Market Update

Amidst the captivating political dramas unfolding in the UK and US, it's crucial to recognize that the real market catalyst remains the ongoing US/China trade negotiations. These talks profoundly impact global economic growth and corporate profits.
While the impeachment of Donald Trump is a serious event, historically, such occurrences haven't necessarily spelled doom for equity markets. The precedent set by Bill Clinton's impeachment in 1998 demonstrated this resilience, with US equities surging both during and after the impeachment process. Although expecting similar market gains during Trump's impeachment might be optimistic, it's essential not to succumb to panic fueled by negative news headlines.
In the UK, the Supreme Court's ruling against Boris Johnson's suspension of parliament has reopened critical Brexit questions: Will there be a delay? Will a general election occur? If so, when? Despite Johnson's insistence on progress in negotiations, the pound depreciated. Notably, Bank of England policymaker Michael Saunders, typically hawkish on interest rates, hinted at a potential rate cut due to economic uncertainties and global risks. This shift in stance, if adopted by the broader BoE, could lead to one of the most lenient tightening cycles ever, benefiting the FTSE-100 due to the weakened pound's positive effect on exporters and overseas earnings.
Regarding US/China trade talks, recent discussions have shown promising signs, indicating warming relations. Despite reports suggesting restrictions on supplying China's Huawei Technologies, officials from both countries described the talks as constructive. President Trump's optimism about an impending trade deal and the agreement reached with Japan on easier access for US agricultural goods also buoyed market sentiments.
Meanwhile, Eurozone PMI data painted a bleak picture, especially with German manufacturing PMI plummeting, hinting at a possible recession. The effectiveness of the ECB's recent interest rate cut in stimulating economic activity remains uncertain, raising the possibility of further stimulus measures.
Looking ahead, the focus shifts to key economic data releases: the US employment data (including non-farm payrolls, unemployment rate, participation rate, and average earnings) on October 4, alongside Eurozone unemployment and CPI inflation figures, and Chinese PMI data. These indicators will likely shape market dynamics in the coming days.