Week 25 In Review

Oil Enters Bear Market

For the week ending 23 June 2017

· Crude oil prices decline more than 20% from recent highs

· Brexit negotiations begin

· BOE governor, economist split over rate moves

· MSCI admits China’s A shares

· Fed’s Powell OK with relaxing Volcker rule

Global equities slipped overall this week, but not before the S&P 500 Index posted a fresh record high early on. Falling oil prices have been a cause for investor concern. West Texas Intermediate crude continued its decline, slipping to $42.65 a barrel on Friday from $44.70 a week ago, trading near a seven-month low. The yield on the US 10-year Treasury note was virtually unchanged, while volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), declined slightly to 10.6 from last Friday’s 10.9.


Crude oil prices deepen slump

The price of a barrel of West Texas Intermediate crude oil extended its decline this week amid rising global inventories. WTI prices have fallen in excess of 25% from their $58.30 high, which was posted on the year’s first trading day. Energy company shares have been under pressure, while spreads in the sector’s high-yield bond market have widened over benchmark Treasury yields this week. The sharp decline in energy prices will make it that much more difficult for the US Federal Reserve to reach its 2% inflation target in the foreseeable future.

Brexit talks underway

Negotiators from the United Kingdom and the European Union met on Monday in the first formal Brexit negotiating session. The one breakthrough from the talks was the UK’s acquiescence to EU demands that the divorce bill must be settled before the EU begins to negotiate a new trade arrangement. Late in the week, Prime Minister Theresa May met with EU leaders in Brussels and laid out her plan to protect the rights of the three million EU citizens living in the UK, allowing them permanent residence. May called on leaders to grant British citizens living in the EU the same rights.

To hike or not to hike?

That is the question on the minds of the members of the Bank of England’s Monetary Policy Committee. While UK growth has suffered a downturn of late, inflation has surged on the heels of a tumble in the pound’s exchange rate. Rising import prices have pushed consumer prices up 2.9% versus year-ago levels, prompting three members of the short-staffed MPC to vote for a rate hike last week against five votes to leave policy unchanged. The divide deepened this week as the Bank’s two most high-profile officials came out on opposite ends of the question of whether rates should be raised this year. BOE governor Mark Carney made the case that now is not the time for rate hikes given low wage growth and mixed signals on consumer spending and business investment. BOE chief economist Andy Haldane countered that it would be prudent to raise rates in the second half of this year to counter the inflation surge. It is rare for a central bank to defy the will of its leader, and it appears unlikely to happen in this instance given recent shifts in the MPC’s composition.

China gets nod from MSCI

After years of fighting for inclusion in MSCI’s influential stock indices, China finally received word that some of its A shares will be included in the indices in mid-2018. Just fewer than half of the 448 A shares will be included in the indices and at an initial weighting of just 5% of each stock’s market cap. These restrictions are an effort by MSCI to incentive China to further liberalize its stocks markets.

Room to relax

Fed governor Jerome Powell told a congressional committee that US regulators have room to relax or eliminate some aspects of the Volcker rule, which is intended to limit banks’ ability to make speculative bets with insured deposits. Regulators are looking for ways to simplify the complicated rule and may exempt small banks from having to comply, Powell said.

Treasury secretary rejects one-off ultra-long bond

US treasury secretary Steven Mnuchin this spring floated the idea that the United States is considering issuing very-long-dated bonds. This week he said the government will only issue ultra-long maturity Treasuries if there is sustained appetite for the securities. Mnuchin said his department is reaching out to investors in order to gauge demand for instruments with maturities between 50 and 100 years, but any move to issue very-long-term debt would not be a one-off. Apparently there is at least some investor demand for long paper, as Argentina issued 100-year bonds this week despite having defaulted six times in the last century. The issue, although rated below investment-grade, was heavily oversubscribed.

US banks clear first round of stress tests

Thirty-four big US banks passed the first round of the Fed’s stress test this week. Next week, the central bank will announce whether it will allow the banks to return capital to shareholders. Some banks may begin to reduce their capital if the Fed approves. That could be seen by markets as a sign of confidence that the banking system is strong and positioned well to withstand a significant economic downturn.

