Global equities were mixed for the week as geopolitical risks continued to drive market sentiment.
Brexit and the US-China trade negotiations both resulted in tentative agreements, with investors cautiously optimistic on perceived progress.
- US equities were boosted by positive earnings surprises during the week, with the S&P 500 shrugging off economic concerns to close within 1% of its all-time closing high on Thursday. Gains were pared back on Friday following the release of disappointing Chinese economic data, but this didn’t prevent the index from ending the week in positive territory.
- Despite the upside earnings surprises a poll by FactSet showed analysts expect overall earnings for the S&P 500 to decline for the third consecutive quarter.
- The UK and EU reached a tentative Brexit deal providing some support to equities, but gains were pared back as investors began to doubt the ability of Boris Johnson to push the deal through Parliament after the DUP refused to support the agreement.
- In a further twist it was announced late on Friday that former-Conservative MP, Sir Oliver Letwin, was planning to table an amendment intending to close a loophole which could allow a no-deal Brexit and which, if passed, could delay the vote on Boris Johnson’s new Brexit deal.
- Despite experiencing a volatile week sterling responded swiftly to Brexit developments and eventually closed up 1.7%, its highest level in five months.
- The US and China reached a ‘limited’ trade deal which postponed the tariff increases planned for 15th October, prompting President Trump to call the accord, a “substantial phase one deal”. However, officials from both sides indicated much more work would be needed and it was reported that China had requested further talks before signing the accord.
- US Treasury Secretary, Steven Mnuchin, separately stated that additional tariffs may be placed on Chinese imports if a deal has not been reached by 15th December.
- Oil prices ended the week lower over heightened concerns for the health of the Chinese economy, although losses were capped by expectations that OPEC will extend supply cuts at its next meeting scheduled for early December.
- The Turkish lira fell to its weakest level against the US dollar since May after the US threatened sanctions following the country’s military action in Syria.
- The Chinese economy grew at its slowest pace in nearly 30 years in Q3, increasing by just 6% y/y and sparking fresh fears of a global recession.
- Chinese trade data for September was also worse than expected, with exports falling 3.2% y/y in US dollar terms and imports plummeting 8.5%, both highlighting the impact of the protracted trade war with the US.
- Likewise, in the US, retail sales fell 0.3% in September, the biggest drop in seven months raising concerns over the health of the US economy where consumption has so far kept the economy growing.
- The IMF warned that the impact of the US-China trade war would be to reduce growth in 2019 to its slowest rate since the 2008-09 crisis, and there was a further warning that the outlook could get considerably darker if a resolution to the current tensions is not found.
- In the UK, unemployment rose by 22,000 in the three months to the end of August, causing the unemployment rate to rise to 3.9%. Retail sales data for September was also underwhelming with volumes flat for the month following a deterioration in August.
- Japanese CPI inflation fell to 0.2% in September, down from 0.3% the previous month, moving the country further away from its 2% target and to its lowest level since April 2017.
The Week Ahead
|Wednesday||Euro-zone consumer confidence |
|Thursday||US manufacturing PMI; US services PMI; ECB deposit rate; Euro-zone manufacturing PMI; Euro-zone services PMI; Japan manufacturing PMI|
|Friday||US consumer sentiment|
|FTSE All Share
|Dow Jones Industrial
|FTSE Eurofirst 300
|MSCI Asia ex Jap $
|MSCI EM $
|MSCI World $
|UK Gov 10 yr
|US Gov 10 yr
|German Gov 10 yr
|Japan Gov 10 yr
|Brent Crude ($/bbl)
|$ per £
|€ per £
|¥ per $
Source: FE Analytics, Financial Times, JP Morgan Asset Management
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