Global Markets Update Monday, 9 December 2019

Posted on 09 Dec 2019

Global stocks started the week on a negative trend as the US stepped up its trade rhetoric and Beijing retaliated against Donald Trump’s decision to sign legislation supporting protesters in Hong Kong. However, reports that the US and China were near to signing a ‘phase one’ trade deal, plus better-than-expected US economic data, helped stocks to recover their earlier losses.

Global Market Update

The FTSE 100 dropped 1.5% over the week.

The IHS Markit/CIPS manufacturing purchasing managers’ index slipped to 48.9 in November, down from 49.6 in October. The construction purchasing managers’ index fell to 43.95 in November, down from 44.61 the previous month. This was the eighth consecutive month of contraction and indicates the longest phase of decline since 2013. The reading for the UK’s dominant services sector was revised higher to 49.3 from a provisional estimate of 48.5, but remained lower than October’s reading of 50.0. The overall composite reading fell to 49.3, the joint lowest (with September) since July 2016 in the wake of the EU referendum result.

M&G Investments suspended trading in its £2.5bn property fund, saying concerns over the UK’s departure from the EU and turmoil in retail had led investors to withdraw large sums, while also making it harder to sell the fund’s assets. This is the fund’s second “gating” since the 2016 Brexit vote. The news sparked a flight out of other property funds.

The S&P 500 rose 0.3% over the week.

Donald Trump moved to reimpose 25% tariffs on metals exports from Brazil and Argentina and threatened 100% taxes on a variety of French goods in retaliation to France’s digital tax (several other countries including the UK and Canada also pledged to support the digital tax). 

Non-farm payrolls rose a larger-than-expected 266,000 in November, the largest monthly increase in 10 months, while the unemployment rate fell back to a record low of 3.5%. Average hourly earnings were also stronger than expected, rising at a pace of 3.1% over the past year.

The University of Michigan’s consumer sentiment index rose to 99.2 in December, its highest level in seven months. 

The ISM manufacturing purchasing managers’ index fell to 48.1 in November, down from 48.3 in October. The non-manufacturing index slid to 53.9 compared to October’s reading of 54.7.

The FTSEurofirst 300 slid 0.1% over the week.
The final reading of the eurozone IHS Markit manufacturing purchasing managers’ index rose to a better-than-expected 46.9 in November. This was the tenth consecutive month of contraction.
Eurozone retail sales fell 0.6% in October, a steeper decline than September’s 0.2% fall.
German industrial output dropped 5.3% in October from the same month in 2018. This is the steepest drop in a decade and raises concerns that the downturn in German manufacturing has yet to bottom out.Europe continued
The Ifo Institute revealed that most German industrial companies said their order books shrank further in November, while other data points showed that new German manufacturing orders fell by 0.4% in October.

The Nikkei 225 rose 0.3% over the week.

Prime minister Shinzo Abe launched a larger-than-expected ¥13.2tn ($121bn) stimulus package to repair typhoon damage, upgrade infrastructure and invest in new technologies. This marks Japan’s first fiscal stimulus since 2016 and is one of the largest since the 2008-09 financial crisis.

The Jibun Bank manufacturing purchasing managers’ index rose to 48.9 in November, from 48.4 in October. 

Pacific Basin
China’s Caixin-Markit manufacturing purchasing managers’ index inched higher to 51.8 in November, up from 51.7 in October and the highest reading since December 2016. China’s official manufacturing purchasing managers’ index rose to 50.2 in November, up from 49.3 a month earlier.

South Korea’s manufacturing purchasing managers’ index rose to 49.4 in November from 48.4 in the previous month, helped by new product launches.

Emerging Markets
South Africa’s GDP contracted at an annualised rate of 0.6% in the third quarter.

Turkey’s GDP expanded 0.9% in the third quarter compared to the same period in 2018. This is the first year-on-year positive rate so far in 2019. Turkish inflation rose 10.6% year-on-year in November, reversing a year-long downward trend.

Brazil’s economy grew by a stronger-than-forecast 0.6% in the third quarter.

The yield on the 10-year US Treasury bond closed the week at 1.84%, while the yield on the 10-year German Bund closed at -0.29%. 

The British pound continued to strengthen amid hopes that the Conservative Party would gain an outright majority in next Thursday’s general election.

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