Global Markets Update Monday, 20 January 2020

Posted on 21 Jan 2020

Global stocks rallied, the MSCI World Index hitting a new peak, with sentiment lifted by news that the US and China had signed a “phase one” trade deal. In the agreement, China has pledged to boost US imports by $200bn above 2017 levels and strengthen intellectual property rules, while the US has agreed to halve some of the new tariffs it has imposed on Chinese products. While the Trump administration also removed its designation of China as a “currency manipulator”, the majority of US tariffs on Chinese goods remain in place.

Global market Update

 

UK
The FTSE 100 rose 1.1% over the week, as a weaker pound helped the index reach a six-month high.

Weak economic data releases were seen to raise the possibility that the Bank of England will cut interest rates.

The UK economy grew 0.1% in the three months to November. While growth was slightly stronger in September and October (at 0.1%) than previously thought, UK GDP shrunk 0.3% in November. 

UK retail sales fell 0.6% in December, marking the longest spell of no growth since records began in 1957. Food sales were especially badly hit, falling 1.3%, with the quantity bought falling by the biggest amount since December 2016. Department stores were also under pressure, with sales down 1.8% month-on-month, as were clothing stores, which saw a 2% fall in sales.

The UK inflation rate dropped to 1.3% in December, down from 1.5% in November and its lowest levels in more than three years. 

US
The S&P 500 rallied 1.8% over the week, reaching a fresh new high.

The Philly Fed’s business index of manufacturing activity on the US east coast jumped to a far stronger-than-expected 17 in January, compared to an upwardly revised 2.4 in December. The New York Fed’s Empire State manufacturing index also rose more than forecast in January, albeit to modest 4.8 from 3.5 in December.

US housing starts jumped the most in 13 years in December, helped by warmer than usual temperatures. 

Europe 
The FTSEurofirst 300 gained 1.3% over the week.

The German economy grew by 0.6% in 2019, its weakest performance since 2013, as global trade tensions, export weakness and a persistent downturn in the automotive industry took their toll on Europe’s largest economy. 

Eurozone industrial output expanded 0.2% in December from the previous month, following two months of contraction. Germany saw a 0.9% expansion, while Italy returned to growth after months of falling output.

Japan 
The Nikkei 225 ended the week 0.8% higher.

Pacific Basin
China’s economy expanded by 6.1% in 2019 from the year before - the slowest rate of growth over a calendar year in 29 years. However, several indicators showed that activity picked up in the final month of 2019. Industrial production rose by a stronger-than-expected 6.9% on a year-on-year basis in December, while fixed-asset investment rose 5.4% over 2019.

China’s December trade figures beat estimates. Exports grew by a stronger-than-expected 7.6% on a year-on-year basis in December, bucking four months of falls, while imports also jumped by more than expected, rising 16.3%.

Emerging Markets
Turkey’s central bank cut interest rates by 75bps to 11.25%, despite a recent acceleration in inflation. 

Argentina’s inflation rate rose to 53.8% in December, its highest level in almost three decades.

Bonds
The yield on the 10-year US Treasury bond closed the week at 1.83% while the yield on the 10-year German Bund ended at -0.21%.

Commodities
Palladium prices surged to a new high, jumping to over $2,500 an ounce.

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