developments by logging into your account and visiting the Market news and data section where you can build watchlists on specific stocks or sectors that you believe could be affected helping you proactively manage and stay in control of your investment decisions.

For some commentators it is perhaps still too early to make any firm commentary on the impact the budget is having on the market however our colleagues at Barclays Wealth Advisory and Financial Solutions have provided some suggestions on where they see opportunities on the investment horizon. For example as the election approaches they make the following four observations for portfolios depending on the investor’s outlook:

Highest conviction: underweight gilts
Next highest: stay positive on UK equities
For the brave: buy sterling now on a 6-9 month view
For the nervous: buy currency and equity put options as portfolio insurance

Of course, it is important to note Barclays Stockbrokers does not give advice. If you are in any doubt as to the suitability of investments specified in this Investment ViewPoint, please seek professional financial advice.

Taking a closer look at last weeks announcement we recognise that little has changed or is likely to change from a macro-economic perspective. Whoever wins the election will still have to steer the UK out of its current budget deficit. And with manifestos yet to be published it remains unclear what definitive path will be taken by the respective parties to tackle the budget deficit. Markets are waiting. Historically any correlation between markets and UK elections has been inconclusive however the table below perhaps provides some interesting insight. On average equities and bonds have grown by 3.6% and 4.4% respectively in the six months leading up to an election with bonds continuing to perform reasonably well in the six months after the election posting an average gain of 5.2%. Historically a Labour government has provided 3.2% and 5.4% growth in equities and bonds respectively in the six months after an election, while a Conservative Party win has shown equity markets have contracted by 5.4% with bonds bucking the trend and posting gains of just under 5% however, past performance is not an indicator of future returns.

Markets and elections – UK history

Markets and elections – UK history graph 1

Markets and elections – UK history graph 2

If you would like more information on which stocks are performing well in the run up to the election why not login to our Market news and data section and review the latest news and insight as it comes to the market. Alternatively our is generally used as a helpful tool to keep track of the top traded stocks by clients through the Barclays Stockbrokers dealing desk

Regular followers of Investment ViewPoint will also be pleased to know we will be continuing to track market dynamics in the lead up to the general election. You can stay in touch with these updates by logging in to your account and visiting the Investment ViewPoint Connect section of our website.

24 March 2010 Budget 2010: Immediate market reaction and insight

With a highly anticipated general election firmly expected to be held on 6 May, today’s budget announcement delivered by the Chancellor of the Exchequer, Alistair Darling has taken on extra significance. As the UK government position themselves for the upcoming battle for number 10 Downing Street and speculation continuing on whether we will see a hung parliament, the economic agenda Darling sets out today will shape the immediate political battle ground and may ultimately influence who will be the eventual winner of the general election. With markets continuing to look for certainty on which political party will win and therefore by default what economic measures will be used to cut the UK’s eye watering £167 billion budget deficit, this budget is no ordinary budget.

Today’s special Budget 2010 Investment ViewPoint takes a snapshot of the budget announcement as it is delivered. Over the coming days Investment ViewPoint will review the budget’s impact, not only on current investment approaches but how it could influence trading strategies in future months as markets reaction to the developing economic and political landscape beds in. So, as Alistair Darling details his strategy to maintain the UK’s return to positive economic growth, we take an at-a-glance look at the budget headlines relevant to you.

Personal Taxation

Pre-announced increases i.e. introduction of 50% tax rate, erosion of personal allowances for individuals earning £100k+ and increase in national insurance contributions with effect from 2010/11 tax year all to proceed unchanged.
Inheritance tax threshold frozen for 4 years
No changes to VAT or income tax planned.

Fuel, Cigarettes and Alcohol

Pre-announced increase in fuel duty to be phased between April 2010 and January 2011
Duty on cider to be brought into line with other alcohol duties, equal to a rise of 10% above inflation
Wine beer and sprit duty raised 2% p/a until 2013 Tobacco duty up 1% in 2010 and 2% p/a thereafter.

Business

£2.5bn allocated to support skills and innovation development within small businesses
£94bn gross lending by publically owned banks to small businesses
One year reduction in business rates effective from October 2010-03-24
Relief on capital gains tax for entrepreneurs increasing 100%.

Employment

Decrease in qualifying time for over 60’s to receive work credits, with the current 6 month work / training guarantee extended till 2012
Public sector pay rises capped at 1% from 2011.

View the Budget Alert 2010 from Enrnst & Young

Visit our Tax Centre to find out more about tax efficient investment products or login to our research centre to see how the budget announcement is being received in the markets.

You can find out how the budget is impacting currency markets through the BARXdirect: FX platform.

17 February 2010 - Pension economics: Baby boomers left holding the baby

As we enter a new decade following the worst economic downturn in modern times, the government’s focus is very much on reducing the United Kingdom's fiscal deficit and indeed what this means for the UK tax payer who has been left struggling as the country continues to experience high unemployment. With a general election later this year and various policies being produced to tackle the budget deficit from both the Labour and Conservative parties, it is clear there are big decisions being made that will affect many generations to come.

