Investment Outlook - Markets Take Fright Again

Global pressures cast shadow over economic recovery in the UK and Europe.

The prospect of the Federal Reserve (Fed) slowing its asset purchases, combined with the threat of military action in Syria, hung heavily over financial markets in August. Oil prices shot up, while bond and equity prices came down, most notably in emerging markets, and overshadowing the encouraging signs of economic recovery in the UK and Europe.

US highs increase possibility of Fed tapering

Having reached new highs in July, US equity markets have pulled back as the prospect of Fed 'tapering' edges towards becoming a reality. The yield on treasuries, probably the single most important price in global financial markets, continues to rise in anticipation of an imminent change in monetary policy. This has helped to send the dollar higher and the currencies of weaker economies in the opposite direction.