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Cambridge Weekly 15 April 2019

Brexit in-limbo aside sentiment is improving

Even though our prediction that Brexit would neither happen on 29 March nor 12 April has turned into
reality, there seems little point in celebrating. Yes, the immediate threat of a cycle-ending shock event to
the pan-European economy has been averted. However, the economic drag brought to the economy by
this extension of uncertainty – continued deferment of business investment and potentially unnecessary
worst-case preparations – has also simply been extended for six months.

Logic behind divergent UK business trends
Better than expected economic data from the UK for February delivered a positive surprise when
business news otherwise was firmly overshadowed by Brexit concerns. UK GDP growth – as well as
industrial production – was reported to be running at a higher rate than continental Europe, although the
mighty UK services sector was not quite following in line. How can this be explained when the general
impression of the past months has been that due to the looming Brexit, everything had come to a
grinding halt?

ECB turns its eye to the banks
This week’s European Central Bank (ECB) meeting was largely a non-event. The bank made no changes
to its monetary policy, nor gave any definitive details on the policies announced last month. The ECB’s
benchmark refinancing rate (the rate at which banks can borrow from the ECB) will remain at 0% “at
least through the end of 2019”, while its controversial deposit rate of -0.4% will continue for now.

India heading into biggest elections on earth
Despite the looming April election, in March, the MSCI India stock market index posted a healthy 10.4%
total return (in £-sterling terms) for the month, outperforming the MSCI World’s 2.4% and the UK’s
FTSE All Shares’ 2.7% by some margin. Last month’s 15 best-performing investment funds in the UK’s IA
peer group were all Indian.


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