29 May 2019

It’s (still) all about trade

With a short week of trading for both us and the Americans and little of note on either the results or the economic front, is it any wonder markets have been relatively quiet.

It doesn’t help that half term will be keeping some professional investors away from their desks. The results of the European elections had little impact on shares, although the likely outcome was well signalled in advance. Neither of the main two political parties can take any comfort from electorate’s behaviour, but the clear extent of tactical voting also means that those parties that benefited should not read too much into these results.

Unsurprisingly the pound did not fare too well, though it was against the dollar that most damage was done. The odds do appear to have shortened on a no-deal Brexit taking place, but the results in Europe provided little comfort for many of the main parties there. As it happens, the outcome of this election here, which was never meant to take place, simply served to underscore just how divided we are as a nation, with the votes cast for those parties committed to leaving and those wishing to reverse the result of the referendum three years ago pretty much cancelling each other out.

It remains the trade talks between China and the US that dominate sentiment globally. They continue, but with little apparent sign of an agreement being reached, while the arguments over Huawei appear to be making matters worse. The fact that both participants are still talking is something of a plus. And with Japan rolling out the red carpet for President Trump it is clear that America has something going for it. Still, it would be nice to consign this particular distraction to history as it retains the ability to send shockwaves through markets.

As I write this June is nearly upon us, the last month in the second quarter of this year. Domestic economic activity was surprisingly buoyant in the first quarter, helped by businesses preparing for our departure from the European Union by stockpiling supplies. Well, we didn’t leave and there will be no such boost during the second quarter. Economic data will be worth watching as we move into high summer, though doubtless attention will be turning to who replaces Theresa May as leader of the Conservative Party and thus becomes Prime Minister. It seems that uncertainties on several fronts are set to continue.

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