With the Fed’s likely pause in monetary action, markets are approaching the end of 2019. Under these circumstances, close scrutiny of investment portfolios remains prudent for the potential for structurally “superior growth.”

US economy immune to the trade war?

The US and China negotiating teams are still searching for a trade standoff compromise. Meanwhile, more evidence has emerged that the conflict is affecting the US economy, although the consequences can still be described as a “dent” in the growth pattern in the US, rather than forecasting a major recession.

The report on jobs in October  exceeded predictions, adding  128,000 jobs, with unemployment hovering around its historic low of 50 years. President Donald Trump said the  US was “before the deadline”  while referring to the talks on  the US-China trade deal. The US Federal Reserve lowered the base rate as anticipated by 25 basis points, while forward-looking guidance prompted  economists to lower their  expectations for future rate cuts.

Europe

The European Central Bank held rates at its historic low,  with outgoing President Mario Draghi saying that  governments in the Eurozone now need to focus more on economic growth fiscal policy.

In the Eurozone, trust indicators were far weaker than expected.

However, stocks rose to a total of 22-month high as the EU granted a further extension to the UK’s Brexit leave date, together with strong capital inflows into the country.

UK

• A application from the UK was approved for a three-month delay to Brexit.
• MPs have now agreed on a December 12th general  election.
• UK equity dropped by 0.4 percent over the week, with  global equity underperforming.
• UK gilts yielded negative returns at -0.2 percent over  the week, with flat equivalents of their investment  grade.

Rest of The World/Asia

• The Bank of Japan has kept its policy rate the same, but has reiterated its forward guidance, saying that it expects short and long-term rates to remain at or below current levels.
• The Bank of Canada also held rates at 1.75 percent, which  economists interpreted as dovish.
• China’s October PMI for manufacturing reported 49.3 (compared to planned 49.8), the lowest reading since February and  the non-manufacturing PMI was below anticipated at 52.8  (compared to 53.6)

Policy Divergence Between the Fed and ECB

The Federal Open Market Committee (FOMC)  lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75% in a  move widely expected by financial markets.

Prolonged Wait for a German Turn-Around

The GfK consumer sentiment index for  Germany dropped from 9.8 in October (the lowest since November 2016) to 9.6 going  into November.

Market Overview

• The Federal Reserve has cut rates in four months for the third time
• During the week, flows into  European stocks outperformed those of US stocks
• Brent crude fell 0.5 percent to $61.7 a barrel as stocks at  the largest storage hub in the US rose by 1.22 m.
• Gold rose 0.4% to $1509.2 an ounce

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