We look at the market movements for the week commencing 25 November and outlook for week commencing 2 December.
Weekly market review and outlook: market movements
Review: 25-29th November
UK politics remains at the forefront of the agenda as the December election creeps ever closer. Parties have now released their manifestos which have come under scrutiny this week by the Institute for Fiscal Studies raising concerns over credibility. The think-tank claimed the Tory pledges to keep spending in check were unlikely and likely to result in either higher taxes or borrowing. In addition, Labour’s reliance on taxation to raise the required sums to meet their extremely ambitious targets would be extremely difficult to fulfil, they’ve come under fire over the week on concerns of their money management and have mostly been unable to come up with the answers. So far the polls suggest a Tory victory, however no one should rule out a late charge from Labour voters.
Another week goes by and more trade war noise is made. Markets have been cautiously optimistic over the week with indices creeping higher largely as a result of perceived trade war optimism. You needn’t look further than the EU, particular its biggest economy Germany, to see the disruption the trade war is causing on export volumes. A deal will help dissipate some of the uncertainty looming over international trade. However, just as the week seemed to be heading towards a positive conclusion, Trump tested the waters yet again in regards to signing the Hong Kong pro-democracy bill, sending markets on another downwards trajectory. Asian stocks dropped as markets braced for retaliation from China after they called for the legislation to be blocked.
US GDP figures impressed on the upside on Wednesday beating initial forecasts posting an annualized 2.1% rate in the three months to the end of September. These results should help relieve any excessive concerns on the health of the US economy as the figures remain resilient. The data helped support US stocks further, boosting the S&P500 by roughly 20bps. The manufacturing order bounce back was also a positive which has had a tough time in past months. On Friday, EU inflation also broke a negative trend with inflation bouncing back up to 1% YOY, adding to signs that economic stabilisation is back on the cards.
The Week Ahead: 2nd December – 6th December
Looking ahead to next week, manufacturing PMI’s are set to kick off the weeks economic events with main markets including the US, UK, Eurozone and China. Eurozone, UK and US are all final revisions and are not expected to change with consensus estimates flat however, China’s PMI is forecast to drop back lower to 51.1. This should not worry investors too much considering the rebound back over 50 in previous months moved the indicator back into positive territory. Later on in the week we see composite PMI figures released where the focus will likely be on Germany who last posted composite figures in contractionary territory. Following the recent uptick in manufacturing, some optimism has been renewed in the region and so investors will be keen to keep an eye out for their composite PMI release next Wednesday.
Next Friday is the non-farm payrolls for November. The highly anticipated jobs number has baked in the surprising upside announcement of the previous months surge in jobs despite the lagging effect of the GE strike. Consensus estimates for November are around 183,000 based on the previous 128,000 increase in October.
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