Expert view: what next for rates, Europe and oil prices


Andrew Milligan

31st May 2016 at 10:25am

We ask Andrew Milligan, Head of Global Strategy at Standard Life Investments, to share his views on the main issues which could affect markets and what they could mean for investors.

The mood of global markets seems to have improved recently, which is a welcome respite after the unpredictable start to 2016.

But investors continue to speculate about the path of interest rates, what will happen to oil prices, and, of course, Europe.

With UK rate rises being pushed out further, what are the short-term growth prospects for the UK?

In the short-term, both growth prospects for the UK and the outlook for the stock market will depend on the results of the Brexit vote.

We’ve already seen some companies holding back in their investment decisions, with some fund managers being more cautious than normal towards UK equities compared with other markets.

Putting this aside, the UK economy does appear to have slowed moderately during 2016. We think this is a reaction to slowdowns in growth in important countries, such as the USA and China.

Many speculators are anticipating a US rate rise in the coming months. What impact do you see this having on global growth and currencies?

The US central bank is considering a rate rise in the summer as the US economy is showing signs of stronger growth, while the financial stress seen in the spring has died down. But, really, this is the only reason.

A small monetary tightening should have little impact on global growth into 2017. However, what will be important is how the US currency reacts to the rate rise, and what influence this could have on commodity prices and emerging market economies.

What do you see as the main drivers in Europe over the next six to nine months?

The European economy is picking up speed, although it’s unlikely it will show very strong growth.

We see European equities as better placed than many other markets. Companies there will benefit more from top-line sales growth, while wages and other cost pressures are not as notable as in some other countries such as the USA.

While the impact of a stronger or weaker Euro remains important for profits growth in many companies, the result of the Brexit vote will matter for Europe.

With oil prices just breaking $50 per barrel, do you have a view on where the price is likely to go from here and what impact it will have on global markets?

Oil prices are unlikely to go much further.

Recent supply cutbacks in countries such as Canada, Nigeria and Venezuela have been pushing the oil price higher but, these should be temporary.  And anyway, as oil prices rise above $50 per barrel so US shale fields become profitable again.

Even so, the rise in oil prices from below $30 per barrel has certainly been important in supporting high-yield debt markets and some emerging equity markets. However, we don’t see this move in oil prices as the start of a major trend higher in global commodity prices. That’s unless the Chinese economy really accelerates, or the US dollar unexpectedly collapses.

Always keep an eye on your investments

Although the climate in global financial markets has improved since the beginning of the year, it’s always important that you review your investments.

And, making sure your investments are spread across a range of geographies and investment types is essential. This should help provide an element of protection from any unforeseen events in the markets.


The views expressed by Andrew in this blog should not be regarded as financial advice. You should speak to a financial adviser if you are in any doubt about your investment options. There may be a charge for this.

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The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in May 2016.