02 December 2019
Bringing the family together around the dinner table at Christmas is something we look forward to and fear in equal measure – especially when the topic of politics is on said table! Last week’s NATO reception at Buckingham Palace was a case in point, with quarrels about trade wars ensuring that the festive mood soon evaporated.
The ‘Boris bounce’
While Prime Minister Boris Johnson was greeting world leaders in Downing Street, investors were busy hedging their bets for Friday’s result at the “Christmas general election” (another festive dampener).
With the Tories achieving a steady 10 points more than Labour in the polls, the pound soared to a 31-month high against the dollar on Thursday, as traders rallied behind a Conservative majority – something that’s been coined as the ‘Boris bounce’. While sterling is back above its 2016 level (for now!), it is still in the clutches of politics, and is likely to remain unstable well into 2020, as the future of the UK’s relationship with the EU remains uncertain.
The week saw Johnson offer up his plans for his first 100 days in office if he wins the election – he promised to pass his Brexit deal (easier said than done) and hold a February Budget. Today, Shadow Chancellor John McDonnell countered with Labour’s priorities for its first 100 days, promising to end austerity. But other news from the week suggested the new PM will have plenty of other things to keep them busy during those three months…
PMI data from the manufacturing and private services sectors suggested the UK economy is stagnating so far this quarter, with both indicators dropping month-on-month since October. House prices jumped last month, and a report by the ONS showed that wealth inequality is on the rise. This will likely increase the pressure for a February Budget to honour promises made in the Conservative manifesto. Johnson may well find himself being haunted by his pledges of Christmas past, present and future!
Impeachment for ‘the tariff man’?
As President Trump arrived home from London on Thursday, House Democrats welcomed him with an announcement of impeachment charges against him for alleged abuse of power. The news followed a busy week for the so-called ‘the tariff man’ – markets around the world were left shaky midweek, after Trump threatened duties on Brazil and Argentina on Monday, and turned his attentions to France and the rest of Europe on Tuesday. However, markets had rallied on Friday following signs of progress with China (who waived tariffs on imports of soybeans and pork).
US jobs soar
Markets also responded positively to a stellar US jobs report. The economy exceeded economists’ predictions, generating 266,000 new jobs in November, suggesting the US is – by and large – shrugging off the trade wars. Wage growth continued, and will help sustain consumer confidence, which has been solid all year.
Jim Henderson of Aristotle Capital Management, Manager of the St. James’s Place North American Fund, commented:
“We have so far seen no impact on US consumers, who continue to carry the economy. That’s largely because the impact of the tariffs has been felt elsewhere, whether by the wholesalers or through China devaluing its currency.”
Another wave of unrest for Macron
Emmanuel Macron not only clashed with Trump at a NATO press conference over the alliance’s role, Turkey, and Islamic State group fighters, but returned home to an equally frosty atmosphere. The French President faced nationwide protests against proposed reforms to the pension system – this second wave of unrest comes just over a year after the gilets jaunes (yellow vest) movement struck Paris last November.
Saudi Aramco tops the charts
In Vienna, OPEC agreed to cut oil production by 500,000 barrels a day, causing a sharp drop in oil prices. The move came a day after Saudi Aramco’s IPO, which valued the company at $25.6bn. It is now the world’s most valuable publicly traded company, overtaking Microsoft Corp. and Apple Inc.
Job fears in Germany
Data released on Friday showed that Germany is suffering its biggest industrial slump in 10 years. Output was 5.3% lower year-on-year – worse than forecast. It’s clear the country has suffered more than most in the global manufacturing slowdown of the last six months. The country’s exposure to the auto industry has left it extremely vulnerable – figures published last week showed another slump in car sales, driven by falling demand for diesel vehicles.
China bucks global manufacturing slowdown
PMI data released on Friday showing a pick-up in Chinese manufacturing activity in November. However, the news was largely eclipsed by data showing the country’s exports are at a nine-month low, with exports to the US falling 23% in November.
Over the weekend, thousands of protestors took to the streets once again to mark six months of anti-government action in Hong Kong. The country’s economy is in steep decline, and on track to see GDP fall by 5% in the fourth quarter as the protests continue to affect business activity.