Synopsis of the week
- US equity markets turn negative for the year, led lower by the technology sector.
- EU leaders sign off on the Brexit deal leaving UK Prime minister Theresa May needing to get the House of Commons approval.
- Oil prices fall for a seventh week in a row, raising doubt about the expected pace of interest rate increases in the US.
On Friday evening, our Director of Investment Management, Alastair McCaig, joined CNN Money Switzerland’s anchor Hannah Wise, for a review of the markets over the week. The topics during the show ranged from Oil prices and production levels, equity markets, the G20 and Brexit.
Trading volumes last week were particularly low as the US enjoyed Thursday and half of Friday off to celebrate Thanksgiving bank holidays. This bank holiday in the US has now become the official start of the Christmas sales with most retailers starting to heavily discount goods on Black Friday followed by more online sales for Cyber Monday. We will start to get some meaningful retail sales figures by the middle of next week, which should be a good barometer on how the all-important fourth quarter retail sales season has started.
Sunday saw the 27 nations of the EU sign off on the Brexit agreement with the United Kingdom. It is now up to Theresa May to get the UK’s House of Commons to sign off on this deal. A week ago, the chances of her succeeding looked very slim but with the threat of no deal with the EU being the alternative, it could be a very close call when the votes are counted. Should the Conservative party fail to get this bill passed, we will likely see Theresa May’s position as PM called into question and a new leader of the party emerge. Unsurprisingly, the Pound has been particularly volatile in the last couple of weeks and we would expect to see further weakness in the run-up to this crucial vote.
This week is going to offer a multitude of important economic data releases. Both the European Central Bank and the Bank of England will be releasing financial stability reports. In conjunction with these releases, we will also be updated on the latest Bank stress test results in the UK. Across the Atlantic, the FOMC will be releasing the minutes from their last meeting. Considering we have now seen oil prices sell-off for seven weeks in a row, this might be beginning to change the voting members’ views on the pace and number of interest rate increases needed. We are still expecting to see another 25 basis point rise in December but subsequent changes might be less certain.
The biggest event next week will be the G20 meeting in Argentina. US President Donald Trump will probably be the busiest person there as he is due to meet with numerous world leaders. The most important meeting will be with his Chinese counterpart President Xi Jinping, if we are to see the US Chinese trade talks get back on track this year, we will need to hear something positive from this meeting.