This macro economic and political backdrop raises concerns on the prosperity of future generations. It is estimated that the UK rate of unemployment for young people (16-24 year olds) is 16.1%. This section of society risk becoming a ‘lost generation’. They will have problems getting on the employment and property ladders and this raises the question, how will they provide for their retirement in later years? It also challenges the wider population on whether the country in general is doing enough to finance the later years in their life. So where is the wealth and how can Britain overcome these problems? This weeks Investment ViewPoint reviews the wealth deficit that faces current and future generations.

Are you saving for your retirement?

Perhaps the most important and daunting investment question facing the UK population today. It is easy to get caught up in the day-to-day challenges of earning a living, running a business or brining up children but what happens in later life? How do we ensure we have sufficient funds for our retirement years and what should we be doing about it now?

Market commentary suggests there is a lot that should be done just now to aid not only the current generation but future generations. Speaking at the London School of Economics on Tuesday, David Willets, the Shadow Minister for Universities and Skills and Conservative MP for Havant, warned "We are in danger of imposing too many debts on the younger generations". Mr Willets also produced data which showed that approximately 33 per cent of pension benefits in the UK were held by individuals aged 55 to 64 - referring to the baby boom generation born before 1970 (people who are now 55-64 were born between 1946 & 1955). He also commented that people aged between 45 and 54 held a further 25 per cent of pension benefits and astonishingly people aged between 50 and retirement age had an aggregate value of housing wealth standing at approximately £1,280bn which is double any other age group.

Schools out for pensions

Some of these statistics are quite concerning and raise observations of inequality between generations. It suggests that the generation born between 1970 and 2000 will never be able to accumulate the same level of pension or housing wealth as their parents. It also suggests that those generations will pay a heavy price in the future not only for the benefits being enjoyed by today's pension generation but indeed the burden of helping clear the UK's eye watering £11.5bn budget deficit*. It is clear today's pension generation face tough times and even tougher decisions on how they not only fund their retirement but perhaps more importantly what inheritance will they leave for their friends and family. Mr Willets continues "My view is that baby boomers are not so selfish that they will not make sacrifices".

There are of course conflicting views on the UK's pensions crisis with George Magnus, Senior Economic Adviser to UBS, suggesting there has been little research into wealth inequality in the UK and there are several factors at hand that need to be considered on why there is such a disproportionate gap in housing wealth, not least the availability of cheap and easily accessible credit of the last thirty years where the UK housing market started to flourish.

Fail to prepare, then prepare to fail

How are you saving for your retirement? There are a number of ways investors can position their pension portfolio to help ensure they make the most of their wealth in the coming years. John Cotter, Vice President at Barclays Stockbrokers says, "Tax rates are on the rise and for the first year in more than a decade we will have multiple higher rates. Therefore it is more important than ever to consider ways in which you can position money outside of the tax net by maximising any tax free allowances available to you. "

Barclays Stockbrokers have a range of products to help you provide for your future financial needs. Our PensionMaster account allows you to make your own pension decisions, choosing how, where and when to invest. You can also save and invest in a tax-efficient manner through our Investment ISA with an annual contribution limit, currently £10,680 Please remember that the tax year ends on 5 April 2012, so you still have time to maximise your contributions for the 2009/10 tax year if you have not already done so. Tax treatment can change in the future and are dependent on individual circumstances.

Of course if you are still undecided on how best to construct your pension portfolio there are tools available at your finger tips. Login to our Research Centre where you will find out all the latest information on investment opportunities and current market movements. Alternatively, login to access our Education Centre ( Investment ViewPoint: Connect) to see all the latest guides, training tools and investment publications and articles available to you as a Barclays Stockbrokers client. Finally you can ask questions of our resident expert John Cotter, simply click the 'Email John' and we will respond in due course. Alternatively email us to register your interest to attend one of John’s extremely popular seminars** which are currently being scheduled for various locations around the UK.

Making your own pension investment decisions are not for everyone and requires skill and knowledge, if you are unsure if this is the right thing for you please seek financial advice.

* As At December 2009. Office of National Statistics

** In response to client demand, in 2010 we are planning a number of seminars across the country that will be hosted by John Cotter. There will be two types of seminar - Investor and Trader.

The 'Investor' seminar will be suitable for both beginners and more experienced investors who are looking to use the wealth of information, tools and products on our website to help them make more informed investment decisions.

The 'Trader' seminar is designed for more active traders and clients interested in leveraged trading such as Contracts for Difference, Financial Spread Trading and Foreign Exchange ('FX').

1 February 2010 - Out of recession but not out of the woods

It was confirmed on Wednesday that the UK officially came out of recession with a 4th quarter growth of 0.1%.

Despite a return to growth, following six consecutive quarters of contraction and a 6.1% reduction in the economy, the news was met by a tentative market reaction, with a small 16 point rise to 5,276.85 by close on Wednesday 26 January.

