Please find attached Weekly Digest.
Last week saw muted price movements in world securities with equity markets generally weaker (FTSE World Index -0.9%) and government bond markets stronger (e.g. gilt market +1.3%). The FTSE All Share rose by 0.7% in the week, partly due to weaker sterling (e.g. cable (£/$) fell from 1.247 to 1.229).
The big themes in markets remained unchanged and mainly political. On the US-China trade dispute, conflicting messages from the US president have worried investors. On the upside, it appears that further talks will take place between the US and China in early October. However, President Trump told the UN General Assembly that he would not accept a bad trade deal and that the US had “tolerated, ignored or even encouraged” Chinese trade abuses for too long. In separate news, the launch of an impeachment enquiry into the president by House Speaker Nancy Pelosi concerning a telephone call with Ukraine’s president unsettled markets.
On the corporate front, investors remain alert to the momentum in global growth data. Recently, data from the export-led Germany economy has pointed to a possible recession in the third quarter and today’s FT leads with the headline that outgoing ECB President Mario Draghi is again calling for a fiscal union and a transfer from fiscally strong to fiscally weak states.
Later this week, a number of market-moving events could occur.
- Tomorrow, the Japanese government plans to increase VAT on consumption from 8% to 10%. This has been attempted twice before but later abandoned on fears that the Japanese economy was too fragile to take it. Economists may be concerned about the impact of such a policy but, for markets, the policy has been known about for a long time.
- On Friday, we have the release of US labour market data. The data from August showed a potential slowdown in US labour market growth, with an extra 130k additional jobs created in the month below the 158k expected by economists’ consensus forecast. Despite healthy wage growth and an extremely low absolute level of unemployment in the US, some economists are worrying that US employment data is starting to show signs of its current aged place in the economic cycle. Monthly job gains for September are forecast to be 145k.
This week brings several key earnings releases from the corporate sector on both sides of the Atlantic. Due to report in the UK are Greggs and Tesco (not currently held) as well as Ted Baker. Whilst in the US, notable companies making announcements are Costco and PepsiCo.