Weekly Market Wrap 04-08/11/2019

Marius Paun | London, UK | Senior dealer | Friday, 8th November 2019

Although the tension between China and the US appears to be thawing somewhat, there are still bits to be agreed before they sign the Phase One deal. For example, China would like the 15% tariff imposed by US President Trump on September 1st to be removed whereas the US wants China to buy $50 billion worth of agricultural products. China Global Times added that ‘both countries must simultaneously remove the existing additional tariffs at the same ratio’. Donald Trump is yet to make a decision on the subject.

China continues to strengthen ties with European countries. During President Macron’s recent visit to Beijing, aircraft engineering was on the table with Airbus ready to become a competitor for Boeing in China.

The happy days for the US stock indices have returned as all 3 majors made record highs. It seems that investors’ sentiment improved, shrugging off uncertainty from the US-China trade war. Aligning this with the very good reporting figures, where over 75% of the US companies have surpassed expectations so far, has meant that the risk-on mood has certainly made a comeback in the US stock markets.

Back in the UK, it’s now official that the country will go to the polls on December 12 to elect a new Parliament. Although some analysts on both sides are trying to convince the public it is about a lot more than Brexit the fact that both sides have lined up big spending plans is saying, in fact, Brexit will be the main deciding topic. Polls suggest that, so far, the Conservatives have managed to maintain their lead and pound sterling has been rangebound 1.28-1.30 to the US dollar.

Meanwhile, the Bank of England left the bank rate unchanged at 0.75% although surprisingly 2 out of 9 members voted for a cut. They justified their action by saying that ‘stimulus is needed as data suggests the labour market is turning and the downside risks from the global economy still linger’. However, the short-term pullback was quickly reversed and the currency remained in the previous range.

Despite disappointing numbers coming out of Germany, the EU largest economy, for quite a few months, optimism in the region does not seem to fade. They continue to deny the need for any sort of fiscal stimulus so much so that some analysts are calling European decision-makers either daydreamers or foolishly overconfident… Only time will tell, but a case in point is the German press quoting EU’s ex-President Junker saying that ‘Donald Trump will not implement auto tariffs on EU automobiles. Trust me, I know what I’m saying’!!! We shall see who is right.

As widely expected, the Reserve Bank of Australia held its benchmark interest rate at 0.75% but added that it stands ready to ease policy if needed. They also said the outlook was little changed from 3 months ago with inflation expectations around 2% for the next year and unemployment dropping below 5%.