This reluctance to celebrate follows a shaky start to the year for the economy. Take for example last weeks Investment ViewPoint: Comment Parallel economics where we discussed how investors are historically wary in the run up to a close run election and fuelling this, the continued uncertainty of how the Government will tackle Britain’s budget deficit of £178billion. Additional factors this week may have added to the apprehensive market mood including a shock announcement of sweeping reforms of the US banking system by President Obama (although the response from both UK Government and opposition indicate this might not be a consistently adopted approach), rumours around the possibility of the Chinese economy overheating and policy makers reigning in domestic bank lending.

The glimmer of recovery also seems to be restricted to certain sectors with others struggling to return to the black such as construction with public spending cuts adding to the pressure of low levels of building activity.

Alastair Darling yesterday warned that there remains a possibility that the UK could slip back into recession despite the growth. The impact of the return to previous tax levels of 17.5% and the Big Freeze have yet to take hold and may still have a detrimental effect on the economy.

A return to growth could also mean that it might not be too long until the quantitative easing measures introduced to combat recession, are paused, with close monitoring and control of inflation a prerequisite. No doubt the government will be paying very close attention to market reaction and next quarter’s figures to inform their next steps.

To stay abreast of market sentiment and the latest economic news sign up for our Alerts services. To register, select ‘Alerts’ from the left hand menu of the Research section. Choose from a range of stock alerts that will notify you via email whenever a stock prices rises/falls by an amount or percentage you select. Alternatively register for Market Insight Alerts directly from our research partners for all the latest market movements and news including Morning Call, Midday roundup and Analysts Views.

12 January 2010 - Parallel economics

High unemployment, union strikes, tough trading conditions on the high street and political uncertainty – all symptoms of a chilly 2010 UK market outlook. It is easy to get caught up in the bleak headlines as we experience arctic weather conditions and struggle to return to work after the holidays. It is also easy to forget that we have seen similar times before.

Just over thirty years ago the original ‘winter of discontent’ hit the UK with some of the coldest weather on record and tens of thousands of public sector workers taking part in strikes, including rubbish collectors, hospital workers, grave diggers and airport staff. Approximately 4.7% of the work-force were unemployed and whilst the way we measure unemployment has changed, the claimant count remains roughly the same today - the Aug 09 - Oct 09 figure of 7.9% remains a worryingly high figure.

In 1979 we also had a labour government struggling to stay in office which finally lost a confidence motion, leading to a general election that was duly won by the Conservative party. Fast forward thirty years or so and whilst we have yet to see the same severity levels of industrial action, January 2010 is hardly short of crisis or political unrest. With the country struggling to withstand the winter weather, talk of regulating the national grid to ensure there is enough gas to fuel the country, splits in the Labour government and the political parties kicking-off their campaigns ahead of a spring or summer general election, it is all sounding rather familiar.

So will markets freeze during this uncertainty and see lukewarm trading conditions throughout 2010 or can we expect to see things warming up as the UK pulls out of recession in a pivotal election year?

Continued uncertainty on how Labour and the Conservatives will tackle Britain’s chilling budget deficit of £178billion has hit sterling over the last month falling 3% from $1.65 to $1.60. On an equities basis, generally speaking some commentators would suggest that markets tend to suffer in a close-run election contest and historically share prices have declined by an average of 15% in the six months leading up to a general election.

All of this suggests that the smart investor should be increasing the heat on their portfolio to ward off the winter freeze and get ready for whatever market weather 2010 brings. Despite these challenging times there was some good news this week where retailers reported their best December growth for eight years with 4.2% rise in like-for-like sales. Clothing, internet and food retailers were the main winners on the high street and while this news was warmly received commentators remain tentative that this may only be a temporary boost on the long road to recovery.

The old adage of holding a fully diversified portfolio in times of uncertainty can generally be considered a sensible approach, especially after the market volatility of the past 18 months. Not only ensuring you have a fully diversified equities portfolio but more broadly having exposure to multiple asset classes including funds, equities, fixed income products and global currencies.

If the UK market does indeed have a chilly outlook in the early part of 2010 then a defensively constructed portfolio might weather the storm better than one with a more opportunistic outlook on markets. You will generally find sectors such as telecoms and pharmaceuticals in a defensive portfolio. Why not review the performance of these sectors by accessing our research centre?

Alternatively if you are looking to speculate on the performance of sterling against the dollar and other major currencies you can do so on our BARXdirect: FX platform, supported by research from Barclays Capital. FX dealing is for experienced investors; you can lose more than you invest.

So, if you find yourself at the start of the New Year reviewing your portfolio and investment goals for the weeks and months ahead, login to our Research Centre where you will find all the tools and information you need to help make informed decisions. As ever though, please bear in mind that any investments can lose as well as gain value.

