Weekly Market Update

27/12/2019

US markets continued to move ahead last week, despite confusion over the phase-one trade deal agreed between Beijing and Washington. The US House of Representatives also voted to impeach Donald Trump, but the move is unlikely to be passed by the Senate.

The tariffs due to be imposed the other week by the US on over $150 billion of Chinese exports were suspended. As part of the deal, tariffs on $120 billion of Chinese exports with be halved from 15 per cent to 7.5 per cent, but 25 per cent tariffs on a further $250 billion of Chinese exports will remain in place.

The news should be enough to keep investors positive on the trade war into the New Year, but we should remember we heard similar news of a ‘deal’ back in October; to see Presidents Trump and Xi sat at a table signing a document will finally convince investors the trade war is on a de-escalating path.

Sterling lost its post-election bounce after freshly re-elected Boris Johnson ruled out extending discussions over a trade deal with the EU beyond the end of 2020 in a move aimed to focus minds and speed up the process. The prime minister’s team is working on amending the withdrawal agreement bill so that the transition, also known as the implementation period, must end on 31 December 2020 and there will be no request to the EU for a further extension.

This once again raises the prospect of a no-deal Brexit at the end of next year. The news reversed the rally in the pound seen since the election result.

The UK economy expanded by 0.4 per cent in the third quarter. The Office for National Statistics (ONS) also revised down its numbers for 2018, growth for the year was only 1.3 per cent, down from the previous reading of 1.4 per cent. The Bank of England (BoE) kept interest rates steady, saying it was too soon to gauge how much Prime Minister Boris Johnson’s election victory would lift the Brexit uncertainty that has hung over the economy.

For a second month, two of the BoE’s nine policymakers voted for a cut to borrowing costs due to fears the job market is deteriorating. However, the majority of the Monetary Policy Committee took a wait-and-see approach.

A very happy and healthy new year to you all !

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