Weekly Market Update

29/08/2017

Geo-politics continued to dominate headlines as relations between North Korea and the West escalated further after the North Korean regime fired a missile towards Japan in what was considered a significant escalation of Kim Jong-un’s military posturing, while Trumps recent decision to add further troops to Afghanistan may well cause further volatility rather providing stability.

Janet Yellen, Chair of the Federal Reserve, provided limited direction on monetary policy and the pace of reduction of the US balance sheet. The muted speech was taken as a dovish statement and the dollar retreated. Markets may continue to be disappointed with the lack of direction of policy makers in the months ahead as growth remain steady and inflation disappoints.

US President Donald Trump tweeted that Congress would have avoided the current legislative mess if it had taken his advice on raising the amount the government could borrow, reflecting the divide between the President and Congress. The US will risk defaulting on its debts if it fails to agree a debt ceiling by late-September, although we have been here several times before.

A strong week for the euro as sterling fell to an eight-year low against the single currency. The movement came on the back of encouraging preliminary data from Eurozone manufacturing, which rose well above expectations. Spain’s GDP growth was also positive, with the economy expanding 0.9 per cent in the second quarter leaving annual growth unchanged at 3.0 per cent. This makes the Iberian nation the fastest-growing major economy in the eurozone.

Private consumption growth in the UK slowed further than expected in the second quarter after publishing 0.3 per cent growth, while year on year figures demonstrated 1.7 per cent growth. Household spending increased only 0.1 per cent over the three months to June, down from 0.4 per cent in the first quarter. This marked its weakest first half since 2012. The component data was also disappointing, with household spending slowing from 0.4 per cent to 0.1 per cent in the quarter, with business growth flat in the second quarter after rising 0.6 per cent quarter-on-quarter in the first three months of the year.

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