The news was supported by a number of strong earnings reports and takes us back above the 3,000 level. The last time we got above that level it lasted all of a day before we saw a near 6% drop in the subsequent few sessions – which begs the question of whether the market will be ready, in the current climate, to want to keep buying and hold above these levels?
The first element that could derail it is if the Fed come out with some more hawkish tones following their likely rate cut tomorrow. If the statement they release doesn‘t have enough soothing words and carry enough expectation that the Fed will cut again by the end of the financial year, then we could well see investors protest with the sell button.
We’d also not bet against this trade deal not materialising – in fact, we were quite surprised that the word of progress being made had an impact on the market in the first place given just how long this has gone on for without results. The numbers are already showing detrimental effects of the trade war and that will only accelerate if there isn‘t a swift resolution. Trump is hoping to get phase one of the deal signed with China at the APEC meeting in Chile, which is the middle of next month – so if he can keep the positivity coming, we’ve got a couple more weeks of open space before we could find out that it isn‘t all going as well as was hoped.
Staying with the US briefly; we reported yesterday that Germany’s budget surplus would be in high single digit billions this year – contrast this to America’s ‘good news’ that they’ll only need to borrow $352bn in the fourth quarter of this year! Amazingly, this number is lower than they had previously expected. As a reminder, here’s how global debt looks – and the UK on percentage terms doesn‘t look pretty.
And still staying with the US – because this stuff just writes itself – Democrats are set to vote this week on how to make the impeachment probe public. There’s been a lot of anger from Republicans about the proceedings to date having taken place behind closed doors, getting them out in the open is tricky because of the sensitivity of what he’s allegedly being doing wrong and also the witnesses involved. Reuters report that for the House to impeach Trump takes a simple majority, but for the Senate to convict him takes a two thirds majority – these splits sound familiar…
Boris last night lost a vote to get his election on December 12th, because it required a two thirds majority. He’s now likely to back a Lib Dem proposal to hold the election slightly earlier, which would only require a simple majority to get across the line.
We should take a moment to look at UK stock markets and compare them to the US. The FTSE100 is nowhere near all-time highs, but we can put a lot of that down to the strengthening Pound having reducing translation valuations of overseas assets. If you look at the FTSE250 though, we’re actually at the highs for the year. The more domestically focused listing has been higher in the past, but the strong performance continues to show the optimism around getting some kind of breakthrough out of parliament. This is doubly impressive when you look at the record amount of profit warnings having been made by listed firms so far this year, which is the highest it’s been in more than a decade.
Today’s data calendar is relatively sparse. We’ve already seen UK house price numbers come in – the data show anaemic growth of just 0.4% and mortgage application numbers still well below average – but actually that’s pretty resilient with this level of consumer confidence, so we’ll take it!
Have a great day.