Have a great week ahead

All the Best



Farringdon Group

+60 3 2026 0286

The UK Company Pension Crisis

The Final Salary Pension Scheme

The black hole in Britain’s final salary pension schemes has grown to a record £390 billion, new data suggests. The deficit of all UK private sector defined benefit schemes has rocketed by £135 billion in the past year alone, the equivalent of a £2.6 billion increase every week, JLT Employee Benefits said. Widening pension deficits are in part triggered by ultra-low interest rates, which drive down the returns on Government bonds held by pension funds


In monetary terms, Royal Dutch Shell has the largest pension deficit. The energy company currently has over £9.5 billion of pension liabilities, equating to a pension deficit of 15%. BT and BP are close behind with £7.5 billion and £7.3 billion of pension liabilities respectively.

BT is appealing to the fund’s trustees and telecoms unions to agree to end accruals in its defined-benefits pension scheme. It has more than 300,000 members and is the UK’s largest private-sector retirement fund.



In the last 12 months, the total disclosed pension liabilities of the FTSE 100 companies have fallen from £614 billion to £586 billion. Ten years ago, the total disclosed pension liabilities were £407 billion. A total of 16 companies have disclosed pension liabilities of more than £10 billion, the largest of which is Royal Dutch Shell with disclosed pension liabilities of £57 billion. A total of 21 companies have disclosed pension liabilities of less than £100 million, of which 12 companies have no defined benefit pension liabilities.

Situation update

The combined deficit of UK pension funds hit £500 BILLION! To put this in context, it’s the same amount as the GDP of Thailand or South Africa!


Pension experts are predicting that final salary pension schemes could be consigned to the history books, not in decades, but in just three years, as schemes close their doors to new members.


  • Low gilt yield (UK government bond interest)
  • Poor performance
  • Members not contributing enough
  • Higher life expectancy

The Pension Protection Fund (PPF), the government’s private enterprise safety net (not funded or guaranteed by the government) for members of final salary schemes, has stated there are over 5,142 schemes in deficit—representing 81.4% of all UK pension schemes.

The average deficit in funding for clients with UK schemes that I have met is 33%. That’s scary.

What could force a scheme into the PPF?

A firm becoming insolvent or pension fund trustees that just can’t handle the deficit. However, there have been recent cases of firms pushing away their pension fund liabilities.

A recent example of this is when UK Coal went into administration, and their 7,000-member pension pot went into the PPF. This is because the group responsible for repairing the pension deficit, of at least £450mn, sank into a long-anticipated administration.

This means that the guaranteed pension members were expecting will be drastically reduced by up to 50% in some instances.

Some schemes that are on my watch list have huge liabilities:

  1. BT Group plc, British Airways and BAE Systems plc (the old privatized industry)
  2. The National Health Service and any Civil Service pension
  3. The Royal Bank of Scotland plc
  4. Barclays plc
  5. Royal Dutch Shell plc

Interest Rates linked to Pension Pot Values

Transfer values are at an all-time high currently, this is due to the post Brexit environment with government bond rates being at an all-time low, as they are correlated with interest rates, meaning employees are getting transfer offers around 30% to 40% higher than they were a few years ago.

Indeed some of these values have increased by as much as 25% in just the last 9 months. Bearing in mind interest rates haven’t been this low in over 200 years, they will soon start to rise, possibly by Q4 this year or the beginning of 2018 meaning the values of Pensions will drop dramatically, add that to a potential reduction in employees benefits in the future by the government, UK Pension schemes will be shockingly bad in the coming years.


Annuity rates plummet, making 2017 ‘worst year for payouts


2007 = 4.6% – 2014 = 3.2% – 2016 = 2.1% – 2017 = 1.5%


Annuity rates are based primarily on the 15-year gilt yields so changes in gilt yields will affect annuities. The above chart shows yields reached an all-time low of 0.90% on 11 August 2016 after an interest rate cut to 0.25% and £70 billion of quantitative easing. The 15-year gilt yields had reduced significantly since June 2008 due to the financial crisis and this has had the effect of reducing annuity rates.

