We look at the market movements for the week commencing 11th November and outlook for week commencing 18th November.
Weekly market review and outlook: Market movements
Review: 11th - 15th November
In an election period the economic data releases have extra importance with parties looking to make political capital depending on the outcome. The Conservative sighed with relief that we avoided a recession, only just – as GDP during the third quarter came out at +0.3%. However this was not much to shout about as the figure was weaker than expectations while the year-on-year growth rate was a paltry +1%. Unlike in March, the run-up to the last Brexit deadline (Oct 31st) failed to lift demand and stockpiling activities – possibly because companies are still destocking from last time around.
The latest set of Industrial and Manufacturing data for September gave us more evidence that these two sectors of the economy are in recession as both fell by 0.3% and 0.4% respectively and both were worse than anticipated. Further evidence of softness in the economy was seen in October’s inflation data which fell to 1.5% year-on-year -though largely due to lower oil prices, retail sales fell 0.3% with the colder weather having a mixed impact on different sectors while the jobs data showed 58,000 fewer people in employment, though this was not as bad as feared.
As the first official week of General Election canvassing got under way, both major parties made huge spending pledges, mostly towards the country’s infrastructure and should be welcome news for businesses and the economy. Usually such pledges would traditionally spook the government bond markets questioning whether such spending commitments can be financed over the longer term but we saw no reaction in government bond yields in the belief that with interest rates being so low, governments should take advantage and that it will not be that difficult as in the past.
Outside the UK, economic data releases again were weak, Japan’s GDP rate slowed while Germany narrowly avoided recession and Chinese industrial output further slowed. The same couldn’t be avoided in Hong Kong as the political instability has taken it into recession and companies exposed to the region this week published results confirming the damage to their business.
The week ahead: 18th – 22nd November
We go into this weekend with Labour pledging to expand it nationalisation programme to BT Group, with the shares having fallen off just a few percentage points, suggesting no real fears this will be the eventual outcome given how far behind in the polls they are. The city will follow weekend talk show interviews closely for further pledges from both sides with the implications analysed on the market on Monday morning. At the time of writing (Friday lunchtime), only the UK markets are trading lower in Europe amid signs of caution.
With all the spending pledges being made, there will be much more of a following and scrutiny of the UK’s public sector net borrowing figures for October to be published on Wednesday next week. Meanwhile the latest FOMC minutes where policy makers cut last month, will also be closely scrutinised as to whether they are now likely to take a ‘wait and see’ approach or go ahead of the curve for more loosening as economies slow. Otherwise it will be a very quiet week for global data releases.
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