The Financial Times highlighted on Tuesday the number of times the government has made a volte-face after public objection, nine so far. The latest u-turn involves social care, following hot on the heels of the reversal of the decision to increase National Insurance contributions from the self-employed. One can only imagine how the rest of Europe view this and what it says about Theresa May’s ability to negotiate Brexit. Opinion polls showed the Conservatives enjoying a large lead a few weeks ago but this is now partly eroded. Despite Theresa May’s best efforts to undermine her position in the polls, the pound and the equity market in the UK appears resilient. They were also resilient to the tragic events which took place in Manchester on Monday evening, which touched everyone as the picture unfolded.
Equity markets around the globe continue to recover their poise. The S&P 500 has quickly retraced close to its historic highs once again. A combination of lack of alternatives, expectations for continued economic growth and the assumption that the positive earnings picture we saw in the first quarter will continue. The latest eurozone reinforced this view as the composite (services and manufacturing) purchasing managers survey for the region was unchanged at 56.8. This reading, according to economic reports, should translate into economic growth of around 0.7% for the second quarter.
The Greek tragedy continues as the EU and the IMF have yet to agree the release of the next set of funds. Unlike times gone past this news hardly registers on investors radar screen. The assumption is that an agreement is always made and will continue to be made, particularly during the period of Brexit. The IMF continue to stress that debt relief was necessary to ensure the country can return to economic strength. Germany remains reluctant to offer new loans until the IMF agree to partake. One day this will need to be resolved, how, is a mystery. Until then Greece will be allowed to continue to struggle along
As a further demonstration of the positive sentiment within Europe, the latest Institute for Economic Research (ifo) survey results reported that German businesses have just climbed to the highest level since the survey started in 1991. Clemens Fuest, the ifo president described business men as feeling euphoric, a phrase that can send a shudder down the backs of fund managers. To pinch a quote from Jeeves and Wooster “I'm not absolutely certain of the facts, but I rather fancy it's Shakespeare who says that it's always just when a fellow is feeling particularly braced with things in general that Fate sneaks up behind him with the bit of lead piping.”