True Potential Morning Markets

George Bell, Portfolio Manager, looks at the latest Tankan survey from Japan and the cautious optimism seen in the manufacturing sector. Large manufacturers plan to increase capital expenditure by 10.6% in the year ending March 2025. The report was taken ahead of the announcement of the massive stimulus package announced in China which should benefit Japanese manufacturers as a key trading partner. In the US, Federal Reserve Chairman, Jerome Powell, has left the door open to two further 0.25% cuts before year end following the initial 0.5% cut in September.

Kevin Kidney, Head of Asset Allocation, looks at the remarkable performance of the Chinese stock market last week which saw a near 20% rise in most major equity markets. As we look to the week ahead, German and Italian inflation data will be a strong indicator of whether the European Central Bank will continue its rate cuts in Q4. We get US survey data on manufacturing and services this week which could potentially paint a more optimistic picture from US businesses after the recent 0.5% cut from the Federal Reserve.

This week, Kevin Kidney, Head of Asset Allocation and Sebastian Mackay, Investment Director, take a look at some equity markets which have reached all time highs. US and German equities reached new highs this week, but tell slightly different stories. The US growth dominance continues, boosting asset prices and supported by lower inflation and lower interest rates. German equities reflect buoyant global growth, given the more outward facing economy there. The surprise stimulus announcements from China have boosted all stock markets this week, but particularly Europe within the G7 economies. The lower oil prices we are seeing will also boost consumer spending power, given the feed through into petrol pumps.

Today, Chris Leyland, Director of Investment Strategy, looks at the recent shifts in oil markets and the wider global events that are affecting supply and demand. From Saudi Arabia who could drop their $100 a barrel target on barrels of oil to increase market share, to agreements in a divided Libya on a Central Bank Manager which could aid in the process of managing oil revenues and help with distribution issues. Later today we also have Federal Reserve members including Chairman Powell which could provide insight into future policy after the 0.5% interest rate cut.

Matt Henderson, Portfolio Manager, covers the announcement of the People’s Bank of China implementing an interest rate cut of 0.3%. This comes off the back of announcements earlier this week and is part of a coordinated strategy to boost the economy. Where this may not seem like a large move, it is actually a record interest rate cut for China’s central bank. This has caused a rally in Chinese equities which are up 7% from the announcements, but will it be enough to revitalise the Chinese economy and hit the central bank’s target of 5% growth?

Today, George Bell, Portfolio Manager, looks at the latest initiatives in China for lending and the property market in a bid to support economic activity. With a plan to lower rates in short and medium term lending as well as a cut to required bank reserves, this amounts to an equivalent 140 billion US dollars into the economy. Moving to the US and we see a positive perspective from corporate America with strong reports from the Services sector, however there still remains a weakness in manufacturing and potential uncertainty around the outcome of the election.

As we look to the week ahead, Paul Durrans, Investment Director, looks at the recent decision from the Federal Reserve to lower interest rates and some of the key US economic data that will be coming through this week. This week, members of the Federal Reserve voting committee will be giving their perspectives on the health of the US economy and the strength of labour markets. In recent months investors have moved on from inflation concerns to economic growth uncertainty. Key economic data points this week, such as consumer confidence, will give a good gauge of the strength of the economy.

This week, Paul Durrans, Investment Director and Joe Forward, Investment Analyst, look at the diverging decisions between two major central banks. The Federal Reserve, this week decided to cut interest rates by 0.5% whilst the Bank of England almost unanimously voted to hold rates unchanged at 5%. Paul and Joe discuss the key takeaways, the market reaction and expectations for future monetary policy.

Today, Kevin Kidney, Head of Asset Allocation, covers the Federal Reserve’s decision to cut interest rates in the US by 0.5%. Other Central Banks will now take note with the US beginning with a large cut, and market expectations to reduce interest rates below 3% by this time next year. 

Paul Durrans, Investment Director, looks at the upcoming interest rate decision that the Bank of England will make tomorrow and the economic factors that will be weighed. Will they continue the cutting cycle or hold rates where they are? In the US the interest rate cut is highly expected and the question is more by how much? The lowering of interest rates over the next 12 months will be dependent on US labor markets and the broader economy.