Market overview: Alan McIntosh, Chief Investment Strategist

US shares powered to new all-time highs last week. Optimism around the prospects of a trade rapprochement with China was largely behind the rise, helping other global stock markets to move upwards in sympathy. The notable exception was Hong Kong, where an intensification of clashes between protestors and the police continued to weigh on sentiment. In the UK, a twenty point opinion poll lead by the Conservatives over Labour sent the pound higher, taking the edge off the largely international FTSE 100 index, but favouring the less currency sensitive mid-cap FTSE 250 index .

On the other side of the coin, the price of gold has weakened as investors move back into riskier assets. Since its recent peak at the end of August, the bullion price has fallen by around 7% in dollar terms and 12% in sterling (the pound has risen as the fears of a no-deal Brexit have receded.) Holders of the yellow metal are still sitting on a 13% gain since the start of the year however.

Although it is too early to call the result of the UK election (a larger opinion poll lead does not necessarily translate into more seats won) the language is moving away from Brexit, leave or remain, to how much money can be spent on infrastructure and public services. The spending promises range from huge to enormous, depending on who is at the microphone. Later this week we will see the published manifestos of the two leading parties (fully costed of course!)

Let the fun begin.

Economic overview: Richard Carter, Head of Fixed Interest

The news in the UK continues to be dominated by the election with the Tories seemingly on course for a comfortable majority following the implosion of the Brexit Party. The election so far though has been less about Brexit and more about the various spending promises being dreamt up to buy a few votes. Whoever wins, it seems that gilt markets will have a lot more issuance to absorb in the coming years.

Elsewhere, the US and China continue to edge towards a trade deal. Markets will hope that events in Hong Kong do not derail the negotiations. Economic data is also beginning to improve slightly with signs that some manufacturing PMIs are bottoming out while the US consumer remains in good shape. It was also confirmed last week that both the UK and Germany avoided a recession in the third quarter, although there is no sign yet of the data in China getting any better. Central banks are likely to be on hold now until the new year.

Looking ahead this week, the latest eurozone manufacturing PMIs are out as are the latest Fed minutes.

Written by

Alan McIntosh
Chief Investment Strategist
Richard Carter
Head of Fixed Interest Research

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