Market Update

News this past week:

  • Macron becomes youngest ever elected French President
  • Strong April jobs report points to robust US labour market
  • Eurozone economy grows 0.5% in first quarter
  • Greece agrees bailout terms with creditors
  • Volatile week for commodity prices

Macron

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One week until Article 50

BrexitIts just a week until Britain is expected to trigger Article 50, sterling is at a three week high, UK inflation is at its highest since 2013, leaked EU documents suggest Britain could be kicked out EU and fined £50bn.  Add to this that the Bank of England (BoE) Chief Economist Andy Haldane is postulating a base rate rise to 4.25% that could wipe out 1.5 million jobs but boost productivity in the long run.  Scotland is pushing harder for another independence vote, and the BoE predicting a further retail slowdown: all in all perhaps enough commotion to burrow yesterday’s embarrassing infighting of the Labour Party. Or perhaps not.  It seems that it doesn’t matter how old a nation’s democracy, advanced its economy or established its laws; political risk teeters when the populous lambast inequality and the public coffers are constrained by their own indebtedness.

Following Labour’s commotion yesterday, with Labour deputy leader Tom Watson clashing with shadow chancellor John McDonnell and an embarrassing parliament session feud, Jeremy Corbyn’s video address seemed a phony attempt to reassure members that the embarrassment only goes to prove that ‘spirits in the Labour party can run high’. Mercifully, attention is focused less on Labours potential disconnect and more on the impending Brexit annulment.

Prime Minister Theresa May’s ‘no deal for Britain is better than a bad deal’ is being threatened by the EU’s leaked plans for a prolonged legal battle, seeking £50bn of apparent dues, should the UK leave the EU with no deal. President of the European Council Donald Tusk promised to make ‘the process of divorce the least painful for the EU’ implying the obvious antithesis for the UK. But as difficult as the Brexit process could be, the legitimacy of the EU’s request for alimony seems tenuous and the potential damage to the EU from a go-it-alone Britain should prove a strong incentive for some sort of eventual deal.

Weekly Market Update

News this past week:

  • Markets climb on ‘Santa Claus rally’
  • ECB extends quantitative easing programme
  • Volatile week for Italian banks following referendum
  • Encouraging trade data out of China
  • Oil surges after more countries agree to cut production

James Klempster (CFA) of Momentum Global Investment Management shares his view:

As this is my final blog of 2016 I felt it an apt time to look back on the year and to look forward to some key issues for 2017.  My colleague, Glyn Owen, will be writing a far more detailed review and outlook which will be published in the coming days .  2016 was a year of mixed fortunes for investors, a very weak start set precedence for what looks likely to be a decent year for equity markets. 2016 will be best remembered for its twin political surprises of Brexit and Trump, or Brump, if you will. Whilst both being seismic-scale political events, the fact that their respective domestic markets brushed them off underscores the fact that a macro or political story is not the same as an investment case.  To put it another way – even if you had called both elections correctly, would you have positioned your portfolio to benefit from an equity rally in either case?  Probably not.

To read the full update please click here

Weekly Market Update

News this past week:

  • US indices record new highs
  • Fillon wins French centre-right primary
  • UK Q3 GDP growth at +0.5% amid sombre OBR forecasts
  • Euro area PMIs show encouraging signs of growth
  • Trump reiterates intent to leave TPP

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Weekly Market Update

• Sterling vs USD lowest since 1985, whilst UK equities reach record highs
• US economy adds 156,000 jobs in September
• Dollar rises as expectations converge on December rate hike
• ECB rumours trigger rise in global bond yields
• In commodities, oil rises and gold falls

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