Key News and Events
- Major political parties in the UK launched their manifestos ahead of the general election on 12 December. Prime Minister Boris Johnson's Conservative party, which holds a substantial lead in opinion polls, have pledged to "get Brexit done" and to increase spending on health, education and policing. The opposition Labour party has promised to hold a second EU referendum, alongside their plans to raise income and corporation taxes and to nationalize various utilities companies.
- Amidst reports that a "phase one" U.S.-China trade agreement may not be reached this year, President Trump stated that the deal is "potentially very close". Meanwhile, the U.S. Congress passed the Hong Kong Human Rights and Democracy Act, before being sent for President Trump’s approval. China warned of "strong countermeasures" if the bill is enacted.
- The People’s Bank of China cut its short-term lending rate for the first time in four years, lowering the seven-day reverse repurchase rate by 5bps to 2.50%, in a bid to stimulate the economy amidst the ongoing U.S.-China trade dispute.
Week in Markets
- Global equity markets fell over the week.
- The S&P 500 index fell by 0.3% over the week, outperforming the MSCI World index, which fell by 0.4%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (26.3% vs 23.6%).
- U.S. Large Cap stocks outperformed Small Cap stocks over the week, as the S&P 500 index fell by 0.3% while the Russell 2000 index fell by 0.5%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (26.3% vs 19.3%).
- Growth stocks underperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks fell by 0.3% while Value Stocks fell by 0.1% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (31.6% vs 21.7%).
- The 10-year U.S. treasury yield fell by 7bps to 1.77% and 30-year U.S. treasury yield fell by 9bps to 2.22% over the week.
- The 20-year TIPS yield fell by 7bps to 0.34% and 20-year breakeven inflation fell by 1bps to 1.74% over the week.
- The spreads on the Bank of America Merrill Lynch U.S. Corporate Index rose by 1bps to 113bps and the spreads on the Bloomberg Barclays Long Credit Index rose by 2bps to 157bps over the week.
- The U.S. High Yield bond spread over U.S. treasury yields rose by 7bps to 413bps and the spread of USD denominated EM debt over U.S. treasury yields rose by 10bps to 341bps over the week.
- The S&P GSCI index fell by 0.3% in USD terms over the week.
- The S&P GSCI Energy index fell by 0.1% as the price of WTI crude oil rose by 0.1% to US$58/BBL.
- Industrial Metal prices fell by 0.8% as copper prices rose by 0.4% to US$5,834/MT.
- Agricultural prices was unchanged and gold prices fell by 0.2% to US$1,464/Oz.
- The U.S. dollar appreciated against most major currencies (except the Japanese yen) over the week.
- Sterling depreciated by 0.6% against the U.S. dollar over the week, ending the week at $1.28/£.
- The euro depreciated by 0.2% against the U.S. dollar over the week, ending the week at $1.1/€.
- The Japanese yen appreciated by 0.1% against the U.S. dollar over the week, ending the week at ¥108.66/$.
- The Canadian dollar depreciated by 0.5% against the U.S. dollar over the week, ending the week at C$1.33/$.
Highlighted Last Week Releases
Markit U.S. Manufacturing PMI
The U.S. Manufacturing PMI rose by 0.9 points to 52.2 in November, outperforming market expectations of a 0.1-point increase. This is the sharpest growth in factory activity since April, supported by strong expansions in production and new orders.
Markit/CIPS UK Composite PMI
UK businesses experienced the sharpest monthly contraction in three years, as the Composite PMI unexpectedly fell by 1.5 points to 48.5 in November. Analysts have been expecting a return to growth following last month's neutral reading. The contraction was broad-based, affecting both the manufacturing sector and the previously robust services sector.
Consumer confidence rose by 0.4 points to -7.2 in November 2019, beating market expectations of a small decrease. Across the European Union as a whole, consumer sentiment increased by 0.6 points to -6.7.
Sources: Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Factset. Click here for index descriptions.
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