Market round-up: 10 – 14 December 2018
Thomas Watts | December 14, 2018
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in December 2018.
The week that was
Christmas can prove to be the season for coughs and colds rather than festive cheer. How refreshing it is then, that although immunity from such afflictions has yet to be discovered, Mrs May is at least now immune from something a lot worse, an ousting from her own party.
Coming in the form of support towards her leadership of the Conservative Party, by 200 votes to 117, Theresa May received immunity from any would be conservative rivals for at least another year. Despite the result showing that 63% of Conservative MPs still back her, certain critics have said that losing the support of a third of her MPs was “devastating” and she should still relinquish the reigns.
Although May’s victory by no means ensures stability in government, the relief around Westminster and the City was palpable. Sterling, which had declined towards $1.25 versus the US dollar on the news that 48 signatures needed for a vote of no confidence had been amassed, jumped over 1% as it became clear victory was in sight for May on Wednesday afternoon. More domestically orientated UK mid cap equities also jumped during Wednesday; the FTSE 250 rising 1.9%, with renewed hope that some stability would return to proceedings.
The picture for equities was also rosier on the international stage, rebounding from the heavy losses endured the previous Friday. In an interview with Reuters on Tuesday, US president Donald Trump said trade talks with China were progressing well and more meetings were to come between the two countries. He commented that he would intervene in the US Justice Department’s case against Huawei’s top executive if it helped to close a trade deal. In return, China made its first US Soybean purchase in more than six months. Large cap multinationals, more tuned into the global economy, were buoyed most from the sudden burst of goodwill between the two nations, making solid gains throughout the week.
On the economic data front this week, there was more cause for cheer on domestic shores as average hourly earnings figures showed that wages are increasing at their highest level for nearly a decade. Compared with a year earlier, wages excluding bonuses were up by 3.3% in October, the largest rise since November 2008 and now well above inflation levels. The numbers are significant as workers, on average, are now earning more in real terms than they have for a while, in theory enabling them to spend more freely.
The week ahead
The last full working week of the year should be as stuffed full of economic data releases as a turkey at Christmas, as both the UK and US’ central banks give their final thoughts on their respective economies before the year comes to a close.
Behind the last doors of the economist’s advent calendar lays a feast of domestic data, starting with UK inflation numbers on Tuesday. With Average Earnings figures showing their strongest growth in a decade, economists and consumers alike will be hoping that CPI data remains largely flat, theoretically putting more money in the consumer’s pocket in real terms.
Analysts should be able to check the rest of the domestic economy’s pulse later on in the week as the Bank of England hosts the last “Super Thursday” of the year. A relatively new phenomenon, the central bank now releases the majority of its economic data on a Thursday on a quarterly basis. Statistics to look out for include Retail Sales numbers, their asset purchase facility as well as their thoughts on the economy in general. With events in Westminster and Brussels seemingly taking their toll on the UK economy, it will be interesting to hear what the bank’s Governor, Mark Carney, has to say on the chances of a no deal Brexit and its potential effects on the economy.
Mirroring the Bank of England, the US Federal Reserve is also set to show their hand on future rate policy for 2019. The minutes released from their previous meeting should make for fascinating reading, especially as many analysts are now betting the Fed could well curtail their rate rise trajectory as softer economic data starts to manifest in the world’s largest economy.