The main focus the past week was on the Tuesday speech by US President Trump to the Economic Club of New York on trade. Much was anticipated but little was delivered, with no new information. Although Trump had a positive outlook for a US-China trade deal being done, he also again raised the spectre of further tariffs if no agreement was achieved.
This spooked Asian markets and pulled global stocks slightly lower into Wednesday.
However, share markets soon rebounded into the end of the week, as late on Thursday White House economic advisor Larry Kudlow stated (once again) that talks were progressing and a deal with China was close
The other spotlight in the US last week was on the Federal Reserve Chairman Jerome Powell and his two testimonies on Wednesday and Thursday to Congress.
His overall tone over the two sessions was upbeat on the US economy, particularly the labour market and also the consumer. He did not suggest the next direction for interest rates, however, highlighted that rates were currently appropriate.
Overall, financial markets took this statement as a positive. The Powell testimonies combined with constructive comments from other Fed speakers through the second half of last week, bolstered Kudlow’s assured rhetoric on US-Sino negotiations. These combined saw equity markets end the week on a very positive footing.
European share indices made new multi-year highs last week and finished near these peaks, whilst the major US stock averages; the S&P 500, Dow Jones Industrial Average and Nasdaq 100 all hit record peaks to finish the week on Friday.
In the UK, the deadline day for nominating candidates for the 12th December general election was Thursday, with the main development being that the Brexit Party stood down all candidates in seats that were won by the Conservatives in 2017. Furthermore, the Brexit Party have subsequently stated they will not field candidates in another 38 non-Tory-held seats, marginal constituencies that the Conservatives have a chance to win.
This has bolstered the prospect that Boris Johnson could attain a majority government and had been reinforced by favourable opinion polls.
Recent polls show the Tories with a 10% lead over Labour, with the latest poll released late in the week from Panelbase showing a 13-point lead for the Conservatives.
The net financial markets impact has been for a rally in the Pound, pushing EURGBP to a multi-month low, whilst the FTSE 100 has underperformed European and US stock indices (at least partially due to the negative effect of Sterling strength).
The pro-democracy demonstrations in Hong Kong and the response from the authorities have moved to new depths, with the chaos and violence more acute that previously seen.
This at times sparked negative moves from Asian (and global) stock averages in the week, though market reaction has been somewhat muted.
The impeachment enquiry into President Trump reached another significant point in the past week, moving into the public domain.
As we have continued to state, this could have a significant impact on US (and global) markets going forward, but as yet the repercussions have been negligible.
Key to Watch
The main macroeconomic focus this coming week will be on Central Banks and on Wednesday’s release of the FOMC Minutes from their October Meeting. We also get the Reserve Bank of Australia (RBA) Minutes released Tuesday and the People’s Bank of China (PBoC) interest rate decision Wednesday.
In a very light data week, the spotlight will be on Friday’s Japanese Consumer Price Index (CPI), German GDP and global Purchasing Managers Index (PMI) data.
Geopolitical influences are as ever likely to come from the US-Sino trade talks, plus UK electioneering, Hong Kong tensions and possibly the US impeachment hearings.