17th June 2019
After a good start, June has carried on in a positive way for investors. Over the past week stock markets consolidated their gains, while bond yields stopped falling. Following the rapid deterioration of US manufacturing data, a number of positive data releases confirmed the ongoing optimistic disposition of consumers and the upbeat sentiment of smaller businesses and the services sector. Notably these surveys took place before President Trump ended his Mexican tariff standoff over the weekend as suddenly as he had started it.
Why does the BoE still want to raise rates?
The Bank of England (BoE) is beginning to look like the odd one out among the world’s central banks. A slowdown in global growth looks set to force a loosening of global monetary policy, led by a more dovish (preferring lower rates) US Federal Reserve, according to market expectations at least. Meanwhile, the BoE continues to suggest that they are minded to tighten policy, rather than loosen it. At the BoE’s last meeting in May, Governor Mark Carney suggested that UK interest rates may have to go up faster than expected in the event of an orderly Brexit.
China moving away from US dependence
While trade wars and Hong Kong’s largest ever protests rage on in the background, the economic newsflow paints a better picture for China. Chinese exports are now showing signs of levelling off, after falls earlier in the year, while imports have also recovered from their lows. Meanwhile, the government continues to push forward supportive measures for the economy.
The ‘Monster’ in Defence
This week saw the announcement of what is likely to be one of the biggest corporate mergers of the year. United Technologies Corporation (UTC) and Raytheon are intending to combine in a ‘merger of equals’ to become the second largest company in the aerospace and defence industry by revenue. The deal has allegedly created a ‘monster’ supplier, with the two companies currently boasting a combined market cap of $166bn.