Sarasin Asset Management website uses cookies. A cookie is a small data file placed on your computer which captures information about your choices which allows us to improve your experience of the website, for example, by remembering your country of residence.  By continuing to access this website, you agree to be bound by our Cookie Policy.  You can accept and/or block cookies at any time by changing your browser settings.

Market news - 22 February 2019

by  Niloofar Rafiei  |  22 Feb 2019

US

  • The minutes of the Fed’s late-January meeting were published this week and evidenced a slightly more hawkish tone than the post-meeting statement and the press conference. On balance, further hikes are a somewhat higher probability than cuts (but in practice it is unlikely to be more than one or two over the next twelve months).
  • It is clear that the discussion on ending balance sheet run-off is very rapidly coming into focus – that process will very likely be concluded in the second half of this year.
  • A “technical note” prepared by Fed staff is likely to be published alongside the post-meeting statement at the next meeting in mid-March, discussing the modalities of ending balance sheet run-off and the optimal size of the Fed balance sheet size (or more precisely, the optimal amount of reserves), though this is likely to be somewhat flexible and avoiding pinpointing a precise dollar amount. 

Eurozone

  • The eurozone composite PMI rose 0.4 points in February to 51.4 (consensus: 51.1). The manufacturing PMI fell into contractionary territory at 49.2, with new orders falling at the fastest pace in almost 6 years. On the other hand, services came in slightly stronger than expected at 52.3 (consensus: 51.3). Germany saw further divergence in sector performance – whilst service PMIs were stronger than expected (55.1), manufacturing PMIs continue to indicate contraction (47.6). France saw a marked improvement in survey results, although both manufacturing and service PMIs still indicate contraction, leaving the composite at 49.9 (consensus: 48.9).
  • A similar pattern was seen in US PMIs, with disappointing manufacturing (53.7 vs 54.8 expected) being offset by strong services (56.2   vs 54.3 expected).

UK

  • UK labour market strength endures regardless of Brexit uncertainty, with 167,000 more people employed between October and December than were in the previous quarter, unemployment at 4.0% and wage gains registering a healthy 3.4% yoy.

Rest of World

  • Equity market gains continued this week with the strongest performance in Asia, despite continued weak industrial activity, trade and business survey data; further positive newsflow regarding the progress of Sino-US trade negotiations re-enforcing market expectations for a rebound later in the year. Commodities extended their year-to-date gains, particularly industrial metals thanks to the anticipated rebound in Chinese demand.