2nd December 2019

It was an extremely quiet week for markets, with very little in the way of newsflow and light trading volumes due to the Thanksgiving holiday in the US. Against this backdrop, stocks resumed their recent path: generally strong returns, but overseas’ gains were thwarted by the strength of the pound. This week much of the focus is likely to be around PMI survey data (most of which is out on Wednesday) and the US jobs report on Friday.

Last Week

  • Stocks were decent but held back by the strength of the pound.
  • Sovereign bonds held up well.
  • The pound had another strong week.
  • US-China relations came under renewed pressure.

This Week

  • There’s a fair amount of data this week. Key numbers being the US ISM Manufacturing numbers today, PMI numbers on Wednesday and Non-farm payrolls on Friday: with 188,000 jobs expected to have been created in November.
  • In the UK, data is light this week, with PMI data out today (manufacturing) and Wednesday (services and composite). The direction of travel on these will be key given the recent spate of bad UK data and the fact that these are currently in contractionary territory.
  • Tuesday sees the kick-off of the two day NATO meeting in London and Wednesday is a busy day all round for PMIs with all the major countries and regions publishing survey data on this date.

Last Week’s Highlights​

  • It was an extremely quiet week for markets, with very little in the way of newsflow and light trading volumes due to the Thanksgiving holiday in the US. Against this backdrop, stocks resumed their recent path: generally strong returns, but overseas’ gains were thwarted by the strength of the pound.
  • Stocks had a decent week, although overseas’ gains were held back by the strength of the pound. The US stock market hit another all-time high last week – its 26th of the year – on continued optimism that the US and China are making progress toward a “Phase 1” trade deal. The US was the best performing market, with the S&P 500 up by just over 1%. The UK FTSE All Share Index was up by 0.6%; spurred by gains within the FTSE 250 Index which rose by 1.7% over the week. The FTSE 250 Index rallied hard following the conservative-friendly opinion polls and is up by 22% this year as compared to 15.3% for the All-Share. Virgin Money and Pets at Home were particularly strong performers within the FTSE 250 last week, up by 24.4% and 20.6% respectively.
  • Within global markets, healthcare continued its strong bounce and is now the best performing sector quarter-to-date; up by 9.8%. It is closely followed by technology, which is up by 9.1% for the quarter and by 38.6% for the year-to-date.
  • The US earnings season concluded last week and finished on a positive note. 76% of companies beat their earnings’ estimates and profits fell by just 1.3% as compared to the previous year. This was a fair bit better than expected, as analysts had expected a near 4% contraction in profits over the quarter.
  • Sovereign bond markets held up well as yields fell over the week; particularly in the UK. UK Government bonds were up by 0.7% on the week which takes returns for the year to just shy of 8.5%. Emerging market local currency bonds have continued to struggle given the strength of the pound; they fell by 1.5% last week and are down by just over 4% so far this quarter.
  • The pound had another strong week, rising by 0.7% versus the US dollar and it is now up by 7% vs the dollar and 6.4% vs the euro since early September. The catalyst for the rise this week was a much anticipated YouGov poll that predicted the Conservative Party would win 359 seats which would give it the largest working majority in decades.
  • US-China relations were strained on Wednesday, with President Trump signing into law the Hong Kong pro-democracy bill. Sentiment towards China wasn’t helped by more disappointing data out of the country, with industrial profits falling by an annualised rate of 9.9%; the worst contraction since 2011.

Asset Returns

 

Equities & Oil: returns are all in base currency, save for Global and Emerging which are in GBP. Bond returns are all shown in GBP. Gold in GBP. Source Bloomberg.

US stocks clocked a 26th record high last week.

Source: Bloomberg

Rory McPherson
Head of Investment Strategy