Please find below our Weekly Market Update for the week ending 1st February 2019.
The intention is to provide a brief insight into the latest dynamics and inform you of any changes occurring within the model portfolios.
Blue Sky Comment
I was in London this week talking to LGT Vestra’s Chief Investment Officer, Jonathan Marriott and we were talking about the challenges facing investment markets. We agreed, in order of importance was the following:-
• Trade talks between the US and China
• Central bank policy in the US with regards to the direction of interest rates and subsequently, the dollar
This is consistent with the rhetoric we’ve been delivering over recent months. We flagged this week’s talks between the US and China as being extremely important. The manifestation appears to be really positive and hence equity markets have responded likewise.
As stated in Bloomberg today, China has promised to “substantially” expand purchases of U.S. goods after the latest round of trade talks, and both sides plan further discussions to reach a breakthrough with only a month to go before the Trump administration is set to ratchet up tariffs.
President Donald Trump said on Thursday he will dispatch two of his top negotiators to China following two days of talks with Chinese officials in Washington. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer will visit the Asian nation in mid-February to hold the next round. The two sides made important progress during talks that were candid, specific, and fruitful, according to a statement published by China’s Xinhua News Agency on Friday. China agreed to increase imports of U.S. agriculture, energy, industrial products and services, it said, without providing details. The countries also agreed to strengthen cooperation on intellectual property rights and technology transfer, Xinhua said of talks.
The agreement to continue talking raises hopes the world’s two biggest economies could find a way to end the conflict before March 1, when the U.S. has said it may more than double tariffs on $200 billion of Chinese goods. But there was little concrete evidence they bridged yawning differences over the toughest issues such as China’s policy on intellectual property and the heavy involvement of the state in its economy. Nevertheless, the over-riding news is positive.
I’m sure you are aware of the latest news re Brexit but nevertheless I thought I would summarise where we are:-
• MP’s narrowly backed Theresa May’s Plan B but she now has to gain agreement from Brussels.
• There has been an immediate rebuff from European leaders. They are not going to change anything!
• The Brexit minister here in the UK insisted Brussels would not get a penny unless they move their position on the Irish backstop.
Later this week: Theresa May is expected to return to Brussels to ask for changes to the Irish backstop, after MPs backed an amendment calling for ‘alternative arrangements’.
February 13: If no new deal has been reached, Mrs May will address MPs again on this date and her Government will put a further motion before the House of Commons. MPs would then be able to vote on further amendments, potentially on February 14.
March 29: Brexit day. The European Union (Withdrawal) Act of 2018 fixed March 29 as the time and date when Britain will leave the EU. If no agreement has been reached by then, the UK – in spite of the Commons vote against a cliff-edge Brexit last night – will leave without a deal.
At least the trade war negotiations are moving forward.
We hope you have a lovely weekend.
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The Blue Sky Investment Team