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Weekly Market Report

11 Nov 2019

11 November 2019


The Market Last Week

Global equities ended firmer last week, amid positive developments surrounding the US-China trade deal.

UK Markets ended the week in positive territory, amid weakness in the British Pound and optimism over the US-Sino trade pact.

UK’s Markit services PMI rose more than market expectations in October.

The Markit construction PMI advanced more than market forecast in October.

The Halifax house prices unexpectedly dropped on a monthly basis in October.

The BRC like-for-like sales grew less than market consensus on an annual basis in October.

The Bank of England (BoE) Governor, Mark Carney, in his speech, hinted that a rate cut would be considered, if global and Brexit tensions do not ease. Further, he indicated that the British Prime Minister, Boris Johnson’s new Brexit deal has helped to reduce some uncertainty and stated that business investment could pick up.

European Markets ended the week on a positive footing, amid strong corporate earnings report and on US-China trade deal hopes.

Eurozone’s Markit manufacturing PMI advanced in October.

The Sentix investor confidence index in the Eurozone improved in November.

Eurozone’s retail sales rose in line with market forecast on a monthly basis in September.

The Markit services PMI in the Eurozone advanced more than market anticipations in October.

Eurozone’s producer price index (PPI) dropped at par with market consensus on an annual basis in September, recording its biggest decline since September 2016.

Germany’s factory orders rebounded on a monthly basis in September.

The Markit services PMI in Germany climbed in October.

Germany’s trade surplus widened in September.

In Germany, the Markit manufacturing PMI advanced more-than-anticipated in October.

Current account surplus in Germany widened more than market expectations in September.

Germany’s industrial production declined more than market consensus on a monthly basis in September.

The European Central Bank (ECB), in its monthly Economic Bulletin, indicated that the Eurozone economy will continue to witness moderate but positive economic growth in the second half of the year, buoyed by private consumption and a slight growth in employment. However, risks to the global economy remain to the downside, amid a further escalation of trade disputes, uncertainties surrounding Brexit and a potentially slowdown in global economy.

The European Union (EU) Commission, in its latest report, lowered its growth forecast for the Eurozone’s economy to 1.1% this year and to 1.2% in 2020, citing global trade conflicts, geopolitical tensions and Brexit. Further, the Commission forecasted the region’s aggregate budget deficit to rise to 0.8% in 2019 and to 0.9% in 2020 and 1.0% in 2021, up from an historic low of 0.5% of GDP in 2018. Also, it expects inflation to be at 1.2% this year and next, rising to 1.3% in 2021

US Markets ended the week in green, on rising optimism over a potential trade agreement between the US and China.

The US ISM services PMI rose more than market forecast in October.

Initial jobless claims decreased more than market forecast to a 1-month low level in the week ended 1 November 2019.

The MBA mortgage applications declined in the week ended 1 November 2019.

Consumer credit advanced at its slowest pace since June 2018 in September.

Factory orders declined more than market expectations to a 4-month low level on a monthly basis in September.

The Michigan consumer sentiment index rose less than market consensus in November.

Durable goods orders dropped on a monthly basis in September.

The Markit services PMI declined in October.

The JOLTS job openings fell more than market anticipations to an 18-month low level in September.

Trade deficit narrowed at par with market expectations in September, recording its biggest drop in eight months.

Asian Markets ended firmer last week, tracking gains in their US counterparts.

Australia’s AiG performance of constrution index improved in October.

Trade surplus in Australia unexpectedly widened in September.

Australia’s home loan approvals climbed more than market anticipations in September.

The AiG performance of service index in Australia advanced in October.

China’s Caixin services PMI unexpectedly fell in October, recording its lowest level in 8 months.

Trade surplus in China widened more-than-expected in October.

China’s consumer price index (CPI) rose more than market expectations on a yearly basis in October.

The PPI in China declined more than market forecast on an annual basis in October.

Japan’s Nikkei services PMI dropped less than market expectations in October.

Current account surplus narrowed in Japan in September.

Japan’s trade surplus (BOP basis) unexpectedly narrowed in September.

The Bank of Japan, in its latest monetary policy meeting minutes, debated the feasibility of additional easing in September, wherein officials agreed that it was appropriate to continue with the current monetary easing. However, the policymakers cautioned over downside risks to economic activity.
The Reserve Bank of Australia (RBA) held its benchmark interest rate at 0.75%, as widely expected. Meanwhile, the central bank reiterated that it was prepared to ease monetary policy further if needed to support sustainable growth, full employment and the achievement of the inflation target over time.
The RBA, in its latest monetary policy statement, indicated that the Australian economy was ‘gradually coming out of a soft patch’. The central bank highlighted concerns that it is running out of room to lower interest rates further and cautioned that additional rate cuts might backfire by affecting consumer sentiment. Further, the RBA forecasted a subdued wage growth of just 2.3% up to the end of 2021.


Currency Update

The EUR ended lower against the USD, after the EU Commission lowered Eurozone’s growth forecast for 2019 and 2020.
The British Pound ended weaker against the greenback, after two BoE policymakers voted to cut interest rates this month.
The US Dollar ended stronger against its major counterparts last week, after China and the US agreed to cancel some tariffs as part of a potential preliminary pact.


Two BoE officials unexpectedly vote for rate cut

The BoE, in its latest monetary policy decision, kept its benchmark interest rate unchanged at 0.75%. However, two officials voted for a quarter-point rate cut, amid signs of deeper economic slowdown. However, the central bank cut its growth forecast to 1.2% for 2020 and 1.8% in 2021. Further, policymakers discussed about growing threats from Brexit and weaker global economy.


The Week Ahead

Going ahead this week, investors will keep a tab on the US NFIB business optimism index, the CPI, PPI, industrial production, monthly budget statement, retail sales, the NY Empire state manufacturing index, initial jobless claims, business inventories and the MBA mortgage applications along with UK’s GDP, CPI, PPI, industrial production, the ILO unemployment rate, average earnings, house price index and the RICS housing price balance for further indication. Additionally, the ECB non-monetary policy meeting, Eurozone’s ZEW survey economic sentiment index, GDP, CPI, industrial production and trade balance along with Germany’s CPI, GDP and ZEW survey economic sentiment index will be on investors’ radar.


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