You wouldn’t be mistaken if you heard tumbleweed last week, with little news of note; even the Trump twitter feed was silent, leading in to what was an incredibly quiet week. It was President’s Day on Monday which meant US equity and bond markets were closed. The FOMC meeting took place mid-week with members of the committee split on further rate hikes in 2019; the word ‘patient’ was used significantly in the minutes. This dovish tone was well received by markets, which rallied on the back of the Federal Reserve’s softer stance on monetary policy.
Tariff negotiations between the US and China continue to make positive progress. Trump shifted his sights to Europe last week engaging in light tariff discourse aimed at car manufacturers. Trump outlined plans to punish the US consumer if they purchased cars from Europe and the EU responded similarly with a tax on European consumers should they buy cars from the US. Japan will quietly be pleased that Trump’s ire is focused on Europe and hope that these discussions will not lead to further tariffs on Japanese car imports and parts.
Brexit negotiations continue, as ever, slowly. There were several resignations from the Conservatives last week, causing Sterling to wobble; one defector commenting that more resignations could follow, narrowing May’s majority and the possibility of another vote an increasing possibility. Fitch, the ratings agency, placed the UK’s AA-rating, a sign of a country’s creditworthiness, on negative watch citing “heightened uncertainty over the outcome of the Brexit process.”
Data releases were also muted. The Euro Area composite figure moved up marginally buoyed by a surprise jump in services data which offset the down-trending manufacturing data. Germany’s services and manufacturing data showed the greatest divergence with 55.1 and 47.6, respectively; the gap between the two sectors is the largest since 2009.
