The Markets



French citizens are usually quite cynical over their leaders and especially those who these days seem to be guided by their spin ‘Meisters’ in managing their media coverage. In France the leaders’ media story was obviously going to be dominated by the centenary of the outbreak of the First World War, as well as the liberation of Provence and Paris. This provided a
perfect platform for the President to look statesman-like and a natural leader for the nation.Sadly though this was not the case. President Hollande is not a very charismatic man – although possibly his private life implies he may have some hidden attractions not obviously visible to the rest of us. From standing on a flight deck of the mighty if somewhat ageing
(eventually commissioned five years late in 2001) French aircraft carrier, Charles de Gaulle, to unveiling various memorials to the fallen, I am afraid Mr Hollande did not cut much of a figure. If ever there was an impersonation of a bemused actuary trying to find a lost pencil, then this was it.

Meanwhile, the rest of the French cabinet, including the prime minister, were being despatched around the nation with no ‘grande vacances’ for them but rather endless television interviews trying to explain away the dire economic figures. Even the weather joined in, with window rattling thunderstorms and a cold mistral bringing the worst weather for most of the
country in years heralding the latest domestic growth figures hitting zero% and the broader Eurozone still in a disinflationary spiral. Hollande is not popular.

The UK’s picture though does stand in stark contrast with growth figures being revised upward, employment figures improving and the business start-up levels seeming far more confident than before. We may still be cynical over our leaders, but certainly the economic backdrop has been very different and, for much of the summer, even reflected by an improvement in our weather for a change.

However, as we are now in the dog days of summer and the holidays end, we can wipe away the last of the sunscreen and start to look at what is next for the economy. The next month is going to be dominated by the emotion of the Scottish referendum, but leaving that aside it has been the discussions around the eventual rise in interest rates that has dominated much of the commentary. Mark Carney, the Governor of the Bank Of England, has made it quite clear that interest rates will go up when he thinks the economic indicators show that it would be prudent to do so. All we need to understand is that they are going up and that any move is likely to be quite small – even as low as 0.25%, but that the direction has now changed.

So what can we draw from this? Firstly anyone or anything that is affected by the rates will be impacted. Thus personal spending will be affected by those running higher debt levels; mortgage costs will rise and have a similar impact, and companies running debt will pay more. From this therefore we can probably deduce that there is unlikely to be an asset value crash as a result of a small rate rise, but there is every likelihood that there will be a brake being applied, at least for the moment, on certain key areas – especially around housing.