29 September 2009 - G20: Shift from West to East

Gordon Brown hailed a new era of economic co-operation at the close of the G20 summit last week, the G20 will become the premier body for monitoring international economic problems” said Brown.

The main outcome of the second G20 summit of 2009 following April’s gathering in London saw agreement that all future G20 proceedings will concentrate upon international economic policymaking, but will not replace the existing G7 or G8 groups. The primary focus of G8 will now be to consider international relations and foreign policy.

With this in mind, the focus of the latest G20 summit was economic recovery and financial regulation. Perhaps most compelling was the acknowledgement of the long-standing changes to the global economic landscape, namely the growing strength in some developing economies. The world leaders committed to a shift of at least five percent in the International Monetary Fund (IMF) voting share to developing economies from over-represented countries. The shift would make the split nearly 50-50 from the current share which is 57 percent for industrialized Western countries and 43 percent for mainly Eastern developing countries.

This shift from west to east is similarly acknowledged in the membership of the G20, which has 6 Asian members including Korea, China and Indonesia, as opposed to G8 which had only Japan. However, when it comes to gauging the G20 position, it would appear that increasingly, the members to watch are the US and China, or the “G2”. “If you want to find out what the world is going to do then take the US position and take China’s position and draw a line somewhere in the middle” said David Rothkopf, former senior official in the Clinton administration.

Some economic observers have questioned the influence of the G20, arguing that the decision making process will prove to be too unwieldy, likening it to the G8. There was no concrete economic stimulus plan as some expected, but there are hints that a new way of running the world economy is coming in to play. Leaders intend to build upon the ‘framework for strong, sustainable and balanced growth’ with a three step process*.

1. Agree priorities for the world economy in annual G20 summits
2. Countries submit reports to show how their domestic policies match those ambitions
3. The IMF assesses whether national plans mesh together to support global objectives.
The G20 will continue to meet regularly to monitor the progress of the resolution of the global economic crisis - with the next meeting scheduled for later this year.

The general sentiment of this latest summit was that the collective G20 actions taken throughout 2009 have done enough to address the global recession so far. However, there is acknowledgement that more must be done to keep the global economy on the path to recovery and ensure that the lessons from the past have been properly learned. The new framework and membership changes for the G20 appear to be the first steps towards achieving this.
If you would like to find out more about emerging markets visit our Investment ViewPoint: Analysis section, where we have been observing the investment prospects for Emerging Markets. For a general view, read Emerging Markets – ready for recovery? Or perhaps you are interested in an individual nation? View an in depth investment profile of Brazil in our latest Investment ViewPoint: Analysis, Brazil – time to smell the coffee?

*Source: Financial Times, 26/27 September 2009; “New Body takes on economic leadership”.

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24 September 2009 - From Wall Street to High Street

It is one year since one of the most prestigious Investment Banks in the world, Lehman Brothers, collapsed sending financial shockwaves around the world which subsequently crippled the global financial system. As the world entered economic recession and organisations have been forced to cut back on costs and staff, almost every bank, business and financial market has been impacted by the ripple effect.

The impact on the UK’s high street has been significant. The list of firms which have gone into administration reads like an A to Z of the UK’s stores, including Adams the childrenswear retailer, Allied Carpets, Dolcis, MFI, The Officer’s Club, USC the designer clothes store, Woolworths and Zavvi, the music and DVD chain. These really have been unprecedented times.

Commentary on the likely path of recovery has been widespread, highlighting the need for a globally co-ordinated solution. Institutions such as the UK Monetary Policy Committee (MPC), the International Monetary Fund (IMF), the European Central Bank (ECB) and the US Federal Reserve have all been pivotal in the decision making process allowing markets to enter into a sustained period of growth in recent months.

This has caused market commentators to look at the recession and forecast The Shape Of Things To Come and what shape recovery will we see V, U, W or L?

V: short and shallow

U: a longer and deeper recession

W: a double dip recession

L: a depression/lasting recession

In recent months market reaction has been buoyant with every major market very much in a V shape recovery showing positive growth as captured in the charts below:

So are we in a bull market recovery or are the gains realised over the last few months too much too soon and a correction is likely in the form of a W, double dip recession?

Speaking at the Sibos conference in Hong Kong, William White, a former chief economist at the Bank of International Settlements had this to say “Are we going into a W shaped recession? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised,” in reference to the protracted recession which affected Japan during the 1990’s. He went on to say “the only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.”

It is clear that the debate about whether we are finally seeing a sustained period of growth is still raging. Last week the Governor of the Bank of England, Mervyn King spoke at a cross-party Treasury Select Committee where he had this to say about the prospects for the UK economy "Following a precipitate fall in economic activity at the end of last year and the start of this, there are now signs that growth has resumed in the third quarter," However, he also warned the strength of the upturn remains “highly uncertain”. Mr King’s comments had an unsettling affect on Sterling with a significant sell off in cable (GBP/USD) as his comments reached the market.

