China Stocks Surge

March 5, 2019

Chinese stocks rallied last week following encouraging developments in the US-China trade talks. It is expected that the two countries will reconcile their issues, leading to lower tariffs and restrictions, and removing the threat of an escalating trade war between world’s two largest economies. The fear of ever-increasing tariffs imposed by the US on Chinese imports was holding back Chinese growth and depressing risk assets. A resolution to this issue is likely to unleash a wave of new activity and provide a boost to stocks, particularly emerging market equities.

Parliament Brexit vote delayed

Up against the threat of another defeat, the Prime Minister has delayed Parliament’s second meaningful vote on her deal. Furthermore, she has put forward a schedule of votes intended to force a consensus. Initially, Parliament will vote on her deal on 12th March, if that fails, there will be a vote to sanction a “No deal” on 13th March, and finally if that were to be rejected, a vote on delaying article 50 will be held on 14th. Theresa May will clearly want to win the first vote and the threat of the subsequent votes and the delayed timing are designed to support her in this. Nevertheless, the magnitude of her first defeat would suggest that there needs to be a significant change of heart by a large number of MPs to push it through.

US GDP Growth Slows

US GDP growth in the final quarter of 2018 slowed sharply from a particularly strong Q3. The annualised rate of growth slowed from 3.4% in Q3, to 2.6% in Q4. Growth continued to be supported by personal consumption and Federal Government spending although residential investment detracted from the headline figure. The reduction in growth reflects the easing of the Trump fiscal stimulus as well as the slowing global economy. Nevertheless, US growth remains strong relative to its long-term potential and jobs continue to be added at a healthy pace. The US consumer remains in a relatively healthy position and as earnings continue to accelerate, private consumption should support growth.

Market Data

Index Open Close Change % Change
FTSE 100 7178 7106 -72 -1.01%
S&P 500 2792 2803 11 0.39%
Dax 11457 11601 144 1.25%
Cac 40 5215 5265 50 0.96%
Nikkei 225 21425 21602 177 0.83%
UK 10 Year Gilt Yield 1.15 1.29 0.14 12.17%