The Monday note - 12 February 2018

• The FTSE 100 fell by over 242 points last week to close on Friday at 7,092.4, as concerns over interest rate rises continued to hit market sentiment. The ten year Gilt yield stood at 1.57%. 
• Citi, the US bank, plans to open a technology innovation centre in London, employing 60 staff. Citi cited access to talent and investor clients as reasons for choosing London. 
• UK manufacturing output rose by 0.3% month-on-month in December 2017, the eighth consecutive month of growth. However, total UK industrial output fell due to a temporary shutdown of the Forties North Sea oil pipeline. 
• The UK services PMI for January read at 53.0, which was below expectations. The convention of the survey is that a reading of over 50.0 suggests growth. 

Chief Economist comments: 

The financial markets correction needs to be split into two parts for analysis. It makes sense that bond yields are softening as we leave the era of ultra-low interest rates. The stock market correction requires more mental gymnastics. Higher rates will moderate growth, but central banks are hardly likely to hike rates to the point that the economy is on the brink of recession. Perhaps the stock market fall has other causes? If you bought a FTSE 100 tracker in January 2016, when it was trading at around 6,000, selling today at above 7,000 looks less like panic and more like profit taking.