P1 Weekly Market Update

  • 0
  • January 29, 2019

China Growth Slows

In one of the greatest feats of modern statistics, Chinese officials were able to release GDP growth figures for 2018 only weeks after the year-end. Unsurprisingly, the data showed that the economy met expectations in the final quarter, leaving full-year growth at 6.6%. While this was the authorities’ target rate of growth, it still marks the slowest pace in 28 years, a trend that is widely expected to continue. International observers have long attempted to estimate the real economic growth of the Chinese economy using export data, electricity consumption and even satellite images of factories. By these factors, it is suggested that GDP growth was weaker than reported in the final quarter. The ambiguity of data coming out of the world’s second-largest economy makes it difficult for investors to anticipate changes and is likely to contribute to increased volatility as more information gradually presents itself over the coming months.

UK Employment Surges

UK employment increased by 141,000 in the three months to November, to a record high of 32.54m. However, the increase in the participation rate meant that the headline unemployment rate remained unchanged at 4.0%. Continued falls in the rate of part-time employment and increases in full-time employment also pointed to a tightening labour market. This appears to have fed into wages, which increased by 3.4% over the year to November. Encouragingly, the falling rate of inflation has also contributed to accelerating real wage growth, which ran at 1.2% over the same period, which has not been higher since November 2016. Higher take-home pay should give more flexibility to consumers who may use the surplus to pay down debts during this period of political uncertainty; however, it should ultimately lead to higher consumption in the medium term.

Sterling Rally

The Pound Sterling rallied 2.5% against the Dollar throughout last week, rising every trading day. Investors have been looking for signs that there is an increasing consensus in Westminster. Furthermore, there are a growing number of commentators who are suggesting that the Pound is undervalued on a fundamental basis and that if there is a well-received resolution to the Brexit process, there is scope for a significant recovery in the currency. Some banks have predicted that the Pound may trade in excess of $1.50 by the end of the year, representing a rise of over 13%. A stronger currency would lead to lower rates of inflation, although it would also weaken the UK competitiveness making goods and services more expensive to international buyers. Nevertheless, the removal of the significant political uncertainty is likely to more than offset any negatives. 

Market Data

IndexOpenCloseChange% Change
FTSE 10069686809-159-2.3%
S&P 50026702664-6-0.2%
Cac 4048754925501.0%
Nikkei 22520666207731070.5%
UK 10 Year Gilt Yield1.311.3100.0%