The Monday note - 15 January 2018

• The FTSE 100 closed on Friday at 7,778.6, up 54 points on a week earlier, as equities gained on speculation that the long bull market for bonds might be ending. The ten year Gilt yield softened to 1.34%, up from 1.25% a week earlier. 
• Core inflation in the US rose by 0.3% in December 2017 on a month-on-month comparison. This was ahead of forecasts and prompted speculation that the Fed may raise interest rates again. 
• According to the Financial Times, French bank, BNP Paribas, wants to expand in UK investment banking. Separately, Deutsche Bank said it will relocate far fewer jobs from London than the 4,000 roles figure previously reported. 
• UK manufacturing output in November 2017 expanded by 0.4% compared to October, beating a consensus forecast of 0.3%. The sector has benefitted from improved conditions in the global economy recently. 

Chief Economist comments: 

Early January brought the usual round of predictions for the year ahead, and made me wonder whether some forecasters had the auto-pilot switched on.

There was the usual bearish warnings on geo-political risks, China’s debts, the populist threat, and asset prices. In short, exactly what we have heard for several years now. Far more interesting, in my opinion, were the  commentators who talked about recovery in the Eurozone, a new appetite for risk, and rising expectations on interest rates.

The global economy is a changed place, and assuming 2018 will be a re-run of 2017 is lazy thinking.