Market Round-Up: 5 November – 9 November 2018

It was a “big victory” and a “tremendous success” but in whose favour is anyone’s guess. With some predictability, both the Republicans and the Democrats claimed victory in Tuesday’s US Midterms, as Americans went to the polls in what had been billed a referendum on their president, Donald Trump.

Once votes for all 435 seats of the House of Representatives and 35 of the 100 seats in the Senate had been counted, the only real surprise was that there were no surprises. Most forecasters predicted that the Democrats would seize the House with a c.25 seat swing, they achieved 23, with the Republicans prophesied to hold the Senate, they gained one seat. For all the political jostling and fanfare, it seems that Washington could be in a state of deadlock for the next two years now as the countdown begins towards the Presidential elections.  The Democrats’ House win allows them to easily create an obstacle for Republican legislation, clouding the outlook for some of Mr Trump’s key economic proposals as well as his plans to build a wall along the southern border with Mexico.

History tells us, however, that markets tend to perform strongly during periods of political impasse. Investors breathed a collective sigh of relief that the polls had finally got it right, having been burned badly over bets on Donald Trump and the Brexit referendum in the past. Markets reacted positively to the outcome, with the S&P500 finishing up 2.1% and tech heavy Nasdaq closing up 2.7%, as commentators mulled over the chance that both parties could agree on key legislation such as infrastructure spending.

The sense of relief was tangible across the world as the FTSE 100 gained 1.2% on Wednesday, taking its cue from gains in Asia and the rest of Europe. The domestic stock exchange was not the only big winner this week as the pound also enjoyed three straight days of advancement. With Westminster proclaiming that a deal is now 95% done, and advances being made in negotiations over the Irish border, the pound made its way back above the $1.31 mark.

Bonfire night failed to produce any fireworks on the economic data front as the UK’s Services sector PMI came in well below forecasts, hitting a seven-month low. Although showing that the sector still expanded at a decent rate, analysts had hoped for more after months of strong readings.

The real loser of the week was high street favourite M&S, reporting yet more disappointing results on Wednesday. Sales at the troubled retailer fell in the first half of its financial year, with demand for clothing and food hit by disruption from its latest attempt to reinvent its ailing image. As a result, the company’s stock fell 2.4% on the day.

For those watching commodity markets, Brent crude, the international oil benchmark dropped below $70 for the first time since April. This signified a bear market, which is defined as a 20% drop from its high, driven by continued concerns around an oversupplied market in a slowing global economy with trade disputes.


Tags: News, Economy, Investment, Market, Newsletter, Politics

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