On Friday the IMF Managing Director, Dominique Strauss-Kahn commented on a delayed correlation between economic recovery and unemployment saying "if we have in mind that the global economy will only fully recover when unemployment goes down, then it will take more time. Because as everybody knows, there is some delay between the time when growth comes back and the time when the employment situation improves". The IMF currently hold the view that the global economy is likely to recover in the first half of 2010 with employment levels taking longer to recover.

So whilst it appears global management of the recession has begun to take hold at a macro-economic level, there remains conflicting views on the speed and path the recovery will take and when it is likely to fully restore the confidence in micro-economic activity for local businesses and shops on the high street.

It has been generally accepted that ‘global problems require global solutions’ and this is where this weeks G20 Summit in Pittsburgh should be very influential. The twenty richest nations meet this week to discuss the state of the economy with unemployment and economic growth among the top agenda points to discuss.

Indeed, the Organisation for Economic Co-Operation and Development’s (OECD) Secretary General, Angel Gurria has stated “Employment is the bottom line of the crisis. We cannot claim victory simply because we see indicators of recovery picking up and we should not just assume that growth will take care of this.” And with the OECD predicting 57 million people being out of work in OECD countries by 2010 if the recovery fails to gain momentum then it is clear that this week’s summit could have a significant impact on the future prospects of the global economy and, closer to home, the UK high street. With more people unemployed, and less spending on the high street, the potential is for the vicious circle to continue. In this case we can certainly expect to see a W or L shaped recession take shape in the coming months.

We will be reviewing the output from the G20 summit in next week’s ViewPoint including analysis of how the summit has been received by industry commentators across the globe.

If you are looking to take advantage of the continued market opportunities, then iShares offer easy access to indices with the potential to take advantage of short term market movements. You can access major markets, for example the US through the iShares S&P 500 or the iShares FTSE 100 giving you low cost access to the UK market. Alternatively, for longer-term investors who think that the markets are in for sustained market recovery, iShares can also be an excellent cost-efficient tool for you to use in order to gain access to these markets. Remember that ETFs are traded like shares and may not be for everyone. They closely track the performance of an index and as such their value can go down as well as up and you may get back less then you invested.

If you are an experienced investor looking to capitalise on market volatility and comfortable with the idea of leveraged investments why not take a look at CFDs or FST to speculate the movement of specific indices or stocks. If you want to take a view on the world’s currencies and profit in both rising and falling markets then FX can be a useful tool to get access to these markets. However, due to the leveraged nature of these investments you can lose more than you invested. Please remember however, that the value of these investments may go down as well as up and you can lose money as well as gain. Barclays Stockbrokers do not give advice and if you have any doubt about the suitability of these investments you should seek professional advice.

Whatever your viewpoint, whatever shape you think the economic recovery will take, you can monitor all the latest news flows and market movements by logging in to your account and visiting our research centre.

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15 July 2009 - G8 Summit Review

Last week saw much of the investment community turn its focus to the G8 summit in L’Aquila, Italy, where the leading eight ‘industrialised’ rich nations converged to discuss their outlook on the world economy.

Perceived by some to be a staging post ahead of two more important economic summits taking place later in the year – September’s G20 in Pittsburgh, the first hosting for new US president Barak Obama, and December’s UN climate change conference in Copenhagen – there are others who believe the format of the G8 group requires overhaul. Its membership has been called into question, with nations like China and Brazil currently excluded despite their nominal GDP now surpassing that of member state Canada’s. And with the wider G20 forum emerging as the main platform for tackling the global economic crisis, the challenge to the effectiveness of the G8 is understandable. Indeed, the forum members themselves have acknowledged this in part, with over 20 additional national leaders invited to the table in L’Aquila.

Debate is ongoing as to the success of the summit. The main agenda items were climate change and the control of emissions, and food aid. Supporters of the G8 have pointed to the key decisions taken on these two topics as achievements – a commitment to control global temperature rises to a maximum of 2 degrees centigrade and a pledge of $20bn over three years to a food security fund which will shift focus from basic food aid to supporting sustainable farming solutions. Detractors however point to the lack of agreement on other matters, such as a base date for their 80% emissions cut commitment, and the partial involvement and (importantly) lack of commitment from the guest emerging nations, among them China, India, Mexico and Brazil.

There were two other main observations from the summit. Firstly, it was clear that the emerging markets are of increasing importance to the success of such global debates. It is therefore likely that some sort of structural change to the forum will result although what shape or, more symbolically, number that will take remains to be seen.

Secondly, the influence on the talks that the change of tone from the US President Barak Obama had was evident – for example, Obama came to the table with a mandate for climate change from the House of Representatives, the first time a US President has done so in over a decade. Many commentators see this level of strength as a further indicator of the US ability to take pole position in moving the global economy further towards recovery.

For more insight into emerging markets, read our latest Investment ViewPoint: Analysis.

