Weekly market review and outlook: More market uncertainty

A new Prime Minister hasn’t quite changed dynamics in parliament.

Article updated: 26 July 2019 1:00pm Author: Helal Miah

Review: 15th-19th July

With the market trading near all-time highs, it seems uncertain as to what the next move in the markets will be. On the one hand, the bears are pointing to the mounting evidence of a slowing global economy (IMF reduced their global growth forecast again to 3.2% for 2019) with earnings under pressure that‘s been seen at the start of the latest earnings season. While on the other hand, the bulls cite the stance of central bankers, keen to come to the rescue. This was evident from the very dovish stance from the ECB this week who kept interest rates on hold for the time being but seem more than willing to act if needed, including the prospect of a resumption of asset purchases.

In the UK, we may have a new populist leader, but the dynamics in parliament haven’t changed much with Boris John, like his predecessor enjoying a very slim majority in the commons which is intent on blocking a no deal Brexit. Despite this, sterling still languishes at its two year lows on the new PM’s “do or die” rhetoric.

The week ahead: 29th July-2nd August

In the UK there will be few data releases of significance, but the latest manufacturing and construction PMI figures for July will be of huge interest given how far they fell back in June; the consensus for July is that maybe confidence amongst businesses was not as dire as in the previous month. Amongst all this noise surrounding the weakening economy, the Bank of England for the time being is expected to do nothing. Until recently it was the only one of its peers thought to be balanced towards raising rates, but the latest statement could suggest that it will be inclined towards lower rates in the near future.

Central banks will be prominent in the news during the week; the Bank of Japan is expected to hold rates steady, but the main event will be the US Federal Reserve’s decision on the 31st of July. A 25bps “insurance” cut has been priced in, but hints of the future path will be highly sought after. Markets are pricing in a couple more rate cuts by the end of the year. Should the Fed’s indications fall short of this, could we see the investors taking profits, especially given the elevated market levels as we head deeper into the holiday season with lower volumes?

There will be more PMI releases from China and Europe; contractions or further moderations in the intentions of purchasing managers are expected, but the US figures are expected to show intentions remain upbeat. The week culminates with the latest employment figures from the US where another 160k jobs are expected to have been created which follows on from last month’s surprisingly good numbers with the unemployment rate possibly dropping even lower to 3.6%. The US president will no doubt want to take credit, but a good set of figures may mean that the “insurance cut” by the Fed is just that, diminishing the prospect of a few more by year end.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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