Weekly Market Update

11/12/2017

High drama amounted to very little reward last week with tech stocks having a volatile week. This reflected the sector’s hefty gains that led to profit taking as some investors eyed the year end. However, the strong structural change within the broader technology industry will likely keep going as euphoria takes hold in the late stages of this bull market. Meanwhile, Bitcoin continued its rocket-propelled rise, crashing through the $16,000 mark on Thursday. The cryptocurrency is now up over 50 per cent for the month. What could possibly go wrong?

After a week of tense discussions on the fate of the Irish border, Britain and the EU finally reached an agreement on exit terms last Friday. The deal enshrines special rights for 4 million citizens and agrees to pay €40bn to €60bn in a divorce settlement that clears the way for trade talks next year. One small step but at least its in the right direction.

Germany’s trade data reinforced earlier poor industrial production figures, showing the country had a weaker-than-expected start to the fourth quarter. However, French factories bucked the trend and significantly outperformed expectations in October.

Japan’s revised third-quarter GDP reading beat expectations, showing annual growth of 2.5 per cent, up from a preliminary estimate of 1.4 per cent reported last month and just below the 2.6 per cent seen in the second quarter.

Most of the suspects detained in a major anti-corruption drive launched in Saudi Arabia last month accepted settlements to avoid prosecution. The current number of individuals detained was 159, while the total number of people subpoenaed to provide information about alleged corruption stands at 320. Meanwhile, the oil price saw a second weekly loss, as investors focused on expanding US oil production and gasoline stockpiles, despite OPEC’s recent agreement to extend supply cuts.

This week, the US Federal Reserve, ECB, and the UK’s Monetary Policy Committee meet to discuss monetary policy and setting of interest rates for the final time in 2017. Clearly the central banks are firmly stuck in different phases of the policy cycle. News of wages growing at an annualised pace of 2.5 per cent for November in the latest monthly jobs report doesn’t shift the needle for US policy expectations, with a quarter percentage rise likely this week.

For the ECB, currently buying €60bn of bonds each month, a tapering to €30bn begins from January with expectations of rate increases still a story for 2019. While for the UK, there appears limited chance of an immediate rise given the undertones of deteriorating economic data.

 

 

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