GBP up up upon election result, has Trump done a great deal????
Much of this post is written by by Richard McCreery, my friend and a talented wealth manager / market commentator. Smart & sharp, thank you..
USD news: Retail Sales data later today marks the final important statistic of the year – EUR/USD at 1.1100 levels wanting to break out of recent ranges, this could be the chance!
GBP/EUR sits near 1.2000 for the first time in 3yrs / GBP/USD at 1.3400
Today we have two important events for markets that could cement the final stock market blow-off. Boris Johnson’s victory in the UK ensures that Brexit will now definitely go ahead and markets are likely to greet this news warmly, despite how negative it is for the economy according to almost every single economist. The removal of a large element of uncertainty trumps the actual long term economic impact, although there could be a sigh of relief in the short term. However, having successfully negotiated a Brexit deal that was worse than Theresa May’s, Boris will now need to negotiate a trade deal with the EU by the end of 2020 whilst at the same time ‘tearing up the EU rule book’. The volatility and uncertainty might not be finished yet.
https://www.ft.com/content/a1a14220-1801-11ea-9ee4-11f260415385
German industry hit by biggest downturn since 2009. Germany's sprawling industrial sector is suffering its steepest downturn for a decade, underlining how the engine of the eurozone's biggest economy is sputtering. Industrial output, which includes Germany’s dominant factory sector, dropped5.3% in October from the same month in 2018. Combined with data showing a big drop in industrial orders and with most manufacturers expecting further shrinkage in November, there are few signs that the two year downturn in German manufacturing is close to ending. “The data support our view that a recession is still more likely than not in the coming quarters,” said Andrew Kenningham at Capital Economics. Germany’s export-focused economy has been hit by the US-China trade war, uncertainty over Brexit and a sharp decline in the car industry which has been disrupted by new emissions rules and the shift to electric vehicles. Germany’s economy grew 0.1% in the latest quarter and there was a worrying sign of consumers pulling back when retail sales fell 0.6% in October.
https://www.bbc.com/news/business-50579897
Can governments ever run out of money? In the UK and US, political parties are promising spending splurges to appease voters after a decade of squeezes. Whether it's more nurses, frozen tax promises, free broadband internet or more social housing in the UK; or tax cuts and green energy investments in America, public spending is set to surge. This sudden abandonment of fiscal rectitude comes amid the rise in prominence of a way of thinking about money, spending and the economy - Modern Monetary Theory (MMT). According to its key architect, US businessman Warren Mosler, it is based on a simple idea - that countries that issue their own currencies can never run out of money in the same way a business or person can. The theory has become popular among economists and political thinkers, particularly on the left. Using MMT as a basis, they argue that countries should be able to borrow and spend more freely, and not be as concerned by things like the national debt or the deficit - the difference between a government's income and outgoings. The idea is fiercely contested.
• The UK economy grew at its slowest annual pace in nearly seven years in October. Gross domestic product rose by 0.7% against October 2018, the weakest growth since March 2012, with services the main driver the Office for National Statistics said. In the three months to October, growth was flat against the previous quarter. PwC is forecasting GDP growth of just 1% in 2020 and that assumes an orderly Brexit.
• Central banks are soaking up about 20% of the world’s gold supply, according to Goldman Sachs. While Goldman said the correction in bullion prices since September has further room to run, the bank is still sticking to its forecast prices will climb to $1,600 over the next year.
• Asset manager GMO forecasts that US equities will on average lose 3.9% a year in real, inflation-adjusted terms over the next 7 years, US bonds will shed 2.2% and international equities will move sideways. The CAPE valuation of US stocks says they are currently valued at twice their long term average.