Weekly Market Update

26/11/2018

Stock markets struggled to gain any positive momentum last week following ongoing Brexit talks, and Italian budget negotiations set firmly on investors’ minds. US technology stocks took a hit with $1 trillion being wiped off the value of the big-five FAANG firms. The tech-heavy Nasdaq Composite has now given back nearly all the gains it has made so far this year, setting it on course for the worst quarter since the Lehman’s event in 2008.

The terms of Britain’s exit from the EU were finally signed off at the European Council meeting on Sunday, but Theresa May now faces a struggle to win over a hostile House of Commons. Irrespective of all that, none of it changes the fact that MPs on both sides of the Brexit divide in the House of Commons hate it, and for all the optimism of Prime Minister May about the withdrawal agreement and the political declaration, on the current arithmetic there still appears little optimism of it getting voted through the UK Parliament in the current form.

There was some hope that the worst scenarios in the ongoing budget tussle between Brussels and Rome might be averted. It had been reported that Italian deputy prime minister, Matteo Salvini, could be open to revising Rome’s spending plans to avoid a penalty from Brussels. Eurozone ministers continue to discuss possible sanctions, but this could simply create a bigger problem, meaning more underperformance of eurozone markets to come.

Orders for American-made durable goods sank in October. Significantly, business investment was weak for the third month in a row. Durable goods orders fell 4.4 per cent year-on-year, the biggest decline in 15 months. This was worse than market expectations. Worries over rising interest rates hit US consumer sentiment, which fell to a three-month low in November.

Oil prices fell below $60 a barrel to hit their lowest level in more than a year last Friday as traders questioned whether Saudi Arabia would be able to cut supply as it comes under US pressure to keep prices low. Saudi Arabia and Russia only started raising production in the summer after requests from President Trump to help replace Iranian barrels that were going to be hit by US sanctions. But while the US still imposed sanctions in early November, it offered more waivers to Iran’s customers than expected in a move that was designed to avoid a spike in oil prices.

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