ISM Manufacturing Index (Dec.)

UK gilt yields have continued to fall over the last month, despite growing fiscal fears and the limited boost to gilt prices provided so far by the Monetary Policy Committee’s further round of asset purchases. The cost of insuring against UK sovereign default has risen steadily, reflecting both the Chancellor’s gloomy Autumn Statement and the Prime Minister use of the UK’s veto at the recent EU summit which has raised fears that the coalition may not last. Nevertheless, gilts have maintained their relative safe haven status as the fiscal outlook in the euro-zone has deteriorated at a faster pace than in the UK and as the outlook for UK economic growth has continued to darken.