The drop is the biggest recorded and means over 55s swapping their pension pot for a guaranteed income in retirement today are now faced with some of the worst deals in history as annuity incomes have hit an all-time low.

Data from savings website, Moneyfacts, shows the average standard annuity income for a 65-year-old has fallen by 14.8pc on a £10,000 deal and by 15pc on a £50,000 deal so far during 2016, with potential to fall even further.

Steven Cameron, pension’s director at Aegon, added: “With annuity prices at an all-time low and unlikely to recover soon, people need to start thinking differently and keep their options open. Putting off retirement, continuing to work and save will be an option for some.”

How can they fix the Final Salary Pension problem?

The governments are in talks to allow UK companies to start cutting benefits which is currently being reviewed and will be decided by the winter autumn statement in December 2017. Also remember how harsh they have been in the last year by changing IHT property tax, lowering the LTA (Pension Life time allowance on IHT), putting a 25% tax on moving your pension into a QROPS and changing the Shell offshore Pension scheme to 100% taxable residing in the UK. They are also looking at removing the Pension commencement Lump Sum tax free benefit.

Any future changes the government plans to make, will be unlikely to come with any prior warning allowing you to move your pension and retain the tax benefits.

The problem is so big it is causing economic risk to the whole Pension system and the financial system, the FTSE 100 for example would have to hold back dividends for 1 full trading year, which is not going to happen. Halt trading??

What can you do?

You can move your UK Company Pensions into a Self-Invested Personal Pension (SIPP) is the name given to the type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC).

SIPPs are a type of Personal Pension Plan. Another subset of this type of pension is the Stakeholder Pension Plan. SIPPs, in common with personal pension schemes, are tax “wrappers”, allowing tax rebates on contributions in exchange for limits on accessibility. The HMRC rules allow for a greater range of investments to be held than Personal Pension Plans, notably equities and property. Rules for contributions, benefit withdrawal etc. are the same as for other personal pension schemes



  • It is a UK Pension Wrapper of your company pensions (You can consolidate all of your pensions under one scheme)
  • Much wider selection of investments
  • You can hold the pension in multiple currencies
  • The internal investments are free of income and capital gains tax
  • Take early retirement at 55 rather than 60/65 with Final Salary
  • 25% tax free lump sum at 55% depending where you are residing
  • On the event of your death your wife/family will get 100% of the remaining pension fund, (Final Salary Scheme – You will only receive 50%/60%, then should anything happen to your wife the children will get 0) with a SIPP they will get 100% of the remaining pot, allowing for greater inheritance benefits.

If you have a frozen defined benefit (DB) pension plan or final salary scheme, there has never been a better time to transfer into a SIPP Self Invested Personal Pension. WHY?

Transfer values are 80% higher today than they were six years ago, due to post Brexit and extremely low interest rates, which will not last long possibly by the end of 2017

Sit down and review your current situation, including the pension itself and the scheme. We have seen an increase in individuals who are fearful of the current UK pension crisis—with good reason.

However, there is an unprecedented window of opportunity available to eligible DB scheme members today, that may not be there by the end of this year.

Due to the complex and convoluted nature of pensions and pension transfers, we have an established a specialist pensions division and commissioned independent actuaries to review and report on the status of pension schemes for interested individuals.

This is a simple step to initiate, with no obligation to act on the results of the review. In many cases this action has already preserved and protected significant transfer amounts, converting a future promise into a real investment today for the benefit of the scheme member, spouse, children, and children’s children.

If you would like a valuation on your pension please contact me directly on +60 3 2026 0286 or email to stuart@farringdongroup.com and we will uncomplicate this information and inform you of the options.

Thanks and have a great day

Stuart Yeomans


Farringdon Group

Kuala Lumpur : Malaysia

If you feel that this is of interest to colleagues, friends or family, please feel free to forward this information on.

