22nd October 2019
Brexit breakthrough versus Brexit fatigue
We have witnessed a second week of improving sentiment in global capital markets, with most equity markets trending higher and bond yields continuing their recovery. However, this was nowhere near the euphoria levels that appeared to grip UK and EU politicians after having secured consensus over another iteration of the UK’s Withdrawal Agreement from the EU. It would have been reasonable to expect a significant rise in the UK asset prices (which are undervalued relative to their global peers), given so many commentators already celebrated the ‘end of Brexit uncertainty’.
Quarter 3 corporate results – why they matter even more this time
It’s that time again. As we head into the last few months of the year, companies will soon announce their results for the third quarter of 2019 – in what could be a crucially important earnings (profits) season. We recently wrote that capital markets have used up all the goodwill they had, and that we would need to see tangible improvement in the underlying picture – either in the macroeconomic backdrop or in firms’ fundamentals – to see a sustainable market rally. Stock markets in the US are once again near their all-time highs, despite two consecutive quarters of corporate earnings declines. If the results this time around are similarly disappointing, it is hard to see how markets could climb further up. But if they show a rebound, it could underwrite some renewed sentiment.
Can China lead the way?
The People’s Republic of China is now 70 years old. And its celebrations at the beginning of this month were certainly befitting of any 70th birthday. In Tiananmen Square, a sea of people gathered to watch President Xi Jinping declare the country’s achievements from atop the Forbidden City – after a military parade through the streets of Beijing had shown the world China’s advanced military might. The Communist Party’s message is clear: China is stronger than ever.
Declining US imports despite strong consumer confidence?
There has been a significant focus on the economic impact of the US-China trade war. It now looks clear that the trade conflict has worsened the slowdown in global growth, particularly from an export standpoint. But the discrepancy between US consumer confidence and US import data also bears closer examination.