The US midterm elections resulted in Democrats taking the House of Representatives and the Republicans maintaining control of the senate. Donald Trump’s legislative agenda appears to be constrained for the next two years which is probably the most positive outcome that the market could have hoped for. The result was swiftly followed by political scandal within the administration. President Trump sacked his attorney general Jeff Sessions, replacing him with the controversial Matthew Whitaker. This prompted concerns in some quarters that the president was trying to shut down the investigation into Russian meddling in the 2016 election.
The US Federal Reserve left interest rates unchanged but reinforced their outlook. Unemployment remains low, household spending remains strong, and inflation is running in-line with their 2 per cent inflation target. In other words, today’s near unanimously expected pause looks almost certain to be followed by a rate hike at the December meeting. The only negative in the statement was the central bank’s highlighting of a moderation in business investment. Data also showed that US mortgage applications had fallen to their lowest level in four years, as rates continue to rise.
Chinese exports grew 15.6 per cent in October in US dollar terms, despite US tariffs on Chinese-made goods. This is down to the roughly 10 per cent fall in the yuan, which has made exports more competitive, but is also a function of companies making purchases before the US tariffs rise to 25 per cent form 10 per cent later this year. The value of the country’s imports also jumped more than expected, providing some relief after the release of softer-than-expected gross domestic product and industrial production statistics last month.
Global oil benchmarks entered a bear market last week, falling more than 20% from their peak at the start of last month. This followed an easing of supply concerns as oil inventories rose and as the US granted waivers from Iran sanctions to some of its major customers, including China.
UK GDP grew by 0.6 per cent quarter-on-quarter in the three months to September, its fastest rate since the fourth quarter of 2016. The figures were in line with expectations and annual growth was 1.5 per cent. After a strong summer, there are some signs of weakness in September, with slowing retail sales and a fall-back in domestic car purchases.
If you would like more information on the above article or advice on your personal financial circumstances, please contact us >>