UK Election Increasingly Likely
Parliament resumed last Monday following the summer recess. Opposition parties and Conservative rebels wasted no time in attempting to force the government to negotiate a withdrawal deal or seek an extension, thus avoiding a no-deal Brexit. This led the Prime Minister to call for an election, which was opposed by Labour leader Jeremy Corbyn and resultingly rejected by parliament. Few seem able to anticipate what the next days or weeks may hold as both sides attempt to gain the upper hand through cross-party deals and devious strategies. Nevertheless, the market appears to have taken the prospect of a perceived lower chance of a no-deal well, with the Sterling and domestically focussed shares rising over the week.
US PMIs & Employment
US purchasing managers indices for August suggested that the economy was continuing to soften in the third quarter, although not contracting. The composite PMI of 50.7 was down on the previous reading of 52.6 and lower than the 50.9 expected. Nevertheless, the data is consistent with a small expansion in GDP. Employment data for August was also released last week, remaining robust. Non-farm payrolls, the headline measure of jobs growth, increased by 130,000, down from 164,000 seen in the prior month. While there has been a slowdown in the rate of employment growth, there was still been enough to keep unemployment at a low of 3.7% and the labour market remains tight supporting accelerating wage growth. However, a slowing rate of jobs growth is likely to be enough to seal another interest rate cut from the Federal Reserve when they meet on 18th September.
Hong Kong Chief Withdraws Extradition Bill
The Chief Executive of Hong Kong, Carrie Lam, announced last week that she has withdrawn the controversial Extradition Bill that sparked weeks of protests in the city. The news gave Asian markets a boost as investors believed that one of the major risks for the region was coming to an end, with Hong Kong’s Hang Seng index rising 3.9% on the day. However, protesters are adamant that the withdrawal of the bill is too little too late, and they will continue pressing for their other demands; an investigation into police brutality, universal suffrage, withdrawal of charges from arrested protesters and for the protests not to be classed as riots. The next few weeks will show whether this action is enough to take the steam out of the protests or only reinvigorate those hungry for more concessions. Current data suggests that the protests have not had a significant impact on economic activity in the city, however, the damage to perception and sentiment may be more damaging and longer-lasting.
|*GBP Returns||% 1w*||% 1m*|
|Europe ex UK||0.45||3.16|