Global stocks were broadly positive, with US equities ending the week at record closing highs.
Investor sentiment was boosted by stronger than expected US jobs data and increased optimism over the US-China trade negotiations.
- Global equities started the week strongly amid hopes of progress over the US-China trade deal and expectations of a third consecutive rate cut by the US Federal Reserve, which was announced on Wednesday. However, equities retreated on Thursday over concerns that the US and China may remain further away from agreeing a deal than hoped, although this was more than offset by the reaction to strong US jobs data released on Friday.
- US equities advanced for the fourth consecutive week with the S&P 500 and Nasdaq both closing the week at fresh record highs.
- The anticipated meeting between presidents Donald Trump and Xi Jinping has been postponed, following the cancellation of the APEC meeting in Chile because of civil unrest. Concerns increased midweek following a Reuters report that President Trump’s demand that China buys up to $50bn of US farm products has become a major obstacle in trade discussions. However, the office of the US trade representative released a statement on Friday claiming a call with China’s vice premier had been “constructive”, reassuring investors.
- In Europe the pan-European STOXX Europe 600 reached a 22-month high after the announcement that the EU27 had agreed to extend the UK’s deadline to leave the bloc, offering a ‘flextension’ which allows the UK to leave at any point before 31st January 2020.
- In the UK, MP’s voted in favour of holding a general election on the 12th December, with Boris Johnson postponing further progress on the withdrawal agreement until the election has been held.
- Oil prices were negative for the week on oversupply concerns as US crude inventories rose steeply; inventories are now close to 1% above the five-year average for this time of year.
- Investors grew nervous over incoming Argentinian president Alberto Fernandez’s policies following his election victory; however, his failure to win a majority in congress brought some calm.
- Chairman of the US Federal Reserve, Jay Powell, announced a rate cut of 0.25% justified by uncertainty over the economic outlook but stated that this could be the end of the rate cutting cycle for the time being, subject to deteriorating US consumer data.
- Data showed that US economic growth slowed in the third quarter, although the figures were better than expected with GDP expanding at an annualised rate of 1.9%.
- US jobs data was also positive with non-farm payrolls rising by 128,000 in October, and September’s figure being revised upwards, despite fears that the slowdown in manufacturing would begin to weigh on jobs. The unemployment rate rose by 0.1% to 3.6%, as the participation rate continued to increase.
- US manufacturing PMI survey data was mixed, improving month on month for the first time in seven months in October, although it contracted by more than expected, with a reading of 48.3.
- Flash GDP data for the Eurozone showed the economy grew by 0.2% in the third quarter.
- The UK manufacturing PMI rose to 49.6 in October but remained in contractionary territory as stockpiling ahead of the Brexit deadline was identified as providing a boost.
- In Japan, both retail sales and industrial production were stronger than expected in September as consumer spending grew ahead of the October sales tax increase. Retail sales jumped to 9.1% y/y and industrial production recovered more than expected advancing 1.4% following a decline in August.
- However, Japan’s unemployment rate unexpectedly increased to 2.4% and manufacturing activity fell to a three-year low with the PMI falling to 48.4 in October, its sixth straight month in contractionary territory.
- Chinese manufacturing expanded at the fastest rate in three years in October with the Caixin/Markit manufacturing PMI rising to 51.7.
The Week Ahead
|Monday||Global PMI manufacturing|
|Tuesday||UK PMI services; US ISM non-manufacturing; China Caixin PMI composite|
|Wednesday||Europe PMI composite; Europe retail sales|
|Thursday||UK BoE base rate|
|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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