This weekThose expecting a quiet start to 2020 after the turmoil of Brexit and trade wars were left disappointed; gold and oil prices were sent spiralling as tensions between the US and Iran mounted after the killing of Qasem Soleimani, the main architect of Iran's drive to increase its influence across the Middle East.
With hundreds of thousands of mourners packed into the streets of Tehran, as well as other Iranian cities, gold prices rose to a seven-year high whilst oil rose to its highest level since the summer of 2019.
The news from Iran also had a profound effect on the bond markets with German 10-year bunds dropping to its lowest level in three weeks to -0.31%.
However, many main bourses recouped their earlier losses throughout the week as on Wednesday US President Donald Trump signalled a desire to de-escalate tensions with the middle eastern nation. Receding worries brought oil prices back down to earth, with data showing a build-up in US Crude stockpiles not helping black gold. Unsurprisingly, it was Shell and BP that acted as the main drags on the FTSE 100.
On the midcap index, the UK also nursed losses as comments from the European Central Bank policymakers that Britain could crash out of the EU without a deal by the end of the year weighed on the market
More bad news was to come on Thursday for British retailers as data showing a Christmas Crunch inflicted more pain on already reeling supermarkets. Changing habits and belt-tightening highlighted the industry's struggle to eke out any growth. John Lewis warned it was one of the "most severe" environments in a generation with M&S and Tesco seeing "challenging" conditions.
US Non-Farm Payroll data showed 145,000 jobs were added to the economy, slightly lower than consensus. The news led the US dollar to fall, while supporting US equities which nudged higher and continued to achieve new highs on Friday, with the tech-heavy Nasdaq 100 breaching the 9000 barrier.
Next weekAfter a strong start to the year, investors will be hoping the momentum continues into next week. There is certainly a raft of key economic data which could impact on global markets.
The UK will feature throughout the week and investors will wake up on Monday to manufacturing and industrial production data. The last manufacturing output data was particularly weak, caused by Brexit uncertainty and weak global demand. However, with some of the Brexit fog beginning to dissipate investors will be anticipating a rebound in production. UK housing data is released on Wednesday and Thursday; important as rising house prices can feed through positively to consumer confidence and spending, which in turn boosts the economy. Much like house prices, inflation is another data point that can affect consumer confidence and is also published on Wednesday. The previous figure of 1.5% falls slightly below the Bank of England’s target and if persistent it could incentivise the BoE to cut interest rates to help boost the economy.
Inflation figures continue through the week, with US and Eurozone inflation published on Tuesday and Friday respectively. The trend of low, but positive inflation is likely to continue, allowing for the low-interest rate environment to persist. With the current low inflation and rising wages in the US, the workforce is experiencing rising real wages, which should promote increased spending; US Retail Sales figures on Thursday will help validate this hypothesis.
The week will close with GDP data from the world’s second largest economy, China. The country’s growth rates are often the envy of many Western economies, but despite this the trend has been for a slowdown in China’s economic growth, as it tries to shift from an export-led market to a more internal, consumption-driven economy. Expectations show that China is likely to have grown by 6% in 2019, which would be the lowest rate in the last decade but may still double its 2010 nominal GDP by 2020.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in January 2019.