Please find below our Weekly Market Update for the week ending 23rd Aug 2019.
Blue Sky Comment
After topsy turvy week in the markets, the economic summit at Jackson Hole, Wyoming is now dominating thinking.
At 3pm UK time today a keynote speech by Mr Powell, the Fed Chairman, will be delivered on the likely direction of interest rates. Earlier this month the Federal Reserve announced the first rate cut in the US for 10 years. The reduction has been described as a mid cycle adjustment but some are questioning whether the Fed have mis-judged where we are in the cycle, particularly in light of recent claims that the global economy is heading for a recession.
Markets have priced in a further 0.25% rate cut butTrump for one, is advocating a much more aggressive reduction. The feeling is that opposition within the Fed will likely limit the extent of the cut which in turn could disappoint the markets. Although it would appear sensible to ‘keep some powder dry’
In the UK as usual, the headlines have been dominated by Brexit and Boris. Talks with Merkel & Macron saw the pound strengthen and the FTSE fall, although concerns about the global outlook had much to do with this momentum. Macron & Merkel have supposedly given Boris 30 days to come up with a plan to reduce the backstop.
Perfect timing for the Fed!
China has just announced new tariffs on some US imports. It will now apply additional tariffs on $75 billion of US imports from September. The S&P has opened lower and European equities gave up ground on their earlier gains.