Above page content

    Site map  Cookie policy


Last Week in the City: Trade talk hopes boost markets

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (2 to 6 September, 2019).

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (2 to 6 September, 2019).
Garry white employee

Garry White

in Features


Trade talks between Beijing and Washington will resume in October, with the news lifting global stock markets this week. This helped ease some concerns over the state of global factories, as some grim manufacturing data was unveiled from around the world.

It was a bad week for UK Prime Minister Boris Johnson, who lost a series of votes in parliament and it looks like his plans to exit the European Union by 31 October will not be achieved. It is possible that an election will be called soon.

The FTSE 100 rose 0.8% over the week by mid-session on Friday and the FTSE 250 was up 1.2%.

Interest rates are very low or even negative in most of the advanced world, leaving savers who want a decent return struggling to find much income from a savings account or deposit. John Redwood looks at the issue here.


The pound bounced to a five-week high as it looks likely that the Brexit deadline of October 31 will now be delayed and a no-deal Brexit is less likely. A fraught week in parliament saw Boris Johnson’s first week as prime minister in the house lose a series of votes, including one that blocked an exit without a deal. It also saw more than 21 MPs – some longstanding – expelled from the Conservative Party for voting against the government. An election is now likely, but the agreement of two-thirds of MPs is needed in the house under the Fixed-Term Parliament Act. Prime Minister Johnson wants an election before the date to leave, but Labour appears to want to wait until November for an election after a delay has been agreed by the EU.

Chancellor Sajid Javid said the UK had "turned the page on austerity" as it set out plans to raise spending across all departments. Mr Javid outlined £13.8bn of investment in areas including health, education and the police in what he said was the fastest increase in spending for 15 years. He also committed an extra £2bn for no-deal Brexit planning, taking the total for preparations to more than £8.3bn since the 2016 referendum.

Analysts at Citibank and Deutsche Bank said that a Jeremy Corbyn premiership was preferable to a no-deal Brexit. The investment banks’ analysts  did not favour the opposition leader’s plans for “higher taxes, tighter labour laws, spending increases and the nationalisation of network industries”, but argued that this may cause less harm than leaving the EU without a deal.

Trade war

The US and China agreed to return to the negotiating table in Washington to discuss trade. It will be the first face-to-face meeