Markets – May (Data supplied by The Outsourced Marketing Department)

The somewhat unexpected success of the ‘Leave’ campaign in the Brexit referendum, declared in the early hours of June 24th, precipitated a violent sell-off of UK equities with the FTSE100 losing over 500 points within minutes of it opening, following the results. However, by the month end it had recovered strongly to close at 6,504.30, up 4.39% on the month. Meanwhile, the wider FTSE 250 fell by 5.32% to 16,271.10; the reliance of the mid cap benchmarks member companies on the UK caused this sharper decline. The junior AIM market followed suit declining by 4.27% to 707.90.

Global markets also reacted negatively, as the sentiment was reflected in Europe as the Eurostoxx50 lost 6.49% on the month, to close at 2,864.74. American markets fared similarly. The Dow Jones lost 0.80% in the month, ending at 17,929.99 while the technology based Nasdaq dipped by 2.13% to 4,842.67. Still there was no respite to the bearish sentiment in Japan as the Nikkei225 closed June at 15,575.92, down 9.63%.

Negative sentiment had a far more profound effect in the foreign exchanges where, at one point on 25th June, Sterling had fallen to $1.32 against the greenback, only to claw back some ground to close the month at $1.35, to register a monthly fall of 6.90%. Sterling was also unloved in Europe with the pound losing 8.46% against the Euro to €1.19. The US Dollar remained flat in June against the Euro at $1.11. As always, in times of increased market volatility, Gold reclaimed its ‘safe haven’ status seeing a monthly rise of 8.81% to $1,322.15 a Troy ounce. ‘Black Gold’ – Oil, as measured by the Brent Crude benchmark, remained steady at $50.05 a barrel, a rise of 1.09%.

The services sector continues to grow

The powerhouse of the UK economy, the services industry, including financial services and which contributed all of the country’s 0.4% economic growth in Q1 2016, continued to grow in May, albeit at a “subdued” level.

The Markit/CIPS Purchasing Managers Index (PMI) for the sector rose to 53.5, against the 52.3 level seen in April. Any figure above 50 indicates growth in the sector.

Over 30% of respondents to the PMI survey cited uncertainty over the ‘Brexit’ referendum as a limiting factor to their growth prospects in the period covered. The latest PMI also noted that respondents reported new business in services grew at its slowest rate for nearly four years.

Job creation in the sector was also muted, recording its lowest pace seen since August 2013, largely as a result of “lacklustre in ows” of new business and the introduction of the new National Living Wage.

Reinforcing these findings, the Chief Economist of Markit/CIPS. Chris Williamson said: “The PMI survey shows that the pace of economic growth remained subdued in May, as ‘Brexit’ worries exacerbated existing headwinds…

Trends in employment and order books also deteriorated further across the economy in May, hinting at the possibility that the pace of growth could weaken again in June especially as the EU referendum draws closer.

“Uncertainty caused by the possibility of ‘Brexit’ has already had a detrimental impact on one-in-three companies, meaning growth could rebound in the event of a Remain win…”

Markit/CIPS also forecast Q2 2016 Gross Domestic Product (GDP) in the UK to be reduced to 0.2% from the 0.4% seen in Q1.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

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