LAST WEEK – KEY TAKEAWAYS

US: Federal Reserve cuts interest rates

• US shares rallied as the Federal Reserve- the US central bank- cut interest rates by 0.25% for the second time this year due to subdued domestic inflation (the rate at which prices increase) and concerns about the global economic outlook;
• US President Donald Trump criticised the board for not lowering rates by a wider margin.

• Omnis view: The Federal Reserve signalled that rates would not change again for the foreseeable future, which may lead to further clashes with President Trump as he believes lower rates will support the economy and strengthen his bid for re-election.

UK: Sterling sensitive to Brexit developments

• Sterling strengthened against the US dollar after European Commission president Jean-Claude Juncker indicated the UK and the EU could agree a withdrawal deal and the EU would be willing to consider alternatives to the Irish backstop;
• However, sterling handed back those gains as the Irish government rejected Boris Johnson’s suggestion that the finer details could be confirmed after the UK leaves the EU.

• Omnis view: The issue of the Irish border remains the biggest obstacle to a withdrawal deal. However, there are signs the two sides are making progress- the Brexit-supporting Democratic Unionist Party (DUP) also claimed it would consider bespoke solutions to avoid a hard border.

Commodities: Oil prices slide as Saudi Arabia restores production

• Oil prices fell as Saudi Arabia’s energy minister said production will be restored by the end of September following the attacks on its facilities and supplies should not be disrupted in the meantime.

• Omnis view: There were concerns that higher oil prices could weigh on the global economy, so the markets should welcome reassurance from Saudi officials.

LOOKING AHEAD - TALKING POINTS

Economic data

• Thursday- confirmation of US economic growth in the second quarter of 2019.

Brexit

• The UK supreme court should rule on whether the Prime Minister’s suspension of parliament- known as proroguing- is legal on Monday or Tuesday. If Boris loses, parliament will be recalled.

Thomas Cook

• The collapse of travel company Thomas Cook means the government will have to arrange for the return of 150,000 UK holidaymakers. The disruption may affect the rest of the sector and weigh on share prices.