Market Update

Global equity markets experienced another positive week, buoyed by encouraging developments in US-China trade relations and monetary policy easing measures implemented by the European Central Bank.
Both the US and China took steps to de-escalate tensions ahead of their upcoming face-to-face trade talks. China announced exemptions on certain US goods from tariffs, and the US postponed additional 5% tariffs slated for early October by two weeks. Despite recent tariffs imposed by the US on Chinese goods, the market responded optimistically, hopeful for a potential trade deal between the two nations.
Mario Draghi, after nearly eight years as the President of the European Central Bank, is set to step down at the end of October, making way for Christine Lagarde, the current President of the International Monetary Fund. In this penultimate monetary policy meeting, Draghi lowered the deposit rate to a historic low of minus 0.5% and announced the resumption of quantitative easing (QE) at a rate of 20 billion euros per month from next month. These decisions were prompted by a deteriorating global economic outlook, primarily due to slowing global trade. Although these measures fell slightly short of expectations, the ECB pledged sustained support until it achieves its inflation target of 2%.
However, disagreements among European policymakers surfaced shortly after these announcements. Several policymakers opposed the latest easing package, indicating potential changes in the ECB's monetary policy under the incoming president. Despite compelling economic data signaling the need for accommodative policies, challenges loom on the horizon.
In the UK, amidst political turmoil marked by the suspension of parliament and a rejected attempt for a general election, the pound rebounded against the US dollar. This rebound was partially due to Scotland’s highest court ruling the parliament's suspension as unlawful. The Supreme Court is set to make a final ruling on the suspension, and the government has committed to respecting its decision.
Despite the uncertainty, the UK's labor market displayed resilience as unemployment dropped by 10,000 in the three months leading to July, bringing the unemployment rate down to 3.8%, the lowest since 1974. Additionally, wage growth accelerated to 4% year on year, marking its fastest pace since June 2008.
Looking ahead, central bank policies will remain a focal point, with the US, UK, and Japan all expected to make monetary policy decisions. Anticipation surrounds another interest rate cut by the US. Furthermore, Boris Johnson is scheduled to have his first in-person Brexit meeting with EU Commission President Jean-Claude Juncker, and economic data to watch includes Chinese industrial production and retail sales, UK and Euro Area inflation, and UK retail sales.