Market Update

This week, global equity markets found their direction in economic data and corporate results, with central banks and politicians offering few surprises.
Despite Boris Johnson's attempts, another Brexit "deadline" came and went as Europe agreed to another extension, referred to as a "Flextension." The hope is that UK politicians can reach an agreement before the new January 2020 deadline. Boris Johnson's efforts to call a general election were successful, setting it for 12 December 2019. This will be the UK's third general election since 2015, with Johnson aiming to secure a parliamentary majority for the current withdrawal agreement.
Anticipated as they were, the Brexit extension and the general election had limited impact on the UK equity market and the pound. The UK market lagged behind the global trend, partly due to cautious outlook statements from major oil companies. Earnings reports from BP and Royal Dutch Shell, which together represent over 15% of the FTSE 100, exceeded expectations but were accompanied by prudent remarks, causing shares to drop and weighing on the UK market. Similarly, in Europe, the Spanish stock market (IBEX-35) was affected by results from Banco Santander and Deutsche Bank.
In the US, the S&P 500 hit an all-time high due to robust economic data and positive corporate earnings. US GDP grew by 1.9% in the third quarter, surpassing expectations of 1.6%. Consumer spending, supported by the lowest unemployment rate in 50 years, played a pivotal role in this growth. While US unemployment slightly increased to 3.6% in October, non-farm payroll data revealed the addition of 128,000 jobs, beating estimates of 85,000. The rise in unemployment was due to 325,000 people joining the labor force. Earnings reports from US companies were positive, with over three-quarters of them beating analyst expectations.
Regarding central banks, the Bank of Japan kept its policies unchanged, while the US Fed cut interest rates by 0.25% for the third time this year. However, they signaled a pause in further cuts unless there are significant changes in the economic outlook.
Looking ahead, the Bank of England will announce interest rates, the UK general election campaigns will commence, and a new House of Commons speaker will be elected.