IN THE NEWS TBA More news soon! Equity Market Roundup Equity markets struggled for most of the week but the resounding election victory for the Conservative Party, and news of a “phase one” trade agreement between the US and China, led to a sharp turnaround. Share indices hit new record highs in the US on Thursday while the pound jumped by 2.7% following the result, to US $1.351 – its highest against the dollar since May 2018 and one of its biggest one-day gains ever. Against the euro, the pound hit €1.207, its strongest performance since 2016. The week started very differently. On Monday, both the FTSE100 and FTSE250 indices closed fractionally down with investors waiting for concrete news of developments in the trade war. Tuesday saw the FTSE100 lose 0.3% and the FTSE250 close down by 0.7% as a survey by the ONS (Office for National Statistics) showed the UK economy flatlined in October. On Wednesday, a poll suggested an increased likelihood of a hung parliament, which saw the FTSE100 close effectively flat, and the more domestically-focused FTSE250 close down 0.7%. Reports of a trade agreement on Thursday helped the FTSE100 gain 0.8%. Friday saw a different reaction, with the FTSEn100 closing up 1.10% on the day & the FTSE 250 closing up 3.34% on the day. Economic Roundup While the UK election campaign and Brexit uncertainties have been dominating recent headlines in the UK, the bigger issue for the global economy has been the damage being wreaked by the US/China trade war and ever-rising tariffs on goods traded between the two superpowers. This week, however, delivered some long-awaited clarity on both issues. While the details are yet to be fully announced or legally finalised, it has been reported that a last- minute “phase one” deal has been reached, avoiding the threatened December 15 tariff hikes on $156bn of Chinese imports. It looks likely to see the roll back of some of the existing tariffs, in addition to China purchasing more US agriculture products and tighter Chinese intellectual property protections. What happens in any “Phase two” talks remains to be seen, but markets have jumped on the news. The decisive win for the Conservatives in the UK general election should lead to some more solid economic growth in the short term as companies have a clearer idea about Brexit; the UK will likely leave the EU on January 31 and the size of Boris Johnson’s majority gives him some leeway in negotiating with the EU, making him less beholden to some of the hard-line euro sceptics in his own party. In addition, as some of the worries about Jeremy Corbyn’s nationalisation plans have disappeared, it could calm overseas investors and encourage more inwards investment into the UK. This is a welcome development, especially after data released this week showed the UK economy suffered its weakest 3 months of economic growth since 2009. UK GDP growth was 0% month-on-month in October, and also flat across the whole August-October quarter. Annualised GDP growth fell to 0.7% in the 12 months to October, the weakest since 2012. It was only thanks to an increase in energy production due to unusually cold weather in October that GDP did not dip into negative territory. There was better news in the US, where signs are pointing to a mini upwards cycle that could extend its record-breaking period of economic expansion still further. The latest survey of business sentiment from the National Federation of Independent Business rose to 104.7 from 102.4 in October, beating expectations. Seven out of the 10 sub-categories measured increased, including, crucially, earnings expectations and capital expenditure, which suggests that business investment will rise next spring. Overall, the survey suggests that Donald Trump’s tax package, implemented 2 years ago, is encouraging businesses to invest and hire, which is supportive of further growth in the coming months. In addition, the US Federal Reserve met on Wednesday and left interest rates unchanged after 3 consecutive cuts. It indicated there would be no rate rises throughout the whole of 2020, which should further boost consumer and business confidence. The European Central Bank (ECB) also left its rates unchanged at record lows to help boost the region’s economic activity. What economic news to expect in the coming days? • Tuesday 17 December. Unemployment rate for October. The UK unemployment rate fell back to 3.8% in the 3 months to September 2019, its lowest level in nearly 45 years and slightly below market expectations of 3.9%. • Wednesday 18 December – Year-on-year December inflation rate. The consumer price inflation in the United Kingdom fell to 1.5% year-on-year in October 2019 from 1.7% in the previous month and below market expectations of 1.6%. As always, if any of the above prompts any questions, please do not hesitate to contact us . NOTE: Thank you to our Investment Partners at Brewin Dolphin for the above views. The views expressed are not necessarily those of The Financial Group or the views held throughout Brewin Dolphin Ltd