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Market round-up: 1 – 5 April 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 April 2019.

 

Chinese market rallies

After a spate of poor data emanating from the orient over recent months, it has been no surprise that investors have been nervy towards the world’s second largest economy. Although one always has to check the news twice on the 1st of April, China’s manufacturing data was no joke, instigating a market rally that would last all week.

Coming in well above consensus, Chinese Manufacturing PMI hit 50.8 against expectations of 50.1, soothing worries that the economy may be slowing as much as first thought. With a reading above 50 signalling expansion, China’s manufacturing sector unexpectedly returned to growth for the first time in four months during March, a sign that government stimulus measures may be gaining traction and amid indications of progress in US-China trade talks.

Optimism surrounding China’s future set the tone for the rest of the week with Asian markets continuing their rally as it seemed that the Sino-US trade war may be coming to an end. By Friday, Asian shares had reached a near eight-month high after five straight days of gains, as both the US and China appeared to move closer to a trade deal. US President, Donald Trump, said on Thursday a trade deal with China may be announced within four weeks, although there was a caveat that it would be difficult to allow trade to continue without an agreement.

 

Europe followed suit

Europe was also a beneficiary of cooling trade tensions, as export led economies such as Germany powered ahead. Racking up its best performance in three weeks, Europe was also spurred on by better than anticipated data out of its largest economy. Industrial output in Germany rose 0.7% in February as mild weather helped a surge in construction activity.

The mood was also buoyant this side of the channel as strong Manufacturing PMI came in at a 13-month high. Although slightly skewed by panic stockpiling ahead of a possible no-deal Brexit, activity in the sector jumped to 55.1 compared to estimates of 51.2. According to the survey, firms have started to hoard raw materials at the fastest monthly rate of any G7 country since 1992 amid concerns that checks at the UK border would hit supplies of raw materials and exports of finished goods.

The week drew to a close with US Non-Farm Payrolls – the most comprehensive measure of job creation in the world’s largest economy. The US labour force gained 196,000 new jobs in March, slightly above the 177,000 consensus maintaining the longest streak of job creation on record. There was a slight sense of relief in markets after February’s subdued report for which the government shutdown and cold weather was blamed. Unemployment remained at a 49-year low at 3.8%.

 

“Brextension”

In a week that could see a new word added to the already crowded Brexit lexicon, “Brextension” could be the new buzzword in Westminster as the government seeks to secure more time for a divorce deal to be secured.

An extension may give Westminster some respite, but just one borough along in the City, it could just result in a longer period of uncertainty. Analysts will get some insight into how the Brexit process may have affected the economy already as domestic GDP is released on Wednesday. With the economy shuddering to a near standstill, commentators will be hoping that UK PLC has experienced something of a bounce back in the first quarter of 2019. GDP numbers themselves act as the broadest measure of economic activity and will measure the total amount of goods and services produced in the UK.

 

Economy health check

Wednesday should prove a busy day for those evaluating the health of the UK economy with Manufacturing Production and Construction Output numbers also being released. With UK house prices coming into focus over the Brexit process, Construction Output should make for interesting reading. Measuring the total amount house builders spend on construction projects, feeds into overall house prices and therefore the buoyancy of the property market in general.

 

Commodities

For those watching the commodities markets, the Organisation of Petroleum Exporting Countries (OPEC) meets on Thursday. OPEC meetings are usually held in Vienna and are attended by representatives from all qualifying 15 oil-rich nations. They are set to discuss a range of issues concerning the oil market and most importantly, agree on how much oil they will pump in the future. OPEC act as a cartel in order to coordinate oil prices and with Brent now sitting at $70 a barrel, analysts are not expecting any major announcements.

 

 

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