BOE raises rates for first time since 2007

Pension and UK related:

  • AuM at 42 biggest UK asset managers drops £228bn in one year
  • UK pension deficit drops by £50bn
  • New state pension rules mean workers’ pay through their 40s and 50s 'for nothing'
  • Interest rates rise: Pensions and savers joy

Macro Related:

  • Powell nominated as Fed chair
  • October US payrolls rebound
  • GOP unveils tax bill
  • BOE raises rates for first time since 2007
  • Fed keeps rates unchanged, December hike foreseen

Pension and UK News:

AuM at 42 biggest UK asset managers drops £228bn in one year

The value of assets under management (AuM) at UK-based firms fell by 4.5% year on year, according to Willis Tower Watson's survey of the world's top 500 managers. The research, which takes into account data up to the end of 2016, shows 42 UK-based firms now manage $6.3trn (£4.8trn) compared to $6.6trn in last year's study. This marks the second consecutive year the amount managed by UK managers has declined. For all 500 firms tracked in the survey, their assets received from the rest of the world saw the greatest year-on-year growth in 2016 with an increase of 27.3%.

UK pension deficit drops by £50bn

The total deficit of all the defined benefit (DB) pension funds in the UK stood at £410bn at the end of October, a drop of £50bn since last month, according to figures released from PWC. PWC’s Skyval index, which comprises data from 5,800 UK DB schemes, showed pension fund assets at almost £1.6trn and liabilities of just below £2trn. Steven Dicker, chief actuary at PWC, said the decrease was due to a “small increase in long-term real interest rates as measured by government bond yields, while assets have grown modestly, which helped to reduce the overall deficit by £50bn”.

New state pension rules mean workers’ pay through their 40s and 50s 'for nothing'

People in their thirties and forties today will find they’ve paid so much in tax that working beyond 50 will not add a penny to their state pension entitlement. Under the old state pension system one could keep accruing extra state pension benefits right up until retirement. But under the new model the maximum amount, currently £160 a week, is received in return for 35 “qualifying” years of National Insurance (NI) payments. Any years you work beyond that don’t increase your pension.

Interest rates rise: Pensions and savers joy

PENSIONERS and savers have welcomed the Bank of England’s decision to increase interest rates for the first time in a decade. Pensioners should be able to earn more interest on their savings after the Bank of England increased the interest rate from 0.25 per cent to 0.5 per cent.

Macro News

Global equities set record highs again during the week, against a backdrop of solid economic and earnings growth. Yields on US 10-year Treasury notes edged lower, trading at 2.34% versus 2.42% a week ago. The price of a barrel of West Texas Intermediate crude oil firmed by around $2 to $54.60 this week. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), declined to 9.50 from 10.8 last week.

Trump names Powell to replace Yellen

US president Donald Trump nominated Jerome Powell to replace Janet Yellen as Federal Reserve Board chair. Powell has been a member of the Fed Board of Governors since 2012. If confirmed, he is expected to maintain monetary policy continuity while rolling back some post–financial crisis banking reforms.

US unemployment rate falls to lowest level since 2001

The US economy created 261,000 new jobs in October as the labor market rebounded from disruptions linked to hurricanes Harvey and Irma. The bounce-back was somewhat smaller than economists had forecast, however, falling short of the 310,000 consensus view. The unemployment rate fell to 4.1%, a 16-year low. Average hourly earnings disappointed, coming in unchanged versus the prior month, and rising at a 2.4% rate year over year, down from 2.8% last month.

Republicans flesh out tax bill

Corporate tax cuts make up the centerpiece of the tax reform proposal unveiled this week by Republicans in the US House of Representatives. Among the bill’s provisions is one that would permanently lower the corporate tax rate from the current 35% to 20%, though interest deductions for businesses would be limited. The plan retains the top 39.6% income tax rate, but raises the threshold at which the tax would kick in for married filers from $470,000 to $1 million a year. Under the proposal, the 40% estate tax would be eliminated in 2024, while the estate tax exemption would immediately double to $11.2 million per married couple. Unchanged under the plan would be 401(k) plans, though deductions for state and local income taxes would be eliminated. Property tax deductions would be limited to $10,000. Some of the themes emphasized in the bill are the elimination of many tax credits, deductions and exclusions, which could simplify the complex tax code somewhat. However, other provisions make it more complex in areas such as the taxation of pass-through businesses.

BOE hikes rates for first time in decade

The Bank of England’s Monetary Policy Committee hiked its policy rate from 0.25% to 0.5% this week, the first increase in more than 10 years. The move comes in reaction to a post-Brexit surge in inflation, largely because of weakness in the pound sterling that resulted in rising import prices. The MPC indicated that further rate hikes are expected “at a gradual pace and to a limited extent.” The pound fell 1% after the announcement while yields on United Kingdom government bonds declined, aided in part by concerns expressed by the MPC that the uncertainty surrounding Brexit will continue to weigh on domestic activity, which has slowed even as global growth has accelerated. The last time the MPC hiked rates was in July 2007.

Fed left policy on hold

The Federal Open Market Committee left rates unchanged at their November meeting but hinted that a rate hike remains likely at its December meeting. The FOMC statement acknowledged that late-summer hurricanes had caused mild economic disruptions but that they were unlikely to persist over the medium term.

US consumer confidence hits 17-year high

The Conference Board’s consumer confidence index rose to the highest levels since December 2000, spurred by surging equity prices and tight labor markets. In addition, investor confidence reportedly rose this week, with the Investors Intelligence survey hitting a bullish reading of 63.5%, up from 63.2% a week ago. In early September the index stood at an eleven-month low of 47.1%.

Venezuela seeks debt restructuring

Venezuelan president Nicolas Maduro said Thursday that his country will seek to restructure the nation’s outstanding debt. Maduro said state-owned oil giant Petroleos de Venezuela will make a principal payment of $1.1 billion on Friday for a bond that came due on Thursday. However, US sanctions against Venezuela will make the restructuring more challenging because of restrictions on US investors dealing with Venezuelan officials.


With nearly 80% of the constituents of the S&P 500 Index having reported, third-quarter earnings are expected to increase 5.9% compared with the same quarter a year ago. Stripping out the insurance sector, which was hampered by the impact of several hurricanes, the growth rate rose to 8.5%.

Date Country/Area Release/Event
Mon, 6 Nov Eurozone, UK Service sector PMIs, investor confidence index
Tue, 7 Nov Australia

Reserve Bank of Australia rate-setting meeting

Tue, 7 Nov Eurozone

Retail sales

Wed, 8 Nov China Trade balance
 Thu, 9 Nov United States

Wholesale inventories

Fri, 10 Nov United Kingdom

Industrial production, trade balance