Global Market Review
Brexit takes a back seat
Although politics continued to dominate newsflow and sentiment in the UK during November, Brexit was superseded by the General Election as the focal point. As the different parties set out their manifestos, Brexit took a back seat as the focus of the different party leaders shifted to matters of domestic policy. However, credit ratings agency Fitch warned that the spending plans laid out by the Conservative and Labour parties would increase uncertainty around the UK’s fiscal outlook. Elsewhere, the UK’s rate of annualised economic growth slowed during the third quarter to 1%, posting its lowest growth rate since 2010. The FTSE 100 Index rose by 4.1% over November.
“Germany’s economy managed to avoid recession in the third quarter”
US economic growth proved to be slightly better than initially calculated during the third quarter. Having originally estimated annualised growth of 1.9%, the Commerce Department raised its calculation for the period to 2.1%. Nevertheless, there are fears that growth will have lost momentum during the fourth quarter, undermined by the unresolved trade conflict between the US and China. The Dow Jones Industrial Average Index rose by 3.7% during November, and investor sentiment was lifted by hopes that the US and China might reach an accord over their longstanding trade conflict. However, their fragile relationship was further soured by the signing into law of the Hong Kong Human Rights and Democracy Act, which sets out US policy towards Hong Kong.
Having shrunk by 0.2% during the second quarter of 2019, Germany’s economy managed to avoid recession in the third quarter, posting growth of 0.1%. Household spending helped to offset a dismal performance from the country’s manufacturing sector, and the Dax Index rose by 2.9% over the month. The new President of the European Central Bank (ECB), Christine Lagarde, urged Europe’s governments to step up public spending in order to support monetary policy and economic growth. Public investment in the eurozone remains below pre-crisis levels, and the region has been “slower to embrace innovation and capitalise on the digital age than others”.
Japan’s economy slowed sharply during the third quarter, expanding at an annualised rate of only 0.2% and increasing pressure on the government to support growth by boosting spending. Meanwhile, retail sales plummeted during October following an increase in consumption tax from 8% to 10%, falling by 14.4% from September. Nevertheless, the Nikkei 225 Index rose by 1.6% during November.