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Market round-up: 25 – 29 March 2019

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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 March 2019.

President Trump cleared of collusion

In Geoffrey Chaucer’s The Canterbury Tales, it is The Miller’s Tale that becomes central to the opening parts of the overall narrative. Bawdy in content but eloquently told, his story establishes many of the literary devices and themes that set the tone for the tales to come. By intervening to tell his story when he is not invited to by the host, the Miller clearly is not welcomed by the Knight and those in charge of proceedings.

In much the same vein, it was more a case of the ‘Mueller’s Tale’ this week. An unwanted narrative that had set the tone for the first half of US President Donald Trump’s administration was finally put paid to. Allegations of collusion with the Russians during the elections of 2016 had been a constant thorn in Trump’s side, however with Sunday’s exoneration the mild threat of impeachment had finally dissipated. A huge sigh of relief was breathed in the White House as Mueller’s report “did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities.” The US President was quick to jump on the news, reiterating his innocence through a series of tweets. Whilst S&P futures rose strongly during Sunday evening, the excitement was short-lived.

 

World stocks

The week that was bore more than a passing resemblance to Chaucer’s medieval misadventures, mirroring the downward trajectory of the actual Miller’s Tale. The beginning of the week acted as a general prologue for what was to come, seeing world stocks selling off aggressively as concerns over global economic growth persisted. US treasury yields fell to one-year lows (when yields fall, prices rise) with the MSCI world stock index losing 0.47%, a working day after its biggest daily fall in three months. By mid-week, 10-year US treasury yields had fallen further while German Bund yields turned negative after further dovish words from the European Central Bank and the US Federal Reserve.

 

Deadlock on domestic shores

The middle of the week saw yet another tale of misery for an embattled Theresa May as the Prime Minister even offered to resign if she were to get her Brexit Deal through Parliament. In an attempt to break the deadlock in Westminster, MPs took part in a series of “indicative” votes designed to find a backing for an alternative to Mrs May’s deal. After all eight proposals were rejected late on Wednesday evening, sterling sank back through 1.31 against the dollar as it appeared no end was in sight to Westminster’s impasse.

 

Economic growth

Towards the end of the week, US GDP figures seemed to paint a picture of a slower economy as economic growth fell to 2.2%, below analyst’s forecasts of 2.4%. Falls in personal consumption, government spending and business investment all contributed to the downward revision. Optimism over US-China trade talks did buoy markets however. It was not so much the Manciple’s Tale as the Mnuchin’s Tale, as the US Secretary of State commented that he had a “productive working dinner” in Beijing, reaching a consensus on issues that go far beyond anything the two nations have agreed before. The Chinese index, CSI-300, spiked over 3% on the news helping drive the best quarter for the index since 2014, up a staggering 28%. The positive news also boosted global equity bourses which advanced on Friday.

 

 

The start of the coming week will usher in British Summer Time, interestingly a concept petitioned for by a builder back in the early part of the 20th century.

Brexit uncertainty

With his legacy in mind, Monday morning will see the UK release Manufacturing PMI data. Although released on April Fool’s Day, the data is no joke, acting as an important barometer for the wider domestic economy. The first Brexit deadline having been and gone, UK economic data should now take on added importance as businesses brace themselves for more uncertainty.  The data itself will measure the confidence of purchasing managers working in the industry, who will be asked to rate the relative level of business conditions such as employment, inventories and new orders. The view of purchasing managers is one that is rated highly by economists due to their exposure to the most current trends and insights.

 

US economy 

The beginning of the week will also see US Durable Goods Orders, an important metric for gauging the strength of the world’s largest economy.  A leading indicator of production, we will be able to measure the total value of new purchase orders placed with manufacturers for large industrial equipment. Rising orders often signal that manufacturers are increasing their activity as they work to fill a growing order book. Economists will be hoping for the current negative trend to reverse, having seen the last five readings all miss analysts’ estimates.

 

The first Friday of the month signals Non-Farm Payrolls in the US, one of the most important pieces of economic data available and a favourite of the US Federal Reserve when debating future rate policy. After last month’s poor reading, Friday’s numbers take on an added importance

 

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