Weekly Digest - INVESTEC
Please find attached today’s Weekly Digest
Today saw a continuation of the risk off mood that persisted for much of last week. Movements in prices are prone to be exaggerated in August, a notoriously thin month for trading volumes. On Friday, the release of US payroll data, which were in line with consensus expectations, did nothing to reassure equity market investors or assuage the desire for bond markets to apply ever lower yields to sovereign securities.
The escalating trade friction between China and the US took a new twist over the weekend with a sharp fall of 1.3% in the Yuan exchange rate, with a move through the psychologically-important level of RMb 7 to the US$. It is no doubt Mr Trump will deem this currency manipulation, whereas the Chinese authorities will suggest it is mere market logic in that the Chinese economy is a loser from Mr Trump’s tariff imposition. Nevertheless the exchange rate is probably one of the few levers that China can pull to apply any pressure to US thinking. Coupled with another weekend of substantial public protests in Hong Kong over the proposed extradition legislation, it is unsurprising that Asian markets this morning are a sea of red.
Looking at the week ahead, domestic headlines are likely to centre on the feasibility of Parliament to block a no-deal Brexit, with weekend papers suggesting that a loss of a confidence vote in the House of Commons for Boris Johnson might not trigger an election before the October 31st date for exiting the EU. At the end of the week UK Gross Domestic Product for Q2 is scheduled to be released, with economists’ forecasts centred on a tight range of -0.1% to zero; recall that Q1 was a surprisingly robust +0.5%.
The corporate calendar for the US is still very active, though with a mere 62 constituents of the S&P due to report, we are past the big hump of announcements. The highlight will come from Walt Disney tomorrow. Other notable companies reporting for us include Continental, Novo Nordisk and Spirax-Sarco.