LAST WEEK – KEY Takeaways

Trade: US and China still negotiating as Trump turns attention elsewhere

Global shares fell when US President Donald Trump claimed he was willing to postpone a trade deal with China until after the US presidential election in November 2020;
However, the markets recovered as media reports suggested the US and China are getting closer to agreeing on reduced tariffs- taxes on goods imported from abroad- for the first phase of a deal;
Elsewhere, President Trump announced he would reintroduce tariffs on steel imported from Argentina and Brazil who he accused of allowing their currencies to weaken to the detriment of US farmers;
President Trump also threatened to impose tariffs on a range of European products in response to EU support for aviation firm Airbus and a French digital tax which could affect US companies such as Amazon and Facebook.

Omnis view: While trade tensions between major powers rattle the world economy, US threats to tariff other countries also intensifies uncertainty. Meanwhile, the US and China inch towards an initial trade deal. The next round of tariffs on Chinese goods come into effect on 15th December, but even if an agreement is not forthcoming, President Trump may delay them because of the impact on the US shoppers before the holiday season.

UK: Chances of Tory majority lifts pound

Sterling strengthened against the US dollar as the Conservative party maintained its lead in the polls ahead of the general election on Thursday.

Omnis view: The pound’s response suggests the markets would prefer the Conservatives to win a majority as Brexit uncertainty would ease in the short term if Boris Johnson could secure backing for his withdrawal deal. However, neither side can afford to take the result for granted as the last few days of campaigning get underway.

US: Jobs market boosts shares

US shares rallied after the non-farm payrolls report showed the US economy comfortably beat expectations by creating 266,000 new jobs in November.

Omnis view: Following last week’s upward revision of growth in the third quarter, the latest jobs number provides further evidence of the resilience of the US economy. However, the recent upbeat economic data is unlikely to change the Federal Reserve’s (US central bank) mind about keeping interest rates unchanged for the time being at its meeting on Wednesday.

Asia: Chinese manufacturing picks up despite trade tensions

There was good news for Asian shares as data showed that activity in China’s manufacturing sector expanded in November.

Omnis view: Signs of recovery in Chinese industrial activity hints at underlying strength in the domestic economy despite ongoing trade tensions with the US.

Japan: Government launches measures to boost growth

The Japanese government announced a number of policies designed to support the country’s economy including repairs after the recent typhoon, improvements to infrastructure and investment in research and development.

Omnis view: The Japanese markets will welcome these measures which are more powerful than expected and should stimulate the domestic economy.

LOOKING AHEAD - TALKING POINTS

Economic data

Tuesday- Chinese inflation rate in November; UK economic growth in October;
Wednesday- US inflation rate in November.

Monetary policy

Wednesday- Federal Reserve interest rate decision;
Thursday- European Central Bank interest rate decision.

UK general election

UK voters go to the polls on Thursday, and the result should be announced early on Friday morning.