Sand storms

After a brief flirtation with new highs early in the week, UK equities joined other major world markets in staging a retreat amidst a renewed bout of volatility. A number of factors contributed to the nervousness amongst global investors, including some disappointing US economic numbers; but most notably the escalation of the military conflict in Yemen added to the list of geopolitical risks that continue to test the markets' resolve. The Saudi-led coalition, which has the support of US President Barack Obama, is defending Saudi Arabia's neighbour Yemen from anti-government Shia Houthi rebels, who are backed by supporters of the former president and, it is believed, Iran. Friday saw the third night of bombing by the coalition's warplanes as they attempt to halt the rebels' advance on the port of Aden.

The renewed instability in the Middle East came as the US Department of Commerce confirmed that US GDP expanded at an annual rate of 2.2% in the last quarter of 2014, just shy of expectations. End-of-quarter profit-taking was another factor contributing to the retreat. The FTSE 100 Index ended the week down 2.39%, as the political uncertainty of the forthcoming general election also unnerved investors.

This week's bulletin also includes:

  • Uncertainty over the forthcoming general election adds to UK market worries
  • European equities see record investment levels as Greek debt negotiations continue
  • UK inflation falls to a 55-year low as strong retail sales figures dispel fears of a deflationary spiral
  • Investors have just four days left to make the most of their tax-year end planning opportunities

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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