US: Interest rate cut weighs on equities

• US equities fell after the Federal Reserve lowered interest rates for the first time in 10 years by 0.25%, blaming global economic uncertainty and trade tensions1;
• Meanwhile, the US economy added 164,000 jobs in July, in line with forecasts, although June’s figure was revised down from 224,000 to 193,0002.

• Omnis view: The markets were disappointed that the Fed decided against reducing rates by a greater margin and by comments from chairman Jay Powell claiming this was an isolated adjustment rather than the start of a series of cuts.

UK: Sterling weakens despite Johnson’s reassurance

• Sterling hit its lowest point against the US dollar since Article 50 was triggered after Michael Gove, the minister responsible for planning the UK’s departure from the EU, suggested a ‘no deal’ Brexit was the government’s working assumption;
• There was further pressure on sterling as the Bank of England downgraded its forecast for UK economic growth, but it held the interest rate at 0.75%.

• Omnis view: The Prime Minister subsequently rebutted Mr Gove and insisted that he still believes the chances of a ‘no deal’ Brexit are remote, although the two sides do not seem to be moving any closer to a resolution on the contentious issue of the Irish border.

Trade: Trump ramps up tensions with China

• Global equities fell after US President Donald Trump tweeted he would impose tariffs of 10% on an additional
$300 billion worth of Chinese goods from the start of September, and China pledged to take
countermeasures.

• Omnis view: The optimism following the meeting between President Trump and his Chinese counterpart Xi Jinping at the G20 summit has faded, and a breakthrough appears to be unlikely any time soon.

LOOKING AHEAD - TALKING POINTS

Economic data

• Thursday- Chinese imports, exports and balance of trade in July;
• Friday- Chinese inflation rate in July; UK economic growth in the second quarter.

1 https://www.federalreserve.gov/newsevents/pressreleases/monetary20190731a.htm
2 https://www.bls.gov/news.release/empsit.nr0.htm