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09 June 2009 - Political noise overshadows global markets

It has been a very mixed week on the domestic news front, with UK politics dominating public attention. The ongoing MPs’ expenses scandal has now been compounded with an apparently warring Cabinet, a reshuffle that the Prime Minister appears to have not been in full control of, local elections that saw the Labour Party lose all four of its remaining county councils and suffer humiliation in the European elections. As an investor you could be excused for missing any good news, but there certainly was some, economically speaking at least.

Last week’s highlights included:

Figures from the UK Land Registry suggest that house prices edged a touch higher in April.
US unemployment data released on Friday (5th June) showed a sharp fall in the number of jobs being lost in the US, leading to hopes that the world’s biggest economy may be through the worst of the recession.
The US Consumer Confidence survey showed a positive divergence in its measure of future confidence vs the current component of the survey. In the just-released May survey, there was a 25 point gap between future and current confidence. This is a notable difference and a very strong indicator that the key ingredient necessary for economic recovery, namely confidence, is returning.
A similar picture, although not quite as pronounced, was evident with the release of the UK’s Nationwide Consume Confidence index – whilst confidence levels at the moment are mixed, future expectations are far more optimistic.
Whilst the S&P 500 Index has risen 39% since the beginning of March 2009, the volatility measure, the VIX Index, has fallen by exactly the same amount, confirming that for now at least, a degree of calm has been restored to global financial markets.
The Coppock Equity Indicator has finally suggested a ‘buy’ signal is now appropriate or imminent in a number of global equity markets – this is a widely-viewed measure of long-term market sentiment.

Against this backdrop of a potentially stabilising global economy, stock markets gained further ground, with the UK actually being the main exception. Despite the encouraging US jobs data at the end of the week, the FTSE 100 Index once again failed to break through key resistance at 4,500, ending the week at 4,438.

Meanwhile FX markets fluctuated according to shifting perceptions of currency values. Sterling, which had been enjoying a strong recovery versus the US dollar and the euro in particular, turned sharply in the middle of the week having reached a 7-month high on Wednesday (3 June). The unfolding political upheaval hurt the pound and caused it to beat a hasty retreat from a high above 1.6650 vs the dollar on Wednesday to end the week trading below 1.5975 – rumours of the resignation of the Prime Minister, later proven to be unfounded of course, did not help the currency.

You can follow the impact of the unfolding political turmoil in the UK and the progress of economic recovery elsewhere in the world by logging in to your Barclays Stockbrokers account and monitoring the key indices, sectors and individual stocks that are currently attracting investors interest.

If you are an experienced investor prepared to accept a high degree of risk to capital and you wish to keep in touch with currency movements and participate in the global fx markets, the world’s biggest market, there are a number of products that you can use. From margin FX, to CFDs & FST and even covered warrants based on currencies, all are available through Barclays Stockbrokers. You should be aware that FX and CFDs/FST are high-risk leveraged investments and you can lose more than the amount initially invested and should not engage in this unless you are an experienced investor and are confident that you have the necessary skills.

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01 May 2009 - Budget 2009: Market reaction and commentary

One week after the budget was announced by the Chancellor Alistair Darling, Investment Viewpoint reviews what have been the key headlines across the markets and investment community alike and assesses how the budget is being digested.

Last week after the Chancellors budget speech the market response was fairly muted with only a 43 points increase on the day. Since the market opened the day after the budget was delivered, the FTSE has stabilised at slightly higher levels, suggesting a renewed mood of widespread optimism amongst investors. Or are we simply seeing another bear market rally? Maybe it is too early to make any firm commentary on the impact the budget is having on the market. You can check the latest market reaction by logging into your account and visiting the Research Centre.

Of course the next important date in the calendar was May 4th, when US banks were due to report their stress testing results. However a late change by the Federal Reserve in the US now means these results may not be announced until later next week. The main reason for the delay is thought to be that regulators are concerned about how the disclosure will be handled by the markets. Depending on the output from these performances it is clear this could move markets further and the current air of stability and optimism could be challenged. These tests are being applied to some of the world’s biggest banks, including Bank of America and Citibank, and the results will be eagerly awaited by investors.

So these are the main banks that are still to report but what other sectors have been affected by the budget. There are clearly a number of sectors that stand to be affected in some way as a result of the budget changes. For example the 2p per litre increase on fuel was perhaps to be expected but how has it affected some of the big fuel companies considering the wider weakening demand for fuel is also now becoming a strong indicator for the performance of these companies. On Tuesday BP reported a 62% drop in profits for the first quarter compared to last year and on 29th April Royal Dutch Shell also reported a 58% decrease in profits on the same period a year ago.

You can see how these companies and the sector in general are managing this changing environment including the latest analyst ratings by logging into your account and visiting the Research Centre.

There was also an announced 2% increase on tax on alcohol. With consumers continuing to cut back on luxury items, will this tax increase have a negative effect on alcohol producers? General market commentary suggests it will with more consumers either cutting back on going out to pubs and restaurants or choosing more affordable substitutes and buying alcohol in supermarkets and staying at home.

