Commentary on financial markets – October 2019
After a moment’s pause, we return to financial market commentary. A little insight is in order. Happy reading!
Highlights:
- US-China trade war
- Brexit postponed
Commentary:
Equity markets performed well in October, although the global economy continues to slow slightly. Gold also joined equities, while the price of oil declined.
In the first decade of October, the United States first imposed sanctions against 28 Chinese security authorities and companies for their involvement in rights abuses against the Uighur Muslim minority. Hundreds of thousands of them have been locked up by the government in so-called re-education camps, while others have had their freedom of movement, culture and dress restricted. Among those sanctioned is Hikvision, a leading manufacturer of camera systems and security equipment. The possible motivation for the sanctions may not have been human rights alone, but an attempt to put pressure on China ahead of joint negotiations. However, at the beginning of the second decade, the US and China concluded a partial trade agreement, which marks a truce in the trade war between the two countries. It should solve some short-term problems. President Donald Trump announced that the United States would suspend the increase in tariffs on Chinese imports that was due to go into effect back in October. The agreement also lays the groundwork for a broader trade deal that Presidents Donald Trump and Xi Jinping could sign later this year.
Although British Prime Minister Boris Johnson had sought a UK withdrawal at all costs by the end of October, Parliament scuttled his efforts and the prime minister failed. Britain’s departure from the European Union has been delayed again, this time for another three months, after EU member states agreed on the form of a new Brexit postponement, which was subsequently approved by parliament. The new deadline is 31 January 2020.
At the end of October, first the ECB and then the US Federal Reserve met. The European bank did not make any changes to interest rates, but the US Fed, in line with investors’ expectations, cut the key interest rate for the third consecutive time by a quarter of a percentage point to a target range of 1.5-1.75%.