Have I got a Defined Benefit Pension?

We have been finding many people lately with DB pensions from the UK and feel that everyone who has one or think they may have one knows about their options.

To give you an idea of how things may have increased, the last two clients with final salary schemes that we retrieved valuations for had increased 30% since 2015, therefore I am hoping you will be pleasantly surprised and fully informed.

We are also finding that 90% of ALL DB Schemes in the UK are severely underfunded with HMRC reviewing this constantly as this will have a huge effect on the UK financially and potentially less of a payout at retirement for your pension. There are some article links at the end of this if you wish to know more.


Have I got a defined benefit pension?

A defined benefit pension (DB) is a type of workplace pension which:

  • Gives you an income that is normally based on your salary, length of service with your employer (or service in the scheme) and a calculation made under the rules of the pension scheme.
  • You should receive statements which set out how much pension per year you are expected to receive when you reach your normal retirement age.
  • If you work in the public sector or have been a member of a workplace pension scheme for some years, you may have a DB pension entitlement.

If you took out a personal pension this will not be a defined benefit pension.

What other pension types might I have?

Most pension schemes that people join now are “defined contribution”.

  • This is a personal or workplace pension based on how much money has been paid into your pot.
  • When you take money from a defined contribution pension scheme it comes from the money you (and sometimes your employer) saved into it over the years, plus any investment returns your money may have earned.
  • There is no guaranteed amount of pension –and you could get back less than the amount you paid in.

Why are defined benefit pensions valuable?

With defined contribution pensions, you can decide how you take your money out – with defined benefit pensions, your employer guarantees a certain amount of pension each year when you retire.

Because of the guaranteed nature of defined benefit pensions they are often seen as more valuable than defined contribution pensions, as the risks (for instance of living longer than expected or of investments under-performing) are under-written by the employer rather than the individual themselves. The Pensions Regulator also believes that is likely to be in the best financial interests of the majority of members to remain in their DB scheme.

Can I take any cash from my defined benefit pension?  NO !

Until the age of 60 or 65 you will not receive anything from a DB Scheme.

BUT – By transferring to a SIPP or QROPS you can have more flexibility:

  • You can normally take a 25% pension commencement lump sum when you retire from a DB Pension (typically up to 25% of the value of your pension) but you will generally have to give up a part of your pension for cash.
  • The rate for giving up pension for cash will be set by the scheme trustees. These are not guaranteed and may change from time to time in line with changing financial conditions.
  • The amount of lump sum you wish to take will depend on your preference and needs, either you take the pension commencement lump sum or a higher income for the rest of your life.

How do the new pension flexibilities affect me?

The changes outlined by the Chancellor of the Exchequer in the March 2014 Budget brought about some significant changes to the way in which defined contribution pensions can be accessed, with effect from 6 April 2015. The flexibilities do not apply to defined benefit pensions. The Pension Wise service is available to anyone over 55 who has a defined contribution pension arrangement

Therefore, if you only have a defined benefit pension arrangement you will not be eligible for the service.

Can people with defined benefit pensions access the new flexibilities?

The only way that a person can take advantage of the flexibilities is to transfer out of their DB pension scheme into a new or existing defined contribution arrangement, which will offer you flexibility. However, if you are in a public sector scheme you will not be able to transfer your benefits out if the scheme is an unfunded one. If you do transfer and you are at an age where you can take your benefits, you will be able to access the funds in the way you wish, but check that the rules of the receiving arrangement allow you to do this.

However, in order to transfer out you (and your employer) must have stopped contributing to the scheme. You should consider carefully as to whether it is in your interests to opt out of membership of the DB scheme as DB schemes have considerable security and you may be losing out on valuable benefits. You will also generally be required to take independent financial advice before being allowed to transfer. If you are currently in receipt of a pension, you will be unable to transfer out of a DB scheme.

Do I have to transfer out all of my benefits in a scheme?

