March was a month which began with headlines about the Greek debt crisis and the impending ‘final deadline.’ By the end of the month the focus – in Britain at least – had shifted to Granny Tax, Cornish Pasties and the shortage of petrol.
On March 7th world stock markets suffered some of their worst falls of recent months as investors worried that the Greek bail-out would not be accepted. In the event the necessary thresholds were met quite comfortably, but sadly this didn’t signal the end of the global economic malaise.
Once the euphoria had died down – and that happened remarkably quickly – reality set in with investors and commentators alike acknowledging that the road ahead would be long and bumpy and that there were plenty more potential crises around the corner.
UK
If a week is a long time in politics, then in March a month was an eternity for the British economy. It began with the FTSE within sight of the 6,000 level and Nissan announcing plans to create 400 new jobs with a compact car plant in Sunderland. With a further 1,600 jobs expected to be created in the supply chain this was one the Government could definitely file under ‘good news.’
Unfortunately petrol reached a record high around the same time and it was then downhill all the way.
There was bad news for UK homeowners, with the Halifax announcing that mortgage rates would rise on May 1st with the base mortgage rate increasing from 3.50% to 3.99% – an increase of 14%. Other lenders were not slow to follow suit and the gloom was compounded a few days later when the Halifax confirmed that house prices had fallen by 1.1% in February. By the end of the month lenders were talking about stricter lending criteria, and house prices fell again as the stamp duty holiday ended.
The response to George Osborne’s budget was lukewarm at best, with several of the measures coming in for criticism and ‘Granny Tax’ trending on Twitter before the Chancellor had even finished speaking. The top rate of tax was cut from 50p to 45p but with tax allowances for pensioners being frozen, it was hardly surprising that the Budget was derided as one that ‘picked the pocket of pensioners.’
However, it was in the final week of the month that it went seriously wrong for the Government, as motorists queued for petrol in the face of a threatened tanker drivers’ strike. The Government also faced the possibility of a ‘bakers’ march’ with a groundswell of opposition to plans to impose VAT on hot, savoury food. When the full weight of the Government spin machine is used to tell the nation how much the Prime Minister likes Cornish Pasties you know that “events, dear boy” are not quite going to plan.
The British Chamber of Commerce cut its forecast for output growth; the retail sector continued to struggle and the OECD claimed that Britain was back in recession. Unsurprisingly, the FTSE struggled to make any ground through March, and ended the month down just under 2% at 5,768.
Europe
With Greece having been ‘saved’ – for now at least – the focus in Europe switched to the other countries that were deemed to be in trouble. Spain introduced an austerity budget at the end of the month which it claimed would save €27bn, but like last month’s tough measures in Greece it was greeted with civil unrest.
However, markets were buoyed by the European finance ministers agreeing a new €500bn bailout fund (which in practice will probably rise to €700bn). This is now the “firewall” on which all hopes are pinned.
Despite these worries the key German DAX index rose again, finishing the month 1.32% up at 6,946. The index has risen by an impressive 17.7% since the start of the year.
Other European markets were mixed, but Spain fell by over 5%. Worryingly, it is the only one of the world’s major stock markets to be down on a ‘year-to-date’ basis, with a fall of 6.52%.
US
The picture in the US was somewhat confused. As Mitt Romney moved towards the Republican nomination, President Obama saw a further 227,000 jobs added in February. Encouragingly, this was across the whole range of employment sectors and unemployment in the US is now running at 8.3%.
However, the pessimists were quick to point out that the US balance of trade had widened in January, with a goods and services deficit of $52.6bn, up from $50.4bn in December and a three-year high. Given these conflicting signals it was no surprise when the Fed (Federal Reserve Bank) opted to keep US monetary policy unchanged.
The Dow Jones index had started the month within touching distance of the 13,000 mark. Although the performance throughout March was not spectacular, the recent gains were consolidated, with the index finishing at 13,212 for a rise of almost exactly 2%. The Dow Jones index is now up by just over 7% since the start of the year.
Far East
The news from Japan was mostly good in March, with a trade surplus of ¥32.9bn being confirmed for February after four-straight months in deficit. Although Japan’s recovery from the world recession and the tsunami is still fragile these are encouraging figures and, not surprisingly, the Bank of Japan left its key monetary policy unchanged.
In China the inflation rate fell to 3.2% – however food price inflation rose to 6.2% which must make life difficult for the average person. There was a worrying story in the BBC news archive about the ghost town of Ordos – a town built for hundreds of thousands of anticipated residents at the start of the Mongolian Coal Rush. Today the town stands derelict and deserted – testimony that not everything in China works out perfectly.
This uncertainty was reflected in the stock market – consistently above 3,000 in 2011, but now down another 3% on the month to finish March at 2,350. If the Chinese Government allows the yuan to float more freely – as has been suggested – then this will presumably make Chinese exports less attractive.
The Hong Kong market also saw big falls in March, declining by over 5% to finish the month at 20,556.
