Weekly Report

23.09.2019
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Most global equity markets closed the week lower as geopolitical risks rose.

Market traders were predominately focused on central bank policy meetings.

Markets

  • Hopes for a quieter week on the geopolitical front were short-lived following a drone attack on Saudi Arabian oil facilities, which knocked out about 5% of global oil production and prompted Brent crude to jump 15% to record its biggest daily gain since 1988. Oil prices remained volatile throughout the week as Saudi Arabia adjusted its estimates for when it expects the damaged facilities to come back online.
  • The US Federal Reserve cut interest rates by 25bps, as expected, in a bid to stimulate the economy amid growing global headwinds. Projections showed that Fed officials are now divided in the path for rates but do not expect additional rate cuts this year or next, leading to some disappointment in the markets.
  • Gold gained support from a weaker dollar as investors sought clarity on the future of US interest rates after the Federal Reserve signaled further monetary easing is likely.
  • European markets were largely range-bound, despite a resumption of trade talks between the US and China and increased hopes of a resolution on Brexit.
  • European Commission President Jean-Claude Juncker remained in favour of reaching a Brexit deal commenting that that a no-deal Brexit would be ‘catastrophic’ and that he would be prepared to consider the removal of the controversial Irish backstop from a withdrawal agreement if the two sides can agree on an alternative.
  • The Bank of England’s MPC voted unanimously to leave interest rates unchanged at 0.75%, as expected, and maintain the size of its asset-purchase programme at £435bn. In a statement, the central bank struck a dovish tone and said the UK would avoid a recession in 2019 but warned over the impact of slowing global growth and Brexit-related uncertainty.
  • In Japan, the BoJ maintained their current monetary policy stance, holding short-term interest rates at -0.1% and pledging to guide yields on 10-year government bonds to around zero.
  • Indian equities rose sharply after the government introduced a series of tax changes in an attempt to stimulate the economy. The measures include an 8% reduction in the corporate tax rate from 30% to 22%, as well as introducing a 15% tax rate for all companies incorporated after 1 October in a bid to attract overseas businesses.
  • Chinese stocks ended the week in negative territory as a batch of closely watched indicators demonstrated the negative impact the US trade war is having on the country’s economy.

Economics

  • Chinese growth industrial output and retail sales for August missed expectations, with industrial output growing at its slowest pace for over 17 years.
  • US industrial production increased more than expected in August and rose 0.6%. Manufacturing represents only 11% of the country’s GDP and 8% of US employment, but the industrial production index has both political and economic significance.
  • Eurozone annual CPI remained steady at 1% in August and was unchanged from the previous month.
  • UK CPI moved lower in August to 1.7% y/y and was the lowest reading since the end of 2016. Investors also digested the latest retail sales data from the ONS which showed an unexpected drop in August as online sales slumped. UK retail sales fell 0.2% and missed expectations for a flat reading.
  • Japanese CPI slipped to a two-year low in August, complicating matters for the BoJ, which earlier in the week refrained from introducing new easing measures. Core CPI, which excludes food and energy prices, came in at 0.5%, down from 0.6% in July.

The Week Ahead

MondayEurope PMI manufacturing; Europe PMI services; US PMI manufacturing; Japan PMI manufacturing
Tuesday-
Wednesday-
ThursdayUS GDP
Friday-

Index Data

Stock Markets Sep 20 Sep 13 % Change
FTSE 100 7345 7367 -0.31%
FTSE All Share 4043 4053 -0.26%
S&P 500 3011 3012 -0.03%
Nasdaq Composite 8166 8188 -0.27%
Dow Jones Industrial 27151 27229 -0.28%
FTSE Eurofirst 300 1545 1538 0.43%
Xetra Dax 12468 12469 0.00%
Nikkei 22079 21988 0.41%
MSCI Asia ex Jap $ 630 636 -0.87%
MSCI EM $ 1017 1022 -0.56%
MSCI World $ 2205 2202 0.13%
Bond Yields Sep 20 Sep 13 Bps Change
UK Gov 10 yr 0.63 0.74 -11
US Gov 10 yr 1.75 1.90 -15
German Gov 10 yr -0.52 -0.46 -6
Japan Gov 10 yr -0.23 -0.16 -7
Commodities Sep 20 Sep 13 % Change
Brent Crude ($/bbl) 64.97 60.15 8.01%
Gold ($/oz) 1500.70 1515.20 -0.96%
Copper ($/lb) 2.59 2.68 -3.36%
Currencies Sep 20 Sep 13 % Change
$ per £ 1.250 1.246 0.32%
€ per £ 1.135 1.124 0.98%
¥ per $ 107.890 108.065 -0.16%

Source: FE Analytics, Financial Times, JP Morgan Asset Management

Risk warning: Investors should be aware that past performance of investments is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them may fall as well as rise. The content of this bulletin is for general information and reflects the general market view of Parallel Investment Management Ltd. - it should not be interpreted as recommendations or advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.

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