Investments

Market round-up 11-15 November 2019

Thomas Watts

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 November2019.

 

This week

Although still 44 days to Christmas, the man in Number 10 received an early present in the run up to the 12 December’s election, one that could prove pivotal for his election and subsequent plan to leave the EU.

Politics

Monday saw Nigel Farage, leader of the Brexit Party, hand Boris Johnson a considerable boost as he pledged that his party would pull out of 317 Conservative held seats in a bid to prevent opponents to Brexit controlling the next parliament. Farage said Brexit was in peril, so he would focus his party’s efforts at unseating opponents of leaving the EU, primarily those held by Labour and the Liberal Democrats. Farage’s move should dramatically increase the chances of a Conservative majority, sparing Mr Johnson the prospect of a right-wing challenge in nearly half of the 650 constituencies contested. The news, coupled with poll data showing the Conservatives held a 10-point lead over Labour, prompted sterling to jump around 1% against the US dollar and hit a six-month high against the Euro.

Although hope that the domestic political landscape may be becoming more stable in the coming months, optimism that stability would be reached any time soon in Hong Kong dissipated further. An escalation in the violence over the weekend rattled Asian markets as news footage showed images of protestors being shot at with live rounds. Banks heavily exposed to the area such as HSBC and Standard Chartered saw falls between 2% and 3% each.

President Trump

Further geopolitical news helped drag down markets throughout the week as a much-awaited update from US President on his country’s ongoing trade war with China left little cause for optimism. After drifting higher on Wednesday following Federal Reserve Chair, Jerome Powell’s statement that he saw “sustained expansion” ahead for the county’s economy, market came back to earth following Donald Trump’s speech in which very few positive details emerged. President Trump said on Tuesday that a trade deal with China was “close,” but offered no details and warned that he would raise tariffs “substantially” on Chinese goods without a deal.

It was not just politics that drove markets this week as a raft of domestic data also allowed economists to focus on the fundamentals. On domestic shores, the UK narrowly avoided recession as GDP increased by 0.3% in the third quarter of the year.  The service and construction sectors provided positive contributions to GDP growth, while output in the manufacturing sector was flat. Tuesday saw the Office for National Statistics release employment figures detailing a slowing of wage increases from 3.8% to 3.6% although unemployment came in better than economists’ predictions at just 3.8%.

There was also cause for cheer on Thursday as Germany also narrowly avoided recession, growing by .1%. Europe’s largest economy’s strength as an exporter of manufactured goods has left it exposed to recent conflict in global trade.

 

The week ahead

As the campaign trail rolls on across the country, all parties will be hoping to increase their share of seats within Westminster with only a few weeks of electioneering left. Whilst the battle for control of the House of Commons rages, it will be houses in the rest of country that economists will take interest in on Monday.

House Price Index

Rightmove will be releasing its House Price Index, detailing the change in the asking price of houses for sale on a month-on-month basis. House price changes are an extremely important leading indicator for the economy as the industry’s health has a significant knock on effect not only on land prices, and therefore housebuilders, but also estate agents, mortgage lenders and even home furnishings businesses.

Staying with the construction theme, Tuesday sees the US Census Bureau release Building Permit data for the world’s largest economy. Much like house prices, building permits are a strong gauge for future construction activity as obtaining a permit is one of the first steps in constructing a new building.

Economic data

In what looks to be a quiet week for economic data, the week is rounded off by a flurry of European Purchasing Manager Index readings. Covering the two largest Eurozone economies, Germany and France, the data will cover both manufacturing and services sectors as well as a composite reading for the entirety of the bloc. With Brexit consistently being the main issue for which the electorate is voting on, it will be interesting to see just how the economy is doing on the other side of the English Channel.