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Market news - 1 March 2019

by  Niloofar Rafiei  |  01 Mar 2019


  • US GDP slowed to 2.6% (quarter on quarter, annualised) in Q4 from 3.4% quarter on quarter in Q3; however, this was well-ahead of the 2.2% consensus expectation. The upside surprise came from unexpected strength in inventory accumulation (which will hence be unwound in coming quarters) and exports (also unlikely to sustain 4Q18’s growth rate).
  • Residential investment and government spending were soft. Investment in non-residential structures was weak, but other types of business investment grew strongly. Household consumption was strong in the early part of the quarter but fell off in December.
  • February US manufacturing ISM was a bit disappointing although still comfortably in expansionary territory at 54.2.
  • US equities were flat, whilst notable strength was observed in continental Europe, particularly bank stocks, and China A-Shares, i.e. precisely those sectors which had the most torrid 2018.


  • Chinese manufacturing PMIs remained in sub-50 contractionary territory in February; however, the private Caixin measure showed an unexpected gain at 49.9 vs 48.5 expected and 48.3 previous, buoying hopes for a stimulus-led in the coming months. The official government services PMI read 53.6 in February (January: 53.9), edging down slightly due to weakening domestic demand, but showing expansion in new export orders and employment growth.
  • Economic data in China’s major trading partners are not yet showing any sign of relief, typified by Japanese industrial production which fell in January (consensus: -2.5%, December: -0.1%). Exports by volume fell -5.3% month on month.


  • Whilst we try to avoid reporting the interminable Brexit headlines every week, a few points of note from the past few days: Jacob Rees-Mogg, the head of the leading Eurosceptic faction of Conservative MPs, softened his opposition to Theresa May’s Brexit deal. Rees-Mogg conceded that the Irish backstop could be scrapped as a condition for his support for the deal, in an effort to enable some progress before the UK leaves the EU on 29 March.
  • Sterling  rallied sharply and even gilts, which have hitherto been relatively insensitive to positive Brexit developments, sold off ~15bp over the week (helped admittedly developments in Europe (strong equity market performance) and the US (robust data). Bund and Treasury were ~10bp higher on the week.