Please find this week’s edition of Weekly Digest attached.
After a nervous week, global indices ended last week on a firmer note following developments in both the US-China trade talks and the ongoing Brexit negotiations. The US and China reached a “phase one” trade agreement, which appears to be more of an agreement to cease escalation than making material progress on key issues. On Brexit, sterling rose 2.5% against the dollar after the surprising “breakthrough” on Thursday. That said, the prospects of an agreement being ratified by the European Council at the end of the week and subsequently put to parliament on Saturday (at the latest) still appear to be touch and go.
Reflecting the reduced trade tensions, this morning saw a positive follow-through in Asia, with Korea and Hong Kong up by 1.1% and 0.8% respectively. The Yuan is also firmer against the Dollar, at CNY/$ 7.07. On the other hand, European and UK markets are seeing some pull-back, with sterling giving back some of its gains. This follows a downbeat assessment of progress in Brexit talks over the weekend, tempering Friday’s optimism and setting us up a fraught week of Brexit-related activity. Parliament reopened today and talks will continue to try to deliver an outline agreement by Wednesday. This would then be considered by the European Council at their meeting on Thursday and Friday. If an agreement is ratified, the UK parliament would be presented with it at the extraordinary session on Saturday. This schedule could conceivably see the UK leave on 31st October. If no deal is agreed by the European council, a hard Brexit on 31st is still possible though a further extension could be granted. This is thought likely as sufficient progress has been made for a deal to be reached, and the extension would be used to allow a general election on the basis of that deal.
Independent of political interference, the prospects for global growth, corporate profits and interest rates, together with solid valuation, all support the case for outperformance of risk assets over insurance assets over the coming eighteen months. Geopolitical risks remain elevated and although, with a wild card in the White House, the risk-premium that we require to invest in global equities is higher than normal, this is currently the case. Our view is that a more stable period in Sino/US relations is in prospect in the run-up to the US elections and this will provide a better backdrop for investors in risky assets, and a more difficult time for those in fixed income. As a result, we are considering a number of investment opportunities at the present time.
Following a period of relatively light company newsflow, we have plenty of results over the coming weeks, as highlighted by a summary of expected results in the next two weeks for companies we are interested in: