20th May 2019
Market support for Trump or unwarranted equanimity?
A little over one week into the escalation of the US-China trade wars, stock markets have calmed and even made a partial recovery from last week’s sell-off. Globally, stock markets are now trading around 3.5% below their highs, but that is still only about a third of a correction (a ‘correction’ is defined as a 10% decline). Given how extended stock markets appeared following the extended recovery since the beginning of the year, they could have been described as being in a state where investors start to search for reasons to take profits.
Irony: UK’s European elections matter more than ever before
Assuming the official schedule, there are 49 official working parliamentary days before the Brexit deadline is upon us again. The disintegration of the previous centres of power in Westminster (Conservatives and Labour) means that MPs may be working more in their constituencies to ensure their re-election. For them, the European Parliament (EP) vote next week will be key.
Eurozone looking brighter
In the midst of the Brexit drama, the European Parliament elections and the ever-present ‘Italian problem’, the latest European economic data are providing some much-needed respite. Eurozone GDP grew 0.4% in the first quarter of 2019 (1.6% annualised) showing signs of a recovery from the lacklustre 0.2% quarter-on-quarter (q/q) growth at the end of last year.
Automobiles have been a significant part of the global economic slowdown both this year and last, with the sector having many issues, not least of which is its exposure to the ongoing trade wars. The nature of the product also means that demand for vehicles impacts various input sectors further up the line.
The slowdown in demand throughout 2018 has continued to feed through the intermediate product suppliers. This is most apparent among steelmakers.