Market Review ? 1st Quarter Of 2010


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We have asked Russell Investments for a summary of global stockmarket performance over the first three months of the year and their commentary is below. UK (al

We have asked Russell Investments for a summary of global stockmarket performance over the first three months of the year and their commentary is below.

UK (all returns are in ? unless otherwise stated)

After a slow start, the FTSE All-Share Index gained 6.4% during the first quarter of 2010. Markets sold off early-on as concerns were raised over the high levels of sovereign debt and the sustainability of the economic rally. However, improving economic data and corporate earnings helped reinforce investor confidence and drive markets to fresh 20-month highs.

Mining companies were once again the primary drivers of performance as they tracked the rise in underlying commodity prices. Other cyclical sectors, such as industrials and technology and smaller-cap stocks also advanced as investors favoured more economically sensitive investments. Better-than-expected earnings results from a number of UK banks helped to further strengthen the returns. Elsewhere, upwardly revised fourth-quarter GDP growth figures from both the US and UK, combined with confirmation that the EU will assist its member countries with their debt obligations, helped strengthen investors? confidence.

Europe (all returns are in ? unless otherwise stated)

The MSCI Europe Index rose 4.1% as a rally in March offset negative performance early in the quarter. European debt worries – most notably within Greece – dominated investor concerns and weighed on financial markets and the Euro. The currency later bounced off 10-month lows as investors reacted positively to the news the International Monetary Fund and all 16 Eurozone countries would lend to Greece if it is unable to borrow from the markets.

In contrast, the Eurozone unemployment rate hit 10%, the first time it has reached double figures since the Euro was introduced. Inflation was also higher than expected at 1.5% – but still lower than the European Central Bank?s target of just below 2%.

US (all returns are in US$ unless otherwise stated)

The Russell 1000 Index advanced 5.5% during the first quarter of 2010 after what had been a mixed three months for US equities. While the market advance did not necessarily follow a smooth pattern during the quarter, investors did react well to positive news and data points.

There were still sizeable concerns over sovereign debt risk however, particularly in the Eurozone, where the crisis in Greece threatened to spread to other vulnerable member states. There was additional uncertainty as to the sustainability of the economic recovery as the US and Chinese governments began withdrawing liquidity. Despite the overhanging economic concerns, positive news put investors in a more buoyant mood as employment figures surprised to the upside, GDP growth was revised upwards, consumer confidence rose, and retail sales posted a better-than-expected growth figure. In addition, housing price indexes have been posting positive month-on-month home price gains nationally. Meanwhile commodity producers rallied strongly in March on the increase in gold, copper and aluminium prices.

Investors generally rewarded those companies most geared towards economic improvement and growth. Those companies that had been worst hit during the global financial crisis of late 2008 again performed well, including regional and large banks as well as some commercial lenders. Energy equipment and mining companies also strengthened, as did highly leveraged consumer companies. Utilities was the sole sector to post a negative return within the Index for the quarter.

Japan (all returns are in ? unless otherwise stated)

Despite a disappointing start to the year, the Topix Index advanced 8.6% during the first quarter following a flurry of positive economic results during February and March. Official figures revealed the economy had expanded at a faster-than-expected rate during the final quarter of 2009, with exports accelerating on the global rebound and manufacturers having increased production at the fastest pace since May. The country?s unemployment rate unexpectedly fell to a 10-month low while business confidence approached pre-crisis levels resulting in larger firms boosting capital expenditure and concerns of a double-dip recession receding.

Asia-Pacific (all returns are in US$ unless otherwise stated)

Despite a weak start to the year, the MSCI Asia Pacific ex Japan Index advanced 2.1% during the first quarter of 2010 as the world?s economy continued to recover from the global recession. Gains were primarily led by the South East Asian ASEAN-5 economies (Indonesia, Malaysia, Philippines, Singapore and Thailand) as the growth outlook substantially improved within the region. Elsewhere, India also contributed positively.

Emerging Markets (all returns are in US$ unless otherwise stated)

The MSCI Emerging Markets Index enjoyed a positive quarter, gaining 2.4%, driven largely by strong results in March, when the Index reached its highest level in ten weeks. Losses earlier in the quarter pared back gains as risk aversion increased on concerns over the sustainability of economic recovery.

Risk appetite increased significantly in March however, on signs that the global economic recovery would spur earnings growth and demand for commodities. This was to the benefit of Russia, South Africa and Turkey. Indonesian and Thai equities were among the best performers as Asian economies looked set to lead the recovery. Emerging European markets including Hungary also made sizeable gains. Amongst the larger markets, returns were generally positive over the quarter – with the notable exceptions of Brazil, China and Taiwan.

Your portfolio

Your equity portfolio would normally include shares or funds covering different regions, with the quantities in each region dependant on your risk tolerance, investment objectives and personal circumstances. Talk to an experienced and qualified financial adviser like Blevins Franks Financial Management Ltd to establish the allocation most suitable for you.

By Bill Blevins, Managing Director, Blevins Franks

9th April 2010

Blevins Franks Financial Management Limited is authorised and regulated by the UK Financial Services Authority only for the conduct of investment and pension business.


Russell Investments Limited is the source of all data; any opinions expressed are those of Russell Investments Limited and do not constitute investment advice.


Investors should be aware that past performance is not a guide to future returns. The value of investments and the income from them can fall as well as rise and investors may get back less than the amount invested.



Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.