Overall market moves were subdued last week, with trade war noise moving sentiment up and down but nothing concrete enough to shift any positioning. The US Senate did unanimously passed legislation aimed at protecting human rights in Hong Kong, drawing condemnation from Beijing and adding further complications to sensitive trade talks.
In the UK, Labour launched its general election manifesto, promising to transform the UK and to renationalise rail, mail, water and energy. Labour would also reverse some of the cuts to corporation tax seen since 2010 and expand Britain’s existing financial transaction tax on shares to trading in other assets, including foreign exchange, interest rate derivatives and commodities. The tax will be based on who does the trade rather than where the transaction takes place. It will also de-list companies from the stock exchange that fail to take adequate steps to deal with climate change and encourage financial watchdogs to promote green investments. Although the party would struggle to implement many of its policies it remains a threat to the current business environment. However, the party continues to trail the Conservatives in polling ahead of the 12 December election.
In terms of the recent macro data, it does suggest the downward slope in the data has eased somewhat. The mid-cycle slowdown narrative has gained some traction in recent weeks and while growth in many parts of the world remains sluggish, a slide into recession in the near term appears unlikely without some sort of shock or policy error. For this reason, and in the absence of any shocks, it appears that the path of least resistance for the moment for equities is upwards. Remember, there is plenty of support from the central banks building up their balance sheets.
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