You will generally need to transfer out all of your DB benefits in a scheme (referred to as “Guaranteed benefit”). However, some schemes may allow you to transfer only a portion of your benefits out of the scheme, but you should check with the scheme administrators about what is permissible. If you also hold defined contribution benefits in the same scheme, you will be able to leave these benefits in the scheme while transferring out your DB benefits.

A member’s transfer right applies to each type of benefit you hold in a scheme, rather than to all the benefits in a scheme. You will have different options to access pension flexibilities depending on the type of benefits in the scheme, for instance if you have defined contribution benefits such as Additional Voluntary Contributions (AVCs).

How do I transfer out if I wish to?

  • Members who are more than one year away from their scheme’s normal retirement age have the right to transfer their DB benefits out of the scheme (unless they are in a public sector scheme which does not permit transfer).
  • Every 12 months you have a right to request a transfer value quotation from the scheme. Your scheme may allow you more frequent requests, although you may be charged for this.
  • When you request a transfer, the trustees of the scheme need to provide you with a “statement of entitlement”. The trustees normally have 3 months from the date of your request to provide you with this statement, although in certain circumstances, this can be extended to 6 months.
  • The statement will provide you with a “Cash Equivalent Transfer Value” (CETV): the CETV is the current value of your benefits within the scheme.
  • The transfer value is normally guaranteed for 3 months from the calculation date (known as the guarantee date) and the trustees should generally pay the transfer value to the accepting pension arrangement within 6 months of the guarantee date.
  • You should be aware that, from April 2015, there will be requirements on trustees when members request a transfer out of a DB scheme where the transfer value is over £30,000. To protect people from making poor choices, there will be a mandatory advice requirement for any member who wants to transfer out to take independent, financial advice from a suitably qualified person. Trustees will need to check that this has been taken before allowing any transfer to go ahead.
  • Members will be expected to meet the cost of this advice, although trustees will not be responsible for checking what advice was given. If you need help in finding a financial adviser, the Money Advice Service has a directory of authorised advisers on its website (directory.moneyadviceservice.org.uk)
  • Schemes are required to notify members about what they have to do and the information the scheme will need to complete a transfer. If a member doesn’t provide what the scheme needs the trustees aren’t obliged to complete the transfer.

How does my scheme calculate the value of my benefits?

  • The cash equivalent transfer value of your benefits is calculated by the scheme actuary. It represents what the actuary and the trustees consider a fair value of the benefits you have given up in the scheme.
  • The calculation will take into account many factors, including how long you might be expected to live and future inflation and investment returns. The trustees will review the assumptions underlying these calculations on a regular basis.
  • It is important to note, that the cash equivalent transfer value you receive may not allow you to purchase from an insurance company, the same level of benefits you have given up. This is because insurers and other providers of retirement products will take a more cautious view of the future, so the cost of buying an income with these companies will tend to be higher.
  • You should also be aware that if the scheme is currently underfunded, the trustees may decide to pay transfer values at a reduced level until full funding is restored. The trustees need to tell you if they are applying any reduction to your transfer value because of underfunding.

What is the role of the trustees of a defined benefit pension schemes?

DB pension schemes are looked after by a board of trustees.

These trustees have a duty in law to act in the interests of all members.

  • When approaching requests out of the scheme, they must balance the interests of both the members wishing to exercise their right to transfer with those that wish to remain in the scheme. This is why they may, from time to time, reduce the amounts paid out if there are insufficient funds in the scheme at a particular point in time.
  • Most importantly, there is a legal requirement on the trustees, set by the Pensions Regulator, to check that a member has obtained appropriate independent financial advice before a transfer is allowed to proceed. This is because, for many people, transferring out of a DB scheme will not be in their best financial interests.
  • You will need to provide the trustees with confirmation that you have obtained such advice, which sets out the relevant details of your adviser, who needs to be authorised by the Financial Conduct Authority (FCA).
  • The trustees do not need to review this advice, but they do need to be satisfied that you have been properly advised. If you have a small amount of benefits in a DB pension scheme (valued by the trustees as £30,000 or less) then the trustees do not need to check whether you have received this advice. However, you still need to be sure that giving up this guaranteed level of income is in your best interests.

