Weekly Report

14.10.2019
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Global equity markets and currencies were buffeted throughout the week by ongoing US-China trade concerns and geo-politics.

Economic data pointed to a continuing slowdown in the global economy.

Markets

  • Global equity markets and currencies were mixed at the start of the week as investors focused on US-China trade tensions and awaited speeches by the governors of the US Federal Reserve and the Bank of England.
  • The week turned out to be akin to a roller-coaster with markets posting gains on one day only to record a loss the next day, and yet the European, US and Asian markets all ended the week on a higher note. Even the UK managed to post a gain as the more positive mood on Friday made up for the previous four days back to back losses.
  • Asia generally had a stronger week than its European and US counterparts; despite starting flat, with the markets in Hong Kong and China closed for public holidays, the glimmers of hope for trade talks as the week progressed began to create some market momentum.
  • On the days when the equity markets retreated investors sought the relative safety of government debt, and early in the week, gold, seen as a safe-haven asset, climbed to trade at just under $1,500 a troy ounce putting the metal on course for its best year since 2010.
  • Currencies also experienced considerable volatility during the week with investors shunning the offshore-traded China currency over trade worries, the Swedish krona tumbled to its weakest against the euro since the financial crisis and the Turkish lira came under pressure after Turkey launched air strikes into northern Syria.
  • Sterling also had a tough time and for most of the week trended lower as hopes of a Brexit deal at this week’s EU summit began to fade. However, on Thursday afternoon, the pound had its biggest one-day rise in six months – jumping 1.6% - after an upbeat assessment on the chances of a Brexit deal from both the Irish and UK prime ministers. The momentum continued as Donald Tusk, the European Council president said that he had seen ‘promising signals’ about the chance of a Brexit agreement, causing sterling to rise 2% against the US dollar to briefly break above $1.27.
  • Following a largely flat week, oil prices rose on Friday with the benchmark Brent Crude gaining 2.6% after a report that an explosion on an Iran-owned tanker near Jeddah, Saudi Arabia’s port city, heightened tension.

Economics

  • New data released showed that German industrial orders have continued their decline.
  • The ONS reported that UK labour productivity (output per hour worked) contracted in Q2 at the fastest pace in five years, highlighting a trend that has persisted since the financial crisis. The decline in productivity is widely considered to have accelerated as a result of Brexit uncertainty, with a lack of business investment being sighted as the primary cause because the low cost and flexibility of labour relative to capital has supported employment over investment.
  • Discouraging services sector activity data from IHS Markit which revealed a sharp slowdown in September, on the back of similarly poor manufacturing and construction surveys, caused markets to retreat as concerns of recession reignited.
  • In the US, the ISM Index for the non-manufacturing sector fell to 52.6 from 56.4 in August, its lowest reading since August 2016, providing further evidence that manufacturing weakness and the global trade war have begun to spill over to the services sector.
  • New survey data shows that global consumer confidence is at historically high levels whilst business confidence continues to struggle; the latter hit by the trade war and the manufacturing downturn. The buoyancy of consumer’s views suggest that household consumption will remain firm in most large economies even as manufacturing and trade stagnate.
  • As the week progressed, the more buoyant mood over a possible interim trade agreement between the US and China was triggered by Chinese officials offering to increase annual purchases of US agricultural products, just a day after the US imposed visa restrictions on Chinese government officials and 28 Chinese entities were added to the a ‘trading’ blacklist.

The Week Ahead

MondayEurozone industrial production
TuesdayUK average weekly earnings; UK unemployment rate; Japan industrial production; China CPI
WednesdayEurozone CPI; UK CPI; US retail sales
ThursdayUK retail sales
FridayChina industrial production; China retail sales; China GDP; Japan CPI

Index Data

Stock Markets Oct 11 Oct 04 % Change
FTSE 100 7247 7155 1.28%
FTSE All Share 3992 3933 1.50%
S&P 500 2984 2937 1.60%
Nasdaq Composite 8087 7947 1.76%
Dow Jones Industrial 26922 26426 1.88%
FTSE Eurofirst 300 1536 1495 2.74%
Xetra Dax 12512 12013 4.15%
Nikkei 21799 21410 1.82%
MSCI Asia ex Jap $ 624 614 1.57%
MSCI EM $ 997 992 0.43%
MSCI World $ 2150 2131 0.88%
Bond Yields Oct 11 Oct 04 Bps Change
UK Gov 10 yr 0.69 0.45 24
US Gov 10 yr 1.75 1.51 24
German Gov 10 yr -0.44 -0.59 15
Japan Gov 10 yr -0.19 -0.21 2
Commodities Oct 11 Oct 04 % Change
Brent Crude ($/bbl) 60.09 58.09 3.44%
Gold ($/oz) 1494.80 1517.10 -1.47%
Copper ($/lb) 2.62 2.56 2.34%
Currencies Oct 11 Oct 04 % Change
$ per £ 1.269 1.230 3.17%
€ per £ 1.149 1.120 2.59%
¥ per $ 108.585 106.885 1.59%

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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