Global Markets Update Monday 25 February-2019

Posted on 25 Feb 2019

Talks between the US and China continued, with both sides appearing keen to make progress ahead of the 1 March deadline, when the US is due to raise tariffs on Chinese imports into the country.  President Donald Trump told reporters that it was more likely than not that a trade deal between the two countries would happen, and that the deadline for the talks could be extended. He also appeared to offer an olive branch to the Chinese telecoms company Huawei; his comments were seen to be laying the ground for a deal to halt the US-China trade war.

Global Market Update


United Kingdom

The FTSE 100 slid 0.8% over the week.

In political news, eight Labour MPs and three Conservative MPs resigned from their parties and joined a newly created Independent Group. While not yet a political party, members of the group appear united in their desire to avoid a no-deal Brexit and to find a middle ground in the UK’s increasingly polarised politics. A ninth MP also rejected the Labour whip, although he said he would not join the Independent Group but would stand as an independent candidate. Elsewhere, Theresa May postponed a vote parliament’s next meaningful vote on her Brexit deal, promising that such a vote will take place by 12 March – but the prime minister faced rebellion from three cabinet ministers who promised to vote against the government to avoid a no-deal Brexit.

Honda announced it would be closing its factory in Swindon in two years’ time to concentrate production in Japan, China and the US. The news follows Nissan’s decision to no longer make one of its models in the UK, as well as Sony and Panasonic’s decision to move their European HQs to Europe.

The merger between Sainsbury’s and Asda was thrown into jeopardy when the Competition and Markets Authority raised concerns over the planned deal.


The S&P 500 gained 0.8% over the week.

Minutes of the latest FOMC meeting showed that policymakers thought that holding rates for a time posed “few risks”, with several saying further increases would only be necessary if inflation accelerated more than they expected. The Fed also indicated that it will hold a much larger balance sheet in the long term than it did before the financial crisis.

The latest reading from the Philadelphia Federal Reserve’s business index dropped to  -4.1 in February from 17 the previous month and well below forecasts among economists for a reading of 14.

Non-defence capital goods orders fell 0.7% in December while November’s reading was revised down to -1.0%, from a previous estimate of -0.6%. The decline in business investment comes amid mounting fears the US-China trade war is having a real impact on the global economy.  

Shares in Kraft Heinz plunged after it took a $15 billion write down and disclosed it was the subject of an investigation by the US Securities and Exchange Commission into its accounting policies in procurement.


The Eurofirst 300 rose 0.6% over the week, hovering near their highest levels in almost four months.

The European Central Bank noted the hostile international trade climate “appeared to be exacting an increasing toll on the world economy”, according to minutes of its January rate-setting meeting.

The flash estimate of the eurozone composite purchasing managers’ index edged up to 51.4 in February, compared to 51.0 in January. However, the manufacturing component slid to 49.2, below the 50 level that separates expansion from contraction and the lowest level in six years.

The IHS Markit German manufacturing purchasing managers' index dropped to 47.6 in February, the lowest level since December 2012.

The Ifo index of German business confidence slumped to 98.5 in February, its weakest level since December 2014.

Eurozone inflation fell to 1.4% on a year-on-year basis in January, down from 1.5% in December. Core inflation picked up to 1.2%, compared to 1.1% the previous month.


The Nikkei 225 bounced 2.5% over the week.

Haruhiko Kuroda, the Bank of Japan governor, signalled that the Japanese central bank would consider easing policy if currency moves had an impact on consumer prices.

The Flash Markit/Nikkei Japan manufacturing purchasing managers’ index fell to 48.5 in February from a final reading of 50.3 in January. This is the first time in two and a half years that the activity in the sector has contracted.

Japan’s exports tumbled 8.4% year on year in January, the steepest decline since October 2016.

Pacific Basin

Thailand posted its biggest trade deficit in almost six years in January, as exports fell 5.7% while imports jumped 14%. The data is the latest sign of Asian exporters being hit by slowing regional growth.

Emerging Markets

Turkish consumer confidence dropped for the third consecutive month in February, falling to 57.8, almost 20% lower than the same time last year and taking the index back close to the 2018 lows, according to the Turkish Statistical Institute.

Brazil unveiled proposals to increase the retirement age over the next decade in an attempt to save 1.2 trillion real.


The 10-year US Treasury bond closed the week at a yield of 2.65%, while the 10-year German Bund closed the week on a yield of 0.09%.

Corporate bonds have seen the best start to a year in over two decades, helped by the Fed’s shift to a more dovish policy stance. High-yield bonds have had the strongest start to a year since 2001, while investment-grade corporate bonds have seen the best start since 1995, when the Fed put an end to an interest-rate hiking cycle.


The Australian dollar weakened on reports that China was restricting the access of Australian coking coal to its ports, citing environmental concerns.

Weaker-than-expected inflation data in Sweden led to a sharp drop in the krona.