Market round-up 14-18 October

Thomas Watts

The week that was saw numismatists up and down the country rejoice as the Royal Mint celebrated the 50th anniversary of the 50 pence piece. Being the most valuable coin at the time of its production, its shape had to be different to the other denominations in circulation. A hole through the middle of the coin did unacceptable things to the Queen’s head (a legal requirement on British tender) and wavy-edged, flat-edged or square coins could not be used in the coin-handling machinery, which were coming into increasing use in banks. The shape needed to be a constant breadth at whichever angle it was measured, leaving the 7-sided shape as the only real option.

Despite having the image of Britannia on the front, the quintessential image of Britain, the press had plenty to say on the subject; ’a monstrous piece of metal’ screamed one headline from the time. A retired Army colonel even started an Anti-Heptagonist movement, providing an illustration of just how much the public dislike change, so to speak.

It is with some irony then, that during a week that saw Brexit negotiations draw to a close in Brussels, the spirit of Britannia and questions over a border still dominate the headlines. After the initial fireworks of last week’s admission that the UK and EU were on “a pathway to a possible deal” which caused the FTSE 250 to enjoy its best day in a decade, Britain entered into eleventh hour negotiations with Europe, finally culminating in a deal being announced on Thursday. Predictably, it was the pound itself as well as more domestically focused stocks that carried on the party, sterling hitting $1.29, with housebuilders and financials leading the mid-cap index higher once again. The day of the announcement ushered in a particularly volatile period for currency markets as sterling jumped over 1% on the news, subsequently reversing into negative territory after news broke that the DUP would not vote in favour of the new deal. With further governmental talks scheduled for the weekend, many investors will be holding their breath to see whether a deal can finally make safe passage through parliament. Much like a coin toss, the odds of success hang in the balance it would seem, with some commentators seeing a 50-50 chance.

Economic data

Although events in Brussels and Westminster dominated market movements during the week, on the other side of the proverbial coin, a raft of economic data kept economic commentators on their toes. UK Employment data was of particular note this week as average hourly earnings and unemployment numbers both came in slightly under consensus. Unemployment rates crept up from 3.8% to 3.9%, but still below this time last year’s figure of 4%. Unemployment numbers measure people without a job, who have been actively seeking work within the last four weeks and who are available to start work within the next two weeks. It is worth remembering the unemployment rate is not the proportion of the total population who are unemployed. It is the proportion of the economically active population – those in work plus those seeking and available to work- who are unemployed.

Across the pond, data also provided little cause for cheer as US Core Retail Sales came in below consensus estimates. Falling by 0.3%, its first such decline in seven months, the figures come on the back of ongoing fears of a recession and worries about trade wars, with automobile sales having been the hardest hit, falling 0.9%, the sharpest decline in eight months.

Next week

A busy week for Boris Johnson turns a whole lot busier this weekend as the Prime Minister seeks a safe passage for his new Brexit deal through parliament. Early comments from various ministers on any part of the political spectrum have given little indication of which way the vote could go, leaving the whole vote on a knife edge. Although it is difficult to see past this weekend’s events in Westminster when setting the tone for what is to come, there are various key economic data points that those of an economic, rather than a political, persuasion can focus on.

The last full week of October not only sees a scramble for votes in Westminster affecting markets over the weekend, but also a hopefully more tranquil affair at the IMF should also be on investors’ minds. IMF meetings are usually held twice a year and are attended by the representatives of IMF and the World Bank. Such meetings are usually open to the press with officials opting to speak with reporters throughout the day, giving formal statements covering policy shifts and meeting objectives after the meetings have concluded.

With the UK yet to close the most current chapter of what has been a long-running saga with the EU, all eyes should shift to the continent on Tuesday as the bloc’s two largest economies, Germany and France, release their PMI data for both services and manufacturing. With worries over the Eurozone’s economic health having manifested yet again in recent months, economists both sides of the Channel will be hoping for better numbers, especially from Germany where the recent trade war between the US and China hasreally taken its toll on the export driven economy.

The information in this blog 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 October 2019.