LAST WEEK – KEY TAKEAWAYS
BREXIT: PARLIAMENT BACKS WITHDRAWAL DEAL BUT REJECTS BORIS’ TIMETABLE
- UK shares rallied and sterling strengthened against the US dollar after the House of Commons backed the Prime Minister’s Brexit withdrawal deal;
- However, sterling handed back some of those gains after MPs voted against Boris’ plan to rush the legislation through Parliament so the UK could leave the EU on 31st October;
- Boris then said he would give MPs until 6th November to approve the deal if they agreed to hold a general election on 12th December.
- Omnis view: A general election before Christmas is looking increasingly likely, as the Scottish National Party and Liberal Democrats proposed an alternative date of 9th December which would simply require a parliamentary majority rather than the support of two-thirds of MPs.
TRADE: US AND CHINA MOVE TOWARDS INITIAL DEAL
- US shares rose as US officials said they were getting close to agreeing the first phase of a trade deal with China ahead of a potential meeting between US President Donald Trump and his Chinese counterpart Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) summit in mid-November.
- Omnis view: The trade truce between the US and China appears to be holding for now, although some of the most contentious issues still need to be addressed.
EUROPE: SHARES CLIMB DESPITE MIXED ECONOMIC DATA
- European shares hit their highest point this year despite economic data depicting a mixed view of the region’s economy;
- The Purchasing Managers Index- a measure of business activity- rose in the EU and France in October, but it showed activity continued to slow in Germany;
- Meanwhile, the European Central Bank kept interest rates unchanged at its last meeting before Christine Lagarde takes over as President from Mario Draghi.
- Omnis view: A combination of encouraging corporate earnings, easing of trade tensions between the US and China and the fading prospects of a ‘no deal’ Brexit appear to be helping European markets overcome the region’s faltering economy.
CORPORATE EARNINGS: TECH FIRMS BOOST US SHARES
- There was a further boost for US equities as software developer Microsoft, chipmaker Intel, payments processor Paypal and auto manufacturer Tesla beat earnings forecasts in the third quarter;
- However, online retailer Amazon and industrial bellwether Caterpillar fell short of expectations.
- Omnis view: Earnings season is going better than expected- according to research firm FactSet, 40% of US companies have reported as of Friday 25th October, and 80% have beaten estimates. The decline in earnings is now forecast to be 3.7%, rather than 4.8%.
LOOKING AHEAD – TALKING POINTS
- Wednesday- US economic growth in the third quarter of 2019;
- Thursday- EU economic growth in the third quarter of 2019, unemployment rate in September and inflation rate in October;
- Friday- Japanese unemployment rate in September; US non-farm payrolls (job creation) in October
- Wednesday- Federal Reserve (US central bank) interest rate decision.
- US tech firms Apple, Alphabet (parent company of Google) and Facebook and UK bank Lloyds are among the companies reporting annual results this week.
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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.