Market Update

After a decisive Conservative victory in the UK elections, the British public's message was clear: their vote for Brexit signified a desire for actual Brexit. Prime Minister Boris Johnson secured a mandate to proceed with the process, injecting a sense of certainty into the market. The FTSE closed the week with a 1.1% rally on Friday, and the British pound surged against major currencies, gaining over 1.3% against the US Dollar and nearly 1.4% against the euro at market close. While this provided some economic assurance to the UK market, there remains work to be done regarding Brexit to provide stability to both UK corporations and the pound.
In other global news, a significant development occurred as US President Donald Trump approved a phase one trade deal with China. Although this deal didn't entirely resolve the ongoing trade tensions between the two largest economies, it did postpone the introduction of planned tariffs set for December 15th. These tariffs, targeting pivotal sectors in trade, were averted, providing relief to global markets. Initial details of the agreement involved increased Chinese purchases of US agricultural goods and gradual reductions in existing US tariffs on select Chinese products. More specifics about the deal are expected in the coming weeks, but the sentiment behind it was crucial. Trump's eagerness for trade progress is evident, especially as the campaign for the 2020 US Presidential Elections gains momentum. He aims to showcase trade achievements as a key factor during his election campaign and hopes to avoid a complete breakdown in US and global economic relations. Trump also confirmed the commencement of the next round of trade talks almost immediately.
Additionally, this week featured policy meetings of both the US Federal Reserve (Fed) and the European Central Bank (ECB). Fed Chair Jerome Powell maintained interest rates and emphasized data dependency, hinting at no major policy changes in 2020. In contrast, new ECB President Christine Lagarde underscored the importance of monetary stimulus and suggested a collaboration with fiscal stimulus to advance regional economies. Lagarde urged the press not to overanalyze her statements, but the impact of her words remained uncertain. Both central banks' decisions implied confidence in robust core data, particularly in the US, with the ECB eyeing future fiscal support.
Regarding data releases, UK Industrial Production fell below expectations on Monday, raising curiosity about its progression after the election outcome. European Investor Confidence exceeded expectations significantly at 0.7, instilling optimism for the new year. Chinese inflation surpassed expectations at 4.5% on Tuesday, and the US outperformed inflation forecasts on Wednesday, with CPI at 2.1% year-on-year. Inflation data in France and Germany on Thursday met expectations. Indian inflation data, released on Thursday, beat expectations by 0.14%, standing at 5.54%, and although industrial production declined by 3.8%, it surpassed both previous data and expectations, providing a substantial boost for the emerging economy.
On a different note, Saudi Aramco, the national petroleum and natural gas company in Saudi Arabia, went public this week, reaching a valuation of around $1.7 trillion at its IPO. This valuation catapulted it far ahead of Microsoft and Apple, making it the most valuable company globally. In the subsequent trading days, the company briefly touched a staggering valuation of $2 trillion.