MARKET UPDATE: STERLING STRENGTHENS AS BORIS SUFFERS SETBACKS

LAST WEEK – KEY TAKEAWAYS

UK: MPS FORCE BORIS TO SEEK BREXIT EXTENSION

• Sterling fell against the US dollar at the start of the week as the Prime Minister Boris Johnson threatened to call a general election if parliament backed a bill forcing him to seek another extension to the Article 50 deadline and to expel Conservative MPs who supported it;
• However, sterling recovered after opposition MPs (and 21 rebels from the Tory party) voted in favour of the bill and then blocked Boris’ attempt to secure an election.
• Omnis view: Opposition MPs are trying to prevent a ‘no deal’ Brexit, but the government still insists that the UK will leave the EU on 31^st October. The options available to Boris seem to be receding, but as demonstrated over the last few weeks, British politics has become highly unpredictable, so it would be unwise to rule out any outcome at this stage.

TRADE: US AND CHINA TO RESTART TALKS

• US shares rallied after senior officials agreed to hold a fresh round of trade talks with their Chinese counterparts in Washington at the start of October.
• Omnis view: The markets welcomed the prospect of further talks following the escalation of trade tensions in August, although the two sides remain far apart on key issues, and whether they manage to make any progress remains to be seen.

US: JOB GROWTH SLOWS

• The US created 130,000 new jobs in August, according to the non-farm payroll report published by the Bureau of Labor Statistics, its lowest level in three months and below forecasts.
• Omnis view: The Federal Reserve, the US central bank, closely tracks the non-farm payroll report, so August’s underwhelming figure increases the chances of an interest rate cut at its next meeting later this month.

LOOKING AHEAD – TALKING POINTS

ECONOMIC DATA

• Tuesday- Chinese inflation rate in August; UK unemployment rate in July;
• Thursday- US inflation rate in August.

MONETARY POLICY

• Thursday- European Central Bank interest rate decision.

 

This update reflects Omnis’ view at the time of writing and is subject to change.

The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your Openwork financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.