Global Markets Update Monday, 25 November 2019

Posted on 25 Nov 2019

Global stocks generally weakened on news that the “phase one” trade deal between Washington and Beijing might not be signed until next year as Chinese negotiators pushed for a broader rollback of tariffs. This revived concerns about the outlook for global economic growth and boosted demand for government debt.

UK

The FTSE 100 rose 0.3% over the week.

The Labour Party launched its manifesto which contained a huge jump in public spending and sweeping nationalisation, along with plans to increase taxation by £83bn a year through higher corporate and personal taxes (for those earnings over £80,000) and ramping up borrowing to £400bn over the course of a single parliamentary term. Meanwhile, the Conservative Party put their plans on hold for lower taxes for higher earners and a cut in corporate tax, but pledged to raise the threshold for National Insurance contributions and to boost public spending for education, the NHS and social services.

The flash reading of the IHS Markit/CIPS composite purchasing managers’ index fell to 48.5 in November, its lowest reading since July 2016. Service sector activity dropped to 48.6 in November, down from 50 in October, while manufacturing slid to 48.3 compared to 49.6 in October. The data indicates that UK GDP is on track to shrink 0.2% in the final quarter of 2019.

US
The S&P 500 slid 0.5% over the week.

Retail stocks had a mixed week, as disappointing results from some of the sector's best known names, Home Depot, Urban Outfitters and Kohl’s, were partly offset by better-than-expected third-quarter earnings and sales from Target which also raised its full-year earnings guidance.

Europe 
The FTSEurofirst 300 lost 0.5% over the week.

The flash reading of the IHS Markit eurozone composite purchasing managers’ index slipped to 50.3 in November, down 0.3 from October’s reading.  Service sector activity fell from 52.2 in October to 51.5 in November, although manufacturing activity rose to a stronger-than-expected 46.6 in November, up from 45.9 in October. The uptick in eurozone manufacturing was largely the result of a slower deterioration in German factories’ activity, which rose for the second month in a row to 43.8, from 42.1 in October. Meanwhile, France’s composite index rose slightly to 52.7 in November, up from 52.6 in October, suggesting the French economy continues to outperform the region’s average.

Japan 
The Nikkei 225 dropped 0.8% over the week.

Pacific Basin
The People’s Bank of China said that it would lower the seven-day reverse repurchase rate from 2.55% to 2.5%. This is the first cut in its short-term lending rate in four years

Bonds
The yield on the 10-year US Treasury bond fell 6ps over the week, closing 1.77%, while the yield on the 10-year German Bund closed the week at -0.36%.

Commodities
Oil prices strengthened on reports that Opec was likely to extend production cuts until mid-2020