Finally last weeks Investment ViewPoint (see below) highlighted a number of funding initiatives announced by the Chancellor including £500m to breathe new life into housing projects and £80m for shared equity mortgage schemes. As a result some of the housing companies and mortgage providers have been the most actively traded. For example, during the budget week of Saturday 18th April and Friday 24th April did you know that Barclays, RBS, Lloyds Banking Group and Taylor Wimpey occupied the top 4 positions in our top ten online trades at Barclays Stockbrokers?

You can keep track of this league table by viewing the top 10 trades from Barclays clients.

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23 April 2009 - Budget 2009: A few surprises but is it enough to kick-start the economy?

In what has been billed as the most important budget for a generation Alistair Darling has detailed a mix of expected measures coupled with a selection of surprises to help kick-start the UK economy. This is all against a backdrop of a forecasted 3.5% shrinkage of the UK economy in 2009, a modest projected growth of 1.25% in 2010 followed by an annualised growth rate of 3.5% for 2011.

In the first of a series of Investment ViewPoints on Budget 09, aimed at assessing what this means for investors, we take a look at some of the fundamental measures announced that are likely to drive market and investor behaviour

Market reaction immediately following Darling’s delivery was fairly muted with the FTSE 100 closing at 4030, up 43 points on the day. You can check the latest market reaction by logging into your account and visiting the Research Centre.

So what are the main elements for investors to consider? Investment ViewPoint takes an at-a-glance look at the budget headlines relevant to you:

Tax & Savings

Income tax for individuals earning more than £150,000 set to rise to 50% in April 2010
Anyone earning over £150,000 will lose higher rate tax relief on pension contributions with effect from April 2011
ISA contribution limits to be raised from £10,200 to £10,680 from October 6 2011.

The income tax increase from 45% to 50% is making all the headlines as it is described as a ‘tax for the successful’ and it is easy to see why sections of investors will be unhappy with the Chancellor’s approach. However, investing within tax wraps and so protecting returns from tax becomes arguably even more compelling. With ISA limits being significantly increased from £10,200 to £10,680 a large cross section of the investor community is likely to jump at the chance to save more in a tax efficient environment.

Visit our tax centre to find out more about tax efficient investment products

Finally, drilling down into some other items announced by the Chancellor we highlight sectors of the economy which may be impacted and subsequently provide opportunities for investors to review their portfolios.

Tax changes

Tax on tobacco up 2%
Tax on alcohol up 2%
Tax on fuel up 2p per litre

Car Scrappage Scheme

Starting in May until the end of Q1 2010 motorists will get a £2,000 discount on new cars if they scrap cars older than 10 years

This will be funded by £300m investment from the government and £300m from manufacturers. Will this approach finally breath new life into the struggling motor industry or is too little too late? Login to the Research Centre to see how this announcement is being received in the sector.

Additional funding announced

£500m to breath new life into housing projects
£80m for shared equity mortgage schemes
£250m to help improve employment levels in growth industries
£525m for offshore wind farm projects
£405m to stimulate demand for low-carbon energy and manufacturing

Keep track of the winners and losers in each of these sectors by logging in to the Research Centre

Finally public borrowing is set to soar to an eye watering £175bn this year through a gilt issuance programme. This will possibly have a negative impact on Sterling with initial market reaction showing a strong sell off of Sterling against the US Dollar as the main themes of the budget were announced – see chart below.

You can find out how the budget is moving the currency markets through the FX on BARX platform from Barclays Stockbrokers.

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03 April 2009 - Initial response to the G20 plan is positive – but will it be sustained?

As Gordon Brown announced the G20 seal on a $1.1 trillion global deal designed to lead world economies out of recession, an overwhelmingly positive market reaction quickly became apparent. Markets have rallied in unison in initial approval of the deal with the FTSE 100 Index closing more than 4% higher, the major European indices enjoying even bigger gains and the Dow Jones index rising by more than 200 points.

Driving the positive reaction are the fundamentals of an apparently sound plan that will see the International Monetary Fund (IMF) have its resources boosted by $750bn and a new Financial Stability board established, designed to work with the IMF to provide smoother cross border coordination and detect the warning signs of further trouble for the financial system. Throw into the mix tighter regulation on hedge funds and an agreed common approach to the clean up of so called toxic assets, and it would appear that a recipe to satisfy the markets and boost global economic confidence has been delivered. Even the French President, Nicholas Sarkozy, who at one stage looked to be heading for conflict with his G20 partners, is quoted as saying the result was “more than we could have hoped for”.

So will the market reaction be a sustained bounce and are we now seeing the first major step on the long road to economic recovery? Or, will Thursday’s market rallies be short-lived? Two steps forward, one step back perhaps?

Continue to keep track of the markets reaction to G20 by logging in to the Research Centre. From here you can follow the major market indices and monitor the ongoing effects of the summit’s outcome.

