Market Update: Tory party conference puts pressure on PM

Market Update: Tory party conference puts pressure on PM

2nd October 2017

LAST WEEK – KEY TAkeAWAYs

US economic growth revised upwards

The US economy grew faster than was previously estimated in the second quarter of the year, meaning it registered the quickest rise since the first three months of 2015. Official data showed the main measure of economic growth, gross domestic product (GDP), increased 3.1%, an upward revision from 3%. However, the figures came with a warning that the momentum likely slowed in the third-quarter due to the impact of hurricanes Harvey and Irma.

Statehood for Catalonia?

Catalan leader Carles Puigdemont says the region has won its vote on independence, claiming that 90% of those who voted backed independence in Sunday’s referendum. However, the referendum was banned by Spain’s constitutional court, causing mass unrest with hundreds of people having been injured as police used force to block locals from voting. The turnout was only 42.3% due to the police crackdown. The direct exposure of Omnis European Equity Fund is less than 3%, but the vote is likely to cause on-going unrest within Spain.

Eurozone inflation fails to pick up

Year-on-year annual inflation in the eurozone was unchanged in September at 1.5%, failing to meet expectations of a rise. With slowing unemployment and encouraging signs on business confidence, the European Central Bank is looking for price rises closer to 2%. Inflation in the eurozone’s largest economy, Germany, also remained flat at 1.8% despite rising food and energy prices.

China orders shut down of North Korean companies  

China has ordered the closing of North Korean businesses operating within its borders, as the United Nations puts more pressure on Pyongyang through sanctions. The vast majority of North Korean trade is with China, but it appears even its usually supportive neighbour is now losing patience with the constant warmongering. North Korean foreign minister Ri Young-ho claimed that US president Donald Trump’s recent assertion that the regime “won’t be around much longer” amounted to a declaration of war.

First London house price drop since 2009

London property prices declined in the third quarter of the year, the first time this has happened since the financial crisis of 2008-09. While the UK’s house price growth has been slowing for some time, this is the first time that the capital – usually buoyed by exceptional demand – has suffered a drop-off. Average prices in London fell 0.63% year-on-year to September, according to the Nationwide House Price Indices, blamed on economic uncertainty around Brexit and higher inflation.

Looking ahead - TALKING POINTS

US unemployment data due as markets digest Trump’s tax plan

US president Donald Trump finally unveiled his ambitious new tax plans last week, with cuts both for individuals and corporations. This could have a long-term positive impact on investment markets, and boost spending, but what about the country’s deficit? A notable dissenter was leading Republican Senator Bob Corker who was quoted as saying he would not vote for any federal tax package financed with borrowed money.

If tax cuts put more money into people’s pockets, this could in turn boost demand and create more jobs. The US jobs market is currently very close to full employment, with the latest unemployment data due this week. In August the figure was 4.4%. Who could benefit from new jobs? It could be the US immigrant population, though Pew Research Centre last week said the unemployment rate for Hispanics in the US has returned to a historic low not seen since more than 10 years ago.

US unemployment rate

 Rsz _united -states -unemployment -rate

Source: TradingEconomics.com, US Bureau of Labour Statistics

May under pressure at Tory party conference

The UK conservative party conference takes place this week. Ms May will speak on Wednesday, while much of the press coverage is honing in on the political “posturing” of foreign secretary Boris Johnson who has set out his four “red lines” for Brexit negotiations. These state that the post-Brexit transition period must be a maximum of two years; that the UK must refuse to accept new EU or European Court of Justice (ECJ) rulings during transition; there will be no payments for single market access after the transition; and the UK must not agree to shadow EU rules to gain access to the market. The Conservatives have ground to make up domestically – a YouGov poll carried out last month found they are now trailing Labour in popularity should an election be held tomorrow.

UK voting intentions

 Rsz _voting _intention _22-24_sep -01

Source: YouGov, September 22-24

THE OMNIS VIEW

Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles.

While the popularity of the leading politicians and their parties will ebb and flow, it is important for investors not to get carried away with polls on popularity until a general election is on the horizon. Still, with no solid agreements in place as yet for Brexit, and given the latest news on the house prices and consumer spending under pressure, the Omnis Managed Portfolio Service remains underweight the UK for the time being, with a preference instead for Europe and emerging markets.

 

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).