What will an independent financial adviser do?

The adviser will consider all your personal and financial circumstances when considering whether a transfer out of a DB scheme is in your best interests. For some individuals there may be advantages of moving out of a DB scheme into one in which you can access the new pension flexibilities. A regulated financial adviser will provide more information on the pros and cons of such a transfer.

Can the trustees stop me transferring out?

Apart from ensuring that you have received proper advice, the trustees are expected to conduct proper due diligence on the scheme which you intend to transfer your benefits to. In some cases the trustees may have reason to believe that the receiving scheme is not a legitimate one and in these cases they will need to carefully consider whether to allow the transfer to proceed. This may happen if the proposed new scheme presents the warning signs of a pension scam.

If they do this, they may be stopping you transferring to a plan where you might lose a significant proportion, or in some cases, all of your pension savings and be faced with a large tax bill. If the trustees are conducting further investigations they should contact you to explain why there is a delay and why, in some cases, they are not permitting the transfer to proceed. Where a request is made to transfer benefits overseas, the trustees will also need to check whether the receiving scheme is one qualified to receive UK pension benefits.

What if am offered an “enhanced” transfer value?

In some cases, companies running DB pension schemes may wish to reduce their exposure to DB pensions, by offering members beneficial terms to transfer out from the scheme. They will calculate the transfer value on the usual basis but will then apply an enhancement to this. Typically, they will write to members explaining their options and advising them how long this offer lasts for. You will still need to take independent financial advice if you wish to take advantage of this offer and transfer out, but in most cases the employer will offer to pay for this financial advice.

Additional Voluntary Contributions (AVCs)

A member of a DB scheme may have decided to make contributions in excess to those required by the scheme in order to enhance your pension income. These are known as Additional Voluntary Contributions (AVCs) and are often defined contribution in nature. If you have made defined contribution AVCs to a DB scheme in the past, then you may be able to take advantage of the new flexibilities. You should check if your scheme allows you to take advantage of these flexibilities. If not, they may allow you to transfer some or all of your AVCs out to another arrangement which does allow the flexibilities.

Useful articles;

  1. The current pension valuations are high, simply because annuity rates are very low. https://www.theguardian.com/money/2016/sep/14/annuity-rates-plummet-2016-worst-year-income-retiring-pensioners this site shows what has happened since Brexit and we expect rates to get better in the short term and I believe that any valuations now, will be significantly lower in 12 months’ time – The UK has already announced that interest rates will be rising to 0.5% next year, this will lower transfer values significantly.
  2. Going into the future, final salary schemes have cut income for members and many schemes have simply cut payments by 30% (via legal actuarial reductions). To back this up, please see this worrying article https://www.theguardian.com/money/2017/jan/04/final-salary-pension-deficit-biggest-listed-firms-uk with the total combined deficit in the UK for final salary pensions growing from £39 billion (2015) to £182 billion (to date).
  3. http://www.pionline.com/article/20170502/ONLINE/170509973/uk-corporate-pension-deficit-rises-nearly-6-in-april
  4. http://www.thisismoney.co.uk/money/pensions/article-3686601/Total-deficit-final-salary-schemes-soars-90bn-384bn-Brexit-hits-funds.html

If you would like a valuation on your pension please contact us directly or email to stuart@farringdongroup.com and we will uncomplicated this information and inform you of the options.

Thanks and have a great day

If you feel that this is of interest to colleagues, friends or family, please feel free to forward this information on.

I hope you enjoyed reading this post.

Stuart Yeomans 


Farringdon Group

Kuala Lumpur : Malaysia

European markets hit fresh highs; US quits the Paris agreement

For the week ending 2nd June 2017

  • US nonfarm payrolls rose 138,000; March/April revised down
  • European markets hit fresh highs
  • Draghi suggests no immediate policy shift
  • UK polls narrow for Conservatives
  • US quits the Paris agreement

U.S. stocks rose for the second consecutive week, bringing the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite Index to new highs. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), remained historically muted, falling to 9.9 from 10.8 last week.


