The outlook for interest rates has undergone a change as the influence of the US economic slowdown and steep cuts in US rates begin to be felt across the region. Although in general Asian companies appear attractively valued, there is a continuing need for businesses to issue new equity in order to strengthen their finances. While the resulting abundance of supply may temper the performance of the region's markets in the short term, further corporate restructuring should be positive for the longer-term outlook. United Kingdom UK equities have not escaped the unsettled conditions seen elsewhere and are currently some way off their market highs. While growth is slowing somewhat, the situation is not too problematic.
Inflation remains below the central bank's target.
These cuts in rates could prove to be positive for the stock market and corporate bonds. We believe that the outlook for smaller and medium-sized companies is still favourable and the overall environment for stock picking has improved. The stock market has experienced increased volatility in recent months. As a result, more defensively-oriented companies have tended to outperform technology and telecommunications stocks. Economic growth is slowing in Germany as higher energy prices have dampened consumer demand and exports have declined in response to weaker demand abroad.