Fears are felt across the globe.
Weekly market review and outlook: US changes cause nervousness
Markets became increasingly nervous this week with the US Dow index falling one day by over 3% as a result of falling bond yields, with the yield on the US 10 year treasury note falling below two-year yields. This ‘inversion’ last occurred in 2007 and has been a reliable recession indicator over the years.
Other economic news over the week added to the gloom, with a fall in industrial output from China and growing fears regarding the economic health of European powerhouse Germany. Figures from the country reported an 8% fall in exports over the past year and that it’s GDP contracted by 0.1% over the second quarter.
Back in the UK there was news of a small rise in inflation last month, which in turn has led to questions being raised with regard to the future direction of interest rates.
The rally in the gold price was maintained, leading to it hitting a new six-year high as investors continued to search for safer havens in light of the negativity surrounding the global economy and markets.
And of course there was the usual amount of speculation regarding the current state of the relationship between China and the US over trade and the never ending saga that is Brexit. The result of all of the above was for many European markets to hit six-month lows.
Corporate news in the UK was limited, but Aston Martin hit the headlines as the latest company to be hit by short-sellers. The share price fell to a new low and since coming to the market at around £18 in October has now crashed to 450p.
The week ahead
It’s clear we are now in the middle of the holiday season, with next week being another light week when it comes to reporting. Potentially of most interest will be FTSE 100 Persimmons results on Tuesday. The housebuilder has come under pressure of late from the media questioning the quality of its new houses. The sector is also regarded as being highly sensitive to Brexit.
Investors who focus on economic news may be tempted to take a short break and return on Thursday, which will see data from some leading countries including manufacturing stats from Japan, Germany (consensus 42.5 v 43.2), France (49.3 v 49.7) & US (50.5 v 50.4), potentially highlighting a weakening European economic environment. There will also be the weekly data for initial claims for unemployment in the US, with an unchanged consensus of 220.0K, along with Leading Indicators information.
The Federal Open Markets Committee minutes from its last meeting will be issued in the US on Wednesday so expect the President to follow up his tweets of this week calling for a cut in rates.
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