Europe’s continued gas issues: Russia halts gas supply to Europe, as EU respond with price cap on oil. EU officials are mulling over an adjustment of electricity and gas prices. The risk is that if implemented Russia might not resume any deliveries of hydrocarbons to the EU.
Broad-based economic slowdown: Europe and UK economic outlook remains particularly uncertain and clearly skewed to the downside, with growing concerns being expressed by both households and businesses. As the global outlook for trade also weakens and financing conditions tighten, both Europe and UK will likely see a recession in 2023, to the tune of 0.5% and 1.0%, respectively.
Central banks go bigger: post the ECB and BoE announced outsized rate hikes at their last policy meetings and will probably continue to do so in the near-term.
UK equity outlook: Higher rates and commodities paired with weaker sterling are supportive of UK large cap relative to small and mid-cap equities. The Global Investment Committee continues to remain neutral on UK equities, favouring large cap over small and mid-cap equities.
UK sovereigns outlook: Newly elected Prime Minister Truss’ fiscal package adds to a worsening deficit outlook and will pressurise the gilt market. Yields across the curve to remain volatile and likely rise towards year end. We continue to remain underweight UK government bonds.