Market round-up: 13 – 17 May 2019
Arjun Pandya | May 17, 2019
Time to read: 4 minutes
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 May 2019.
The week that was…
After a burgeoning trade war between the US and China rocked global markets last week, it seems that “a little squabble” is a much more manageable proposition for investors.
Markets, once again, took their cue from Donald Trump’s Twitter account as he announced he had enjoyed a “very good dialogue” with China, and that he and his opposite number, President Xi Jinping, shared an “extraordinary relationship”. Appearing to downplay the scope of a trade war between the two nations, President Trump’s words helped soothe concerns of more tit-for-tat tariffs being put in place as Wall Street moved back within 2% of a record high on Thursday. The optimism over a cooling in tensions also spread to Europe as the export-heavy German DAX rose 1.7%. Corporate news also spurred on European stocks as German industrial heavyweight Thyssenkrupp saw its shares lift 9.4% after Reuters news agency reported Finnish company Kone was assessing a bid for their elevator division.
Easing tensions were backed up with solid economic data as US housebuilding increased more than expected in April, and general activity in the sector also remained robust. Such positivity in the housing market, coupled with a report showing that the number of Americans filing for unemployment benefits fell more than forecast, also helped push global bourses forward.
With stock rebounding so aggressively, there was some surprise in the bond markets with benchmark Treasury yields falling on Wednesday evening before tracing their way higher, following the trajectory of the US dollar.
In the currency markets, the dollar’s gain was sterling’s loss as events in Westminster sent the pound spiralling to a five-month low against the dollar. Cross party talks over Britain’s divorce from the EU ended in disarray on Friday with Labour leader, Jeremy Corbyn, admitting “talks have gone as far as they can”. It seems six weeks of talks have concluded with only one certainty, that the PM will be leaving sooner rather than later. Thursday saw Theresa May promising to set out a timetable for choosing her successor after the next parliament vote in June. The week also saw Boris Johnson officially toss his hat in the ring for the title, joining a host of other Tory heavyweights such as Michael Gove, Jeremy Hunt and Amber Rudd.
There was some good news on the economic front for the UK however, as the National Average Earnings Index showed wage growth at 3.2%, slightly under a predicted figure of 3.4%, but still ahead of inflation, meaning in real terms the consumer still has a growing amount of disposable income in their pocket.
The week ahead…
As we move into mid-May, moving house could well be on the minds of many consumers. With the spring months being one of the most popular periods for movers, those looking to put their house on the market will be paying added attention to Rightmove’s HPI figures released at the beginning of the week.
Detailing the changes in the value of houses coming on to the market, the report will help us gauge the overall strength of the domestic housing market. With house prices starting to gradually pick up, many will be hoping for a continuation of the pattern, especially as we head into the next round of Brexit negotiations.
Although house price appreciation remains anaemic, general inflation is still running near the Bank of England’s target of 2%. Tuesday will see the BoE Governor, Mark Carney, testify on inflation and the UK’s general economic outlook before Parliament’s Treasury Select Committee. The hearing will be a few hours long and will be reported by the media, with analysts scrutinising Mr Carney’s words for any hints as to future rate policy.
The direction of markets could well be set at the beginning of the week by central bankers as Mark Carney’s opposite number in the US, Jerome Powell, will also give his views on where he sees rates heading. Due to deliver a speech titled “Assessing Risks to our Financial System” at the Financial Markets Conference in Florida, the address will be made all the more interesting by a series of unscripted questions towards the end that Mr Powell cannot prepare for.
After a host of PMI readings from all the major economies of Europe on Thursday, the week will be rounded off by UK Retail Sales. With Debenhams, the latest high-profile casualty on the high street, the amount we are spending on retail items has taken on added significance. Consumer spending is vitally important to the economy as it accounts for the majority of overall economic activity.