Weekly Digest - INVESTEC
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US equities took a turn for the worse last week, with the S&P 500 falling 0.8% and the Dow closing lower for the fourth consecutive week. The absolute scale of these cumulative declines, however, is relatively modest; the S&P 500 is down 2% (from close to all-time highs) over the last month. The cause of Friday’s reversal was the deteriorating sentiment around the US/China trade talks, which have now stalled. The Chinese state media has suggested that Chinese authorities will not resume negotiations until the US shifts its current position. The latest development is that Google has blocked Huawei from receiving updates to certain applications on its Android mobile operating system, and may block the next release of the system entirely. This is in response to the US government adding Huawei to its ‘entity’ list of companies with which US companies may not trade. Separately, Bloomberg is reporting that a number of US components companies (including chip manufacturers) are also ceasing to deal with Huawei.
In the UK, the FTSE 100 gained more than 2% last week as sterling weakened amid mounting concerns about Brexit. This was in response to the breakdown of the cross-party Brexit talks, increasing the likelihood of an early general election which could potentially herald a Labour-led government.
Despite rising tensions in Iran, the oil price was reasonably restrained, with Brent crude gaining less than 2% over the week. Saudi Arabia sought to assuage concerns over the weekend, saying that global supply is plentiful and there is no need for OPEC to increase production.
This week sees the European Parliamentary elections, which start in the UK on Thursday and run until Sunday. The latest development on Brexit is that Mrs May plans to unveil a ‘bold new offer’ in an attempt to secure support for her withdrawal agreement at the fourth attempt, with a vote expected in early June.