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.
In a week that saw Pancake Day celebrated up and down the country, domestic markets flipped like the proverbial as Brexit worries coupled with growth concerns in Europe and China left investors flat.
China attempts to boost the economy
The week had started on a firmer footing, especially in Asia as Chinese equities had rallied hard on stimulus hopes, hovering near nine-month highs by Wednesday. Chinese state media reported that the government will boost domestic consumption this year through billions of dollars in tax cuts and infrastructure spending, in an attempt to reduce the risk of an economic slowdown, much to the relief of investors.
Asian markets quiver
The potential boost to the economy looks like it couldn’t come soon enough; on Friday Asian markets shuddered lower as news of shockingly weak export data stoked fears that a global economic slowdown may be on the way. Beijing reported that February exports tumbled an alarming 20.7% from a year earlier, massively undershooting analysts’ predictions of a 4.8% drop. Of course the timing of Chinese New Year can muddy the waters slightly; however, the sheer scale of the drop is still something to take note of.
European markets feel the backlash
The negative sentiment spilled over to European stock markets where the German DAX and UK FTSE100 fell around 1% each during Friday morning. Losses on the continent were compounded as the European Central Bank cut its growth forecast for the region with the Bank’s President saying it was in “a period of continued weakness and pervasive uncertainty.”
Brexit clock counts down
Domestic markets also struggled this week as sterling and the FTSE 250, a more accurate representation of UK PLC, made their way south. Fears that May’s Brexit deal will not make it through the House of Commons if an agreement on the contentious Irish backstop is not reached soon have started to rear their head of late. A no-deal Brexit could be back on the cards with time seemingly running out and a second “meaningful vote” due this Tuesday.
There was a little positive flip side to the data this week as even largely dependable US employment data appeared to falter. The US added just 20,000 new jobs last month, compared to the 180,000 forecast by economists.
As North America enters daylight savings time it could also be the time to see just how much cash the consumer has been looking to save, as US Core Retail Sales Data is released on Monday.
The amount the consumer spends and the cconfidence that they can maintain such levels, feeling self-assured in their employment and remuneration is paramount to the overall economy. Monday’s data will detail the change in the total value of sales in the US over the month, a period when trade tensions with China have seemingly cooled. Many will be hoping that the American consumer has upped their spending at least as the high street continues to struggle on both sides of the Atlantic.
US Federal Reserve Chair to give his views
Shortly after the sales data is released US Federal Reserve Chair, Jerome Powell, is due to speak at the National Community Reinvestment Coalition’s Conference in Washington DC. We can expect heightened volatility during his speech, especially in the more reactive currency markets. As head of the central bank that controls rates, Powell’s views on the economy are always going to be listened to carefully with investors looking for any hints as to future monetary policy.
UK hoping for a positive turn
Attention turns to domestic shores later on in the week with the Office for National statistics releasing overarching GDP numbers as well several key data points for the construction and industrial sectors. UK construction has really been in the doldrums since 2016’s Brexit referendum, with last month’s figures showing a 2.8% drop in construction output. Many economists will be hoping for stronger numbers, especially as the deadline for leaving the EU draws ever closer.
B20 Tokyo Summit attracting attention
The week is rounded off in the land of the rising sun as Japan’s Central Bank governor, Haruhiko Kuroda, speaks at the B20 Tokyo Summit. The Business 20, or B20, is the private sector’s voice of the G20 community and will include some of the leaders of the largest businesses in the world. Interestingly, the aim of the summit is to address some of the challenges defined by the G20 countries focussing on trade. With US-China trade talks having now passed their deadline and with Japan being one of the world’s largest exporters, Kuroda’s speech should attract the attention of investors the world over.