Weekly Market Update 2019 12 23

23/12/2019

UK Jobs Growth

The UK labour market surprised economists by posting a 24,000 increase in jobs over the three months to October, against the -15,000 expected. Given the level of political uncertainty that was present in October the rate of growth is encouraging. Furthermore, the increase was driven by a 66,000 rise in full-time posts and a 41,000 fall in part time positions suggesting that there was an even greater demand for labour than the headline figure would suggest. Wage growth continued to moderate with regular pay falling from an annual rate of 3.6% to 3.5%, although this is still well above the rate of inflation, which has also drifted lower. While this data is encouraging, employment is a lagging indicator and the weaker end to the year for the economy may start to come through over the coming months. However, with the election now over, a flurry of activity and hiring may now be taking place.

US Manufacturing Output

The manufacturing sector in the US grew by 1.1% last month, ahead of the 0.8% expected and rebounding strongly from the 0.9% fall in the prior month. The gain was mostly due to a 12.4% jump in motor vehicle production, reversing the declines seen in September and October during the General Motors strike. While there is not much scope for another boost in December’s figures, there were still some early signs of an improving manufacturing sector. The US benefitted from a slight improvement in global manufacturing, particularly in electronics. However, the news that Boing will suspend production of the 737 Max aircraft will undoubtedly impact production in the early 2020 data, although this may be reversed by the second half of the year. Unfortunately though, it will make the headline data more volatile and challenging to interpret.

 

Bank of England holds rates

The Monetary Policy Committee (MPC) elected to hold UK interest rates at 0.75%, opting to wait and see if the economy will receive an election bounce. With inflation under control and the economy struggling to accelerate, two of the committee members voted to cut rates, mirroring the previous decision. However, the committee did note that if global growth fails to stabilise or if Brexit uncertainties remain entrenched, they may act to stimulate the economy by cutting rates. Additional news was released last week confirming that Andrew Bailey, the current chief of the FCA will replace Mark Carney as Governor of the Bank of England (BOE). Bailey was the front runner for the role and is in effect an inside hire for the BOE. As Andrew Bailey has never sat on the MPC before there is little insight into the direction of interest rates although most commentators are expecting that conditions will remain the same.

Market Data

 % 1w*% 1m*
UK3.12%4.6%
US3.98%2.67%
Europe ex UK3.61%2.05%
Japan1.58%0.56%
Emerging Markets4.29%4.30%
Oil3.81%6.65%
Gold2.28%-0.93%

(*GBP Returns)

Prydis

This article was written by Prydis

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