Latest from Lyxor
18 Nov 2019: What’s going on with the trade deal?
Markets posted mixed returns over the week. The US-China trade negotiations went quiet, leading US officials to deny reports that discussions have hit another impasse. An unravelling of a ‘phase one’ agreement would be painful, particularly if the next planned increased in tariffs on 15 December does indeed take effect. The US administration’s position on trade with the EU is also unclear. More encouragingly, the German economy managed to avoid a recession by expanding 0.1% quarter-on-quarter in Q3, but there was further disappointing data coming out of China, and this was exacerbated by continued unrest in Hong Kong.
Next week, investors will be looking to housing data for some hints about the health of US economic activity, while the University of Michigan consumer sentiment survey will provide further indications of how the consumer sector is holding up as the main engine of US growth. It’s set to be a relatively quiet week on the data front in Europe, although the minutes of the ECB’s October meeting and euro-area PMIs are well worth looking out for. Finally in Asia, Japan’s trade and inflation data will be the main highlight of the week as the figures will show how the economy is holding up after the recent hike in the sales tax.
Latest performance
Source: Lyxor International Asset Management. Figures reported in local currency terms. Past performance is no guide to future returns. Data as at
Our key calls
Week commencing 18/11/2019
Profit from inflation in the US
US headline inflation, as represented by the US Urban Consumer price index, rose by 0.4% month-on-month in October due to higher gasoline and food prices, and inflation-linked bonds have been outperforming US Treasuries since early September. Green shoots of economic recovery and easing trade tensions should support inflation expectations in the months ahead, which means it could still be a good time to invest in inflation-linked securities.
Things looking up for European equities
A modest economic recovery in Europe in the coming quarters, supported by resilience in private consumption and the services sector along with receding political uncertainty, now seems credible. We therefore expect further upside for European equities in the near term.
Japanese equities a good long-term call
The Japanese economy remains weak. However, a manageable VAT hike, lower inventories and improving external demand (provided a trade truce materialises) should support activity. In our view, a number of factors, including additional fiscal support, their lower correlation with the yen than in the past, cheap valuations and the market’s diversification benefits, are supportive of a long-term allocation to Japanese equities.
Things we are watching out for
The Main Event
Lyxor strategists on the key moments in the week ahead
08
July
Coming soon...
Other major events
4 more things to put in the diary
10 Nov
19
Nov
05
Dec
OPEC meeting
11
Dec
FOMC meeting (with forecasts)
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