LAST WEEK – KEY TAKEAWAYS

Trade: Initial deal between US and China remains elusive

• Global shares have stopped rising as markets await firm news on trade developments between the US and China;

• The signals were mixed, as optimism amongst negotiators was countered by the risk that the US had aggravated China by passing the Hong Kong Human Rights and Democracy Act which allows it to impose sanctions on anyone believed to be repressing human rights;
• Time is running short, but the market still expects a positive announcement this year.

• Omnis view: How close the two sides are to signing the initial deal is unclear- at the end of the week both US President Donald Trump and his counterpart Xi Jinping sounded hopeful, but then President Trump confused matters by claiming China wanted a deal more than the US.

UK: Slowing economic activity weighs on pound

• The pound weakened against the US dollar as activity in the manufacturing and services sectors looks set to fall to its lowest level in three years in November according to a preliminary release of an economic indicator known as the Purchasing Managers Index1.

• Omnis view: The UK economy was already struggling with Brexit, but it also faces the uncertainty of a general election in the short term. Whether this uncertainty diminishes after the vote depends on the result.

US: Federal Reserve minutes released

• In the minutes from its latest meeting, the Federal Reserve (the US central bank) said political risks- including trade tensions with China and the chance of a ‘no deal’ Brexit- appear to have eased, but it expressed concern about the level of borrowing by US companies.

• Omnis view: The markets pay close attention to the minutes for any hint of a change in interest rates, although on this occasion the Federal Reserve reaffirmed earlier guidance that rates would stay the same unless the economic outlook changed.

China: Central bank cuts interest rates

• Chinese shares fell despite the decision by the People’s Bank of China (or the PBOC, the country’s central bank) to cut interest rates in an effort to boost the domestic economy.

• Omnis view: The markets were disappointed because the PBOC did not go far enough to support the Chinese economy which is struggling due to trade tensions with the US.

LOOKING AHEAD - TALKING POINTS

Economic data (NB all regions)

• Friday- Japanese unemployment rate in October; EU unemployment rate in October.