US adds fewer jobs than forecast

The May employment report was a disappointment save for a continued drop in the unemployment rate. 138,000 new jobs were added last month, while revisions to March and April data trimmed 66,000 from pervious totals. Economists had expected a rise of 184,000 nonfarm payrolls. Wage gains were steady at 2.5% versus a year ago. The bright spot in the report was the continued fall in the unemployment rate, which edged down to a 16 year low of 4.3%. While weaker than expected, the data likely won’t dissuade the US Federal Reserve from hiking rates later this month.

The EU in Review

Eurozone stocks posted gains for the week. Britain’s FTSE 100 and Germany’s DAX reached fresh highs as investors turn toward Europe and other developed markets. European equities saw a 10th consecutive week of inflows according to data from Bank of America Merrill Lynch. Cyclical stocks led gains, while energy stocks, which include oil and gas and renewables, were laggards, weighed down in part by news of the U.S. announcement to withdraw from the Paris agreement on climate change. European political concerns resurfaced amid the growing possibility of early parliamentary elections in Italy, but news that Italy logged better-than-expected economic growth lifted Italian stocks late in the week.

Draghi: Not ready to unwind stimulus

Appearing before the European Parliament’s committee on economic affairs this week, European Central Bank President Mario Draghi played down the odds of any shift in policy at next week’s rate-setting meeting. Economic growth is improving but inflation remains subdued, the central banker said, adding that the economy still requires substantial stimulus. Some analysts had expected the ECB to signal that it will begin tapering bond purchases later this year. Very subdued Eurozone inflation data (+1.4% year over year) released later in the week further tamped down expectations of a policy shift.

UK polls tighten

Opinion polls ahead of next week’s UK general election have been wide and varied with some showing the Conservatives with a lead as small as 3% and others indicating a lead as wide as 15%. What is not in doubt is that the race has tightened; the Conservatives held a 22% advantage on the day the election was called back in April. Not helping the Conservatives, Prime Minister Theresa May was criticized for skipping a BBC-sponsored debate, choosing instead to send a surrogate. Labour Party leader Jeremy Corbyn pounced on the decision. May tried to keep the focus on Brexit, saying Corbyn is not suited to lead those negotiations with the European Union.

US pulls out of Paris Agreement

Saying he was elected to represent the voters of Pittsburgh, not Paris, US president Donald Trump this week announced that the United States would pull out of the Paris climate deal. The agreement put the US at a disadvantage, Trump said, highlighting its lack of enforcement mechanisms. Trump offered to renegotiate the deal, though Germany, France and Italy have been dismissive of the notion.

Italy moving closer to early elections

Elections could come as early as this autumn if the Italian parliament adopts a new election law resembling German’s proportional system, with a 5% cutoff for smaller parties. If the law is approved in the coming weeks, as expected, Italians could go back to the polls around the same time as Germany votes on 24 September. The ruling Democratic Party and the Eurosceptic Five Star Movement are nearly tied atop the polls.

Europe continues to hog the growth spotlight

While manufacturing in the US and China moderated slightly in May, Europe continues to show strength. The Eurozone manufacturing purchasing managers’ index firmed to 57.0 from 56.7 in April, the highest in six years. UK PMI stayed robust at 56.7, down from April’s 57.3, while the US ISM Manufacturing Index saw slight improvement to 54.9 In May from 54.8 in saw slight improvement to 54.9 In May from 54.8 in April. China’s official PMI stood unchanged at 51.2, though the Caixin PMI dipped to 49.6 from 50.3.


With 492 of the members of the S&P 500 Index reporting, earnings are expected to have increased 15.4% in the first quarter versus the same quarter a year ago. Excluding the energy sector, earnings rose 11.1%. Revenues are seen up 7.3%, and up 5.4% excluding energy.

I hope you enjoyed reading this post.

Stuart Yeomans 


Farringdon Group

Kuala Lumpur : Malaysia