Please find this week’s edition of Weekly Digest attached.
Global equity markets closed on a strong note last week, with America delivering good consumer confidence and employment data. On the latter, Friday’s report showed that healthy job creation continues with non-farm payroll employment data up 266,000 in November, significantly higher than the 180,000 forecast. This supports a “wait and see” Federal Reserve stance on interest rates, but investors were more encouraged by the positive message on growth and US markets rose.
Increasing investor conviction that the Conservative party will win a majority in Thursday’s general election saw sterling strengthen over the course of last week and this has continued today, with sterling trading above $1.315 at the time of writing. Six opinion polls published over the weekend put the Conservative Party’s lead over Labour at between eight and fifteen points. At the upper end of this range, such polls would translate to estimates of a solid Tory majority whereas, at the lower end, a Tory majority looks to be a closer run thing. The average lead in the FT poll of polls is still at 10%. Tomorrow evening at 10pm, all eyes will be on the second and final YouGov MRP seat-by-seat election prediction. The results will be tracked closely because, in 2017, this particular poll accurately predicted the hung parliament result which other pollsters had not expected. Their prediction two weeks ago for the upcoming election was for a Conservative majority of 68. As we know, the polls can also be wrong!
China trade data released over the weekend showed exports falling 1.1% year-on-year, weaker than forecast, with exports to the US down by 23%. This is particularly pertinent ahead of the Sunday 15th December deadline, imposed by the US for unilaterally raising tariffs if there has been no trade agreement.
Staying with the US, the House judiciary committee held its second public impeachment hearing today. The committee could draw up and vote on specific charges for impeachment as early as the end of this week. The President would then likely be impeached by the House and submitted to the Senate for trial. Although there is no expectation that President Trump would be found guilty and removed from office in the Senate (a 2/3 majority would be required and there is little sign of a material move to defect in the Republican dominated Senate), the political temperature is rising fast.
Aside from politics, Central Bank meetings are the main focus this week: the Federal Reserve meets on Tuesday and Wednesday, with the interest rate decision published on Wednesday. No change in US interest rates, currently 1.75%, is expected. The European Central Bank meets under Christine Lagarde for the first time on Thursday. Again, no change is expected, but her inaugural comments will be closely watched in the context of an ECB that has seemed internally at war with the policy legacy of Mario Draghi.