Weekly Report

30.09.2019
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Global equities closed lower for a second consecutive week amid increasing political uncertainties.

Impeachment proceedings in the US and mixed US-China trade signals supressed sentiment for the week.

Markets

  • Global equity markets commenced the week unsettled as investors grappled with the implications of the impeachment investigation against President Trump. Democratic House speaker Nancy Pelosi formally initiated proceedings against the US President following a whistleblower complaint alleging he pressured Ukrainian President Volodymyr Zelensky into investigating Democratic lead candidate Joe Biden and his son, by threatening to withhold a $391 million military aid package. The proceedings are unlikely to lead to Trump’s removal from office, unless a two-thirds majority in the Republican controlled senate can be reached.
  • Mixed messages relating to the US-China trade dispute led to increased levels of volatility during week. President Trump criticised China’s trade practices, stating he would not accept a “bad deal” only to contradict himself as the week progressed, commenting that a deal “could happen sooner than you think”. Trade negotiations are due to resume on October 10th.
  • Elsewhere, the US President signed a partial trade deal with Japan, reducing some US tariffs in exchange for agricultural concessions. Although, the agreement does not guarantee protection for the Japanese autos sector, and several market commentators doubt whether a much broader agreement will be reached.
  • The outlook for trade remained in focus amid reports the White House was considering restricting US investment in China and forcing US exchanges to delist shares of Chinese companies.
  • European equities closed the week lower as weak data reignited growth fears in the region. The UK’s blue-chip index was an exception as it reached a two-month high on Friday, as overseas earners were supported by a weaker pound. Sterling was under pressure following dovish comments by the Bank of England’s Monetary Policy Committee member Michael Saunders.
  • Boris Johnson was dealt another defeat, this time at the hands of the supreme court who ruled that his decision to prorogue parliament in the weeks leading up to the Brexit deadline was unlawful, stating that it should be quashed immediately.
  • Oil prices fell with Brent crude experiencing its worst week in seven. Supply fears receded as Saudi Arabia recovered from the recent drone strike quicker than expected while US crude inventories also rose unexpectedly by 2.4 million barrels.
  • Gold suffered its third straight weekly decline, owed to reduce demand for haven-assets, as US economic data beat expectations and the US dollar maintained multi-week highs against other major currencies.

Economics

  • Concerns over the outlook for the Eurozone economy deteriorated further as the composite PMI index, which includes both manufacturing and services, fell to six-year low of 50.4 in September and close to the expansionary threshold of 50. The move lower was attributable to a weaker reading from the services sector, sparking fears that the manufacturing downturn was spreading to services.
  • Eurozone economic sentiment weakened in September falling to 101.7, the worst level since February 2015.
  • Outgoing ECB President Mario Draghi commented that the eurozone economy was now facing a much more “prolonged sag” than was expected just a few months ago.
  • The US manufacturing sector PMI reached a five-month high in September with a reading of 51.0. However, the US consumer confidence index unexpectedly dropped to 125.1 from 134.2 in August.
  • Japan’s manufacturing PMI dropped to 48.9 in September, falling at its fastest rate in seven months.

The Week Ahead

MondayUK GDP; Europe unemployment rate
TuesdayUK PMI manufacturing; Europe inflation; US ISM manufacturing; Japan unemployment rate; China PMI manufacturing
Wednesday-
ThursdayEurope retail sales
FridayUS unemployment rate

Index Data

Stock Markets Sep 27 Sep 20 % Change
FTSE 100 7426 7345 1.11%
FTSE All Share 4071 4043 0.70%
S&P 500 2976 3011 -1.17%
Nasdaq Composite 8006 8166 -1.96%
Dow Jones Industrial 26933 27151 -0.81%
FTSE Eurofirst 300 1541 1545 -0.21%
Xetra Dax 12381 12468 -0.70%
Nikkei 21879 22079 -0.91%
MSCI Asia ex Jap $ 616 630 -2.21%
MSCI EM $ 1009 1017 -0.72%
MSCI World $ 2183 2205 -0.96%
Bond Yields Sep 27 Sep 20 Bps Change
UK Gov 10 yr 0.49 0.63 -14
US Gov 10 yr 1.68 1.75 -7
German Gov 10 yr -0.58 -0.52 -6
Japan Gov 10 yr -0.26 -0.23 -3
Commodities Sep 27 Sep 20 % Change
Brent Crude ($/bbl) 61.76 64.97 -4.94%
Gold ($/oz) 1506.40 1500.70 0.38%
Copper ($/lb) 2.58 2.59 -0.39%
Currencies Sep 27 Sep 20 % Change
$ per £ 1.231 1.250 -1.52%
€ per £ 1.125 1.135 -0.88%
¥ per $ 108.155 107.890 0.25%

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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