Agenda item

Consideration was given to graphs showing recent movements in the Stock and Share Indices (for copy see file of Minutes).

The graphs captured the beginning of the setback in equity markets and Robbie Bowker, P-Solve explained the market conditions in the first few days of September 2015. The UK market was down by almost 6% with emerging markets down 14%.  

The stock market sell-off had been triggered by events in China. China was the second largest economy and a big importer, and was therefore very important in the world-wide market. Commodities also fell by 15% which affected emerging markets. When the news of China broke, huge daily market volatility resulted. Equity markets remained volatile and investors were nervous, taking a more defensive approach.

In response to questions from Councillors Shuttleworth and Martin about the potential impact on interest rates, Robbie Bowker advised that there was a lot of pressure on bond markets as private pension schemes looked to purchase. Banks were also buying more bonds putting additional pressure on the bond market and this was keeping interest rates suppressed.  However he did not envisage that interest rates would increase to levels previously seen.

In terms of liabilities, because investors were being risk averse, long-dated bonds had been the best performing asset in the 3 month period. This was a difficult environment for pension schemes as the value of liabilities rose sharply.

Resolved:

That the information given be noted.