Emerging Markets
Like China, the other ‘BRIC’ countries, Brazil, Russia and India, all saw their stock markets fall during the month although all are comfortably ahead since the start of the year.
Several other emerging markets posted useful rises, but the stellar performer of the month was once again Venezuela, with the stock market there recording a massive gain of over 30% in March. As we have already seen, The Dog of the Month award – or ‘perro del mes’ in this case – went to Spain.
And finally…
However your investments performed, March was a remarkably good month for Bob Diamond, the boss of Barclays. He staggered home under the weight of £17m in pay, shares and perks – at a time when the bank’s profits fell. Anyone who invested £100 in Barclays in 2006 would now have £29. It’s alright for some…
Sources: Confirmation of US trade deficit http://www.nytimes.com/2012/03/10/business/economy/us-trade-deficit-widens.html 2/3 Oil price jumps to 43 month high http://www.bbc.co.uk/news/business-17229025 Greek bailout has to wait another week – await the debt swap deal with private bondholders: now March 8th http://www.bbc.co.uk/news/world-europe-17219379 Davey ‘no mates’ complains other EU leaders ignoring him http://www.bbc.co.uk/news/uk-17224109 3/3 moodys downgrades Greece to C from Ca – lowest level on scale Warns of Greek default despite the bailout http://www.bbc.co.uk/news/business-17238523 Halifax expected to raise mortgage rate in May from 3.5% to 3.99% Expected on 1st May http://www.bbc.co.uk/news/business-17234257 typical Halifax borrower has >£100,000 – payments on interest only will go up by 14% Three days later reports 1.1% fall in house prices in February http://www.guardian.co.uk/money/2012/mar/06/house-property-prices-mortgages-halifax?CMP=twt_fd Petrol reaches a record high at beginning of month http://www.bbc.co.uk/news/business-17231140 Sell in May and go away Chamber of Commerce 6/3 Nissan to create 2,000 new jobs http://www.guardian.co.uk/business/2012/mar/06/nissan-jobs-compact-car-sunderland Fall in UK retail sales http://www.guardian.co.uk/business/2012/mar/06/brc-survey-uk-retail-sales-fall Down 0.3% like for like on last year 6/3 Fears that Eurozone in recession prompt biggest stock market falls of the year to date: http://www.guardian.co.uk/business/2012/mar/06/eurozone-crisis-live-markets-anxious-gdp Lib dems prepared to do deal on mansion tax http://www.guardian.co.uk/politics/2012/mar/06/vince-cable-lib-dems-50p-tax 7th March – Times 8th March – Greek target nearly reached by lunchtime More young people unemployed than employed in Greece 9/3 Half of UK’s 16-24 black males unemployed http://www.guardian.co.uk/society/2012/mar/09/half-uk-young-black-men-unemployed more young people without a job than with one in Greece Fall in industrial output Barclays boss Bob Diamond staggered home under the weight of £17m in pay, shares and perks – at a time when the bank’s profits fell. Anyone who invested £100 in Barclays in 2006 would now have £29 14/3 Wall Street soars on Euro stability – Greece upgraded to B http://www.guardian.co.uk/business/2012/mar/13/wall-street-high-eurozone-greece-fitch Spotlight moves on to Spain Cyprus downgraded to junk Encyc Britannia ceases print edition http://www.guardian.co.uk/books/2012/mar/13/encyclopedia-britannica-halts-print-publication UK considers super long term bond http://www.bbc.co.uk/news/business-17361330 China to allow yuan to float more freely http://www.bbc.co.uk/news/business-17362888 15/3 Fitch – 50% chance UK will lose AAA status in next 3 years http://www.guardian.co.uk/business/2012/mar/14/fitch-uk-aaa-rating-at-risk 18/3 The Chinese Ghost Town http://www.bbc.co.uk/news/magazine-17390729 21/3 up to 40% of high street shops could close http://www.guardian.co.uk/business/2012/mar/20/high-street-shops-close-deloitte inflation falls as Saudis pledge to boost oil supplies down to 3.4% – 3.3% expected http://www.guardian.co.uk/business/2012/mar/20/inflation-falls-again-lower-energy-bills ‘Granny tax’ trending on twitter within minutes of the Chancellor sitting down 22/3 Japan posts surprise trade surplus http://www.bbc.co.uk/news/business-17470616 Glaxo invests £500m in UK http://www.bbc.co.uk/news/business-17465090 29/3 UK GDP falls, fall in disposable income – bad for retail http://www.guardian.co.uk/business/2012/mar/28/uk-fourth-quarter-gdp-estimate-ons Pie Tax and Fuel Shortage OECD says Britain back in recession http://www.guardian.co.uk/business/2012/mar/29/uk-back-in-recession-oecd Further fall in house prices as stamp duty holiday ends http://www.guardian.co.uk/money/2012/mar/29/house-prices-fall-in-march US jobs at four year high http://www.guardian.co.uk/business/2012/mar/29/employment-jobs-economy-unemployment-benefits end of the month saw significant stock market falls as … Spanish general strike Higher mortgage rates and tighter lending criteria
