MARKET UPDATE: US OPENS ITS BEIGE BOOK AS EUROZONE DATA COLOURS JOBS OUTLOOK

MARKET UPDATE: US OPENS ITS BEIGE BOOK AS EUROZONE DATA COLOURS JOBS OUTLOOK

27th November 2017

LAST WEEK – KEY TAkeAWAYs

OBR downgrades UK GDP forecasts…

Wednesday’s Budget saw the chancellor outline the Office for Budget Responsibility’s (OBR) revised UK growth forecasts. Rises in gross domestic product (GDP) are now predicted to come in at 1.5% for this year and 1.4% in 2018, down from previous predictions of 2% and 1.6%. The growth is expected to slip further to 1.3% in 2019 and 2020, before picking up gradually to 1.5% in 2021 and 1.6% in 2022.

…as big pharma pledges to support post-Brexit Britain

With ongoing Brexit negotiations generating plenty of negative headlines, some welcome good news has come from two global pharmaceutical companies – Qiagen and MSD – which have pledge to invest more than £1bn of investment in research hubs in London and Manchester, creating up to 1,850 high-skilled jobs.

Ireland set for snap election?

Irish prime minister Leo Varadkar has threatened to call a pre-Christmas election. This follows controversy sparked by politicians seeking the resignation of the deputy prime minister Frances Fitzgerald over her handling of a police whistle-blower controversy. The news came as Ireland takes centre stage in Brexit negotiations with ministers unhappy with options offered so far to prevent a hard border with Northern Ireland.

Germans consider ‘grand coalition’

After plans to form a new government seemingly collapsed following the withdrawal of the Free Democratic Party (FDP) from talks, German chancellor Angela Merkel’s Christian Democratic Union (CDU/CSU) party has pushed for the formation of an alternative ‘grand coalition’ with the second-biggest party, the Social Democrats (SPD).

Mnangagwa sworn in as Zimbabwe’s president

Robert Mugabe’s 37-year rule as president of Zimbabwe has finally come to an end, following the military’s decision to place him under house arrest. His old ally Emmerson Mnangagwa took over on Friday and committed to holding democratic elections in 2018. Once known as a the “breadbasket of Africa”, Zimbabwe still has plenty to do to attract foreign investors.

Looking ahead - TALKING POINTS

Consumer confidence, GDP and Beige Book reports due in the US

On Tuesday, the Conference Board releases its monthly index on US consumer confidence which, despite Thanksgiving, is expected to have fallen in November from a 17-year high reading in October. Still, US citizens have been buoyed this year by a healthy job market, with unemployment at long-term lows.

A day later, a second estimate on third-quarter GDP growth data is due, which is expected to have increased to 3.2% compared with 3.1% in the second quarter. Also due is the Beige Book report, where the US Federal Reserve’s 12 individual districts will present details on business conditions. Published eight times per year, the report gathers anecdotal information on current economic conditions in each district via interviews with key business contacts, economists, and other market experts.

US GDP (January 2016 – October 2017)

 Rsz _united -states -gdp -growth _nov _17

Source: US Bureau of Economic Analysis, Tradingeconomics.com

Eurozone data brings focus on to jobless rates

As expected last week, data from the European Commission showed eurozone consumer confidence to have surged in November, reaching its highest level since the start of 2001. The optimism could well be extended this week with the release of unemployment data for the region, which is expected to fall slightly for October from the 8.9% figure in September. As with the UK, where unemployment is at 4.3%, and in the US, where the rate is 4.1%, creating jobs is not such a big problem currently across developed nations which suggests the picture will continue to improve in Europe. In Japan however, the problem appears to be labour shortages with companies across a range of sectors having warned recently of hiring problems, exacerbated by a declining population and the strong domestic economy.

Eurozone unemployment (October 2016 – September 2017)

 Rsz _euro -area -unemployment -rate _nov 17

Source: Eurostat, TradingEconomics.com

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 UK’s revised growth figures were a shock to some, our main stock market – the FTSE 100 – remained relatively resilient. Indeed, investors know it is not such a good idea to read into future forecasts for up to five years ahead when we have as yet little idea on how Brexit will impact the domestic economy. Until evidence shows otherwise, we believe that selected equity markets will continue to grow.

 

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).