And remember that if you want to track an investment in one of the major developed equity markets, you could consider the range of iShares available to investors. Simple, easy and transparent, there are iShares designed to track all of the major equity markets, whether you happen to be bullish on the US ( iShares S&P 500 ), bearish on the UK ( iShares FTSE 100) or neutral on Europe ( iShares MSCI Europe).

iShares are not for everyone, their values can fall as well as rise.

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01 April 2009 - Plenty to anticipate from the G20 but what will they deliver?

Market eyes will turn to the G20 Conference this week, hosted by UK Prime Minister Gordon Brown in London.

On the agenda will be a review of the macro economic measures taken so far in an effort to revive the global economy and stimulate growth and employment, with a view to agreeing further co-ordinated action that will strengthen the global response to the current recession.

Can the worldwide elite of leaders and policymakers design a further series of fiscal measures that could turn hints and rumours of economic recovery into hard facts? Since last November’s summit in Washington we have seen further sweeping interest rate cuts, quantitative easing tactics and fiscal support schemes unprecedented in their expenditure. These have all led to short-lived market revivals and the sight of ticker boards bull-blue one day followed by bear-red the next is becoming all too familiar.

So how will the markets react to this summit? Will they take confidence from a show of strength and leadership and stage a recovery, as we saw recently with the rally after the Fed’s announcement that it was buying up $300bn of US Government Debt - Read our ViewPoint “US Recession – Is this the beginning of the end?"

Or will there be jittery reactions if policy makers make it clear that weakness in the economy will no longer do and tougher regulation edges ever closer, with markets squirming at the thought of impending new constraints?

Then again, the G20 participants themselves may send out mixed messages. Already there are signs of disharmony in the ranks as the French government warn that they will walk away from the summit if they are not satisfied with proposals for stricter financial regulation. So a united policy front is far from guaranteed.

Whichever way the markets react, make sure you keep track of events and movements by logging in to the Research Centre. From here you can follow the major market indices and monitor the impacts of the summit’s events.

And if you want to track an investment in one of the major developed equity markets then you could consider the range of iShares available to investors. Simple, easy and transparent, there are iShares designed to track all of the major equity markets, whether you happen to be bullish on the US ( iShares S&P 500 ), bearish on the UK ( iShares FTSE 100) or neutral on Europe ( iShares MSCI Europe).

iShares are not for everyone, their values can fall as well as rise

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27 February 2009 - ‘Quantitative Easing’ focuses interest on Gilts and Corporate Bonds

The announcement that the UK is about to embark on a round of quantitative easing has caused investors to once again look at Corporate Bonds and Gilts. The Bank of England’s Monetary Policy Committee has agreed that BoE Governor Mervyn King should seek the Treasury’s permission to “conduct purchases of government and other securities, financed by the creation of central bank money.” In other words consider investing government’s funds into Gilts and Corporate Bonds.

What are bonds? A bond is a form of debt issued by companies or the government to raise money as an alternative to taxation (for governments) and share options (for companies). If you buy one you are, in effect, lending money to the issuer. In return, the issuer promises to pay you a fixed rate of interest each year and repays the nominal value at a set date in the future, If you buy the bond on the open market you may pay more or less than the nominal value and The market value of bonds and gilts will fall as well as rise and you can lose money.

Interested? Call 0845 601 7788* now to open an account and invest.

If you are looking for steady income, then fixed income investments (Gilts & Bonds) may be of interest to you. Bonds or gilts can be held in a trading account, Investment ISA or SIPP.

For more information on Fixed income investments (Gilts & Bonds) visit our Fixed Income microsite.

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17 March 2009 - Quantitative easing – what does it mean for sterling?

The Bank of England’s ‘quantitative easing’ policy kicked in last week with £2billion of gilts being bought by the bank at auction.

The reaction of the Pound to this policy implementation has been quite muted as investors appear uncertain about the effect it will have on the UK economy in the medium and long term. Sterling has been trading broadly lower since the March 5 announcement but research from Barclays Wealth suggests that the prospects for sterling are favourable throughout the course of 2009.

Elsewhere in the currency markets, the Japanese Yen has been attracting a lot of investor attention as the Japanese fiscal year-end approaches. This period often means widespread repatriation of funds into Japan by companies with overseas earnings and the Yen can strengthen as a result. But with the Japanese economy apparently deteriorating quite severely, will any boost in the currency’s value in the next couple of weeks be sustainable?

Whatever your ViewPoint on the outlook for these and other major global currencies, for the experienced investor, you have the opportunity to access the world’s most liquid market, the foreign exchange market, via BARXdirect: FX from Barclays Stockbrokers. Here you will find all the research, news, analysis and technical trading tools to help you navigate your way around the global foreign exchange markets, FX is a high risk investment and you can lose money.

BARXdirect: FX

Alternatively, you might be interested in gilts & bonds, visit our Fixed Income microsite and see this weeks ‘Bond of the week’ for information on the impact of quantitative easing on the Gilt market, or view our range of Fixed Income iShares.

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