Sep 11, 2017 - Mind you, 3.6% isn't a particularly fast pace. The average ... Last Week. In Markets. -1.0. -0.9. -0.6. 0
Market Update Week 37: 11 September 2017
OECD Comp Leading Indicators
UK Trade
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Stable growth momentum
The Organisation for Economic Cooperation and Development (OECD) are forecasting stable growth for the global economy in the next six to nine months. That’s good news generally and, all other things being equal, good news more specifically for nervous stock market investors. In other words, there’s nothing in the most recent release of the Composite Leading Indicators (CLI) report to indicate of any material deterioration in the macro economic outlook – at least on a global scale. There are signs of slowing output in the UK. Indeed, the OECD expect the British economy to grow 1.6% this year and slow to 1.0% next year. Global growth, meanwhile, will tend toward a 3.5% increase this year on course to a 3.6% gain in 2018. Mind you, 3.6% isn’t a particularly fast pace. The average, stretching back to 1987, is a little less than 4.0%. In summary, the outlook isn’t entirely bright but it isn’t entirely gloomy either.
Not as awful as expected
The trade deficit for July came in at £2.9 billion compared with expectations for a -£3.3 billion and a £4.6 billion deficit in the prior month. Mind you, the monthly trade data are particularly volatile. That is why the boffins at the Office for National Statistics promote the rolling 3-month figure instead and, on that measure, the UK’s trade gap is little changed. The 3-months to July accumulated a £8.9 billion shortfall compared with £8.8 billion on the 3-months to June. The aggregate hides a £25.8 billion surplus in services and a whopping £34.4 billion deficit in goods. A year ago, the total deficit amounted to £8.3 billion. That is really quite remarkable when you think about it. Ordinarily, you’d expect a 15.0% decline in sterling’s trade-weighted exchange rate would help to limit expensive imports and boost cheaper exports. In turn, you’d expect a narrower trade gap today. But increased costs for raw materials and labour – both sourced abroad for many British manufacturing firms – have largely offset any currency gains that might otherwise have been there for the taking.
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UK Value UK Large UK Mid UK Small
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USA Europe Japan
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Brazil Russia India China
Other Developments Central Bank policies
Last week saw the European Central Bank opt to do nothing at it’s meeting of the governing council. I expect that course of action will prevail for a while yet. Similarly, policymakers at the Reserve Bank of Australia opted to maintain the target cash rate at 1.5%.
That contrasts with policy changes in Canada and in Brazil. Rates are being driven higher in Canada, fuelled by a strong increase in GDP, voracious consumption spending and healthy income growth. Indeed, the Canadian economy is expanding at a healthy clip. Meanwhile, lower inflation metrics allowed for lower interest rates in Brazil where the main policy rate was reduced from 9.25% to 8.25%. Imagine having rates as high as 8.25%.
This Week
Shares of financial firms were hit by dovish comments from Federal Reserve Governor Lael Brainard on Tuesday. Her comments added to investor concerns for banks globally, whose margins have been under pressure much of the past decade in this low-rate environment. A run of soft inflation data in the US has been contributing to a twomonth decline in Treasury yields. On Wednesday, 10year Treasurys fell slightly to 2.27% after hitting 2017 lows the previous day.
Monday
Wall Street Journal 06 September 2017
India trade
Japan industrial activity Italy industrial production Russia trade Moody’s survey of business confidence Tuesday UK consumer price index India consumer price index Brazil retail sales Argentina consumer price index Wednesday UK employment situation USA oil inventories Germany consumer price index Euro zone industrial production Australia employment situation China retail sales Thursday France consumer price index
Italy consumer price index UK monetary policy meeting Argentina employment situation Friday Euro zone trade Russia monetary policy meeting USA retail sales
Market Dashboard Market Data
– 0.25%
Bank Base Rate
Equity Index Levels
– 2.6%
Inflation (Y-o-Y)
Unemployment Rate – 4.4%
J F M A M J J A S O N D
▼
7,378
S&P 500
▼
2,461
Stoxx Euro 600
▲
376
Nikkei 225
▼
19,275
10 year UK Gilt
▼
0.99
10 year US Treasury
▼
2.05
10 year German Bund
▼
0.31
10 year Japanese GB
▼
0.00
Brent Crude
▼
47.6
Gold Bullion (per t oz)
▲
1,351
Bond Yields
– 2.1%
Wage Growth
FTSE 100
House Prices
– £210,495
Monthly Trade (£B)
▲
GDP (Y-o-Y)
– 1.7%
-2.9
Commodity Prices ($)
OECD Composite Leading Indicators 106
106
104
104
102
102
100
100
98
98
96
96
94 Jan-90
94 Jan-93
Jan-96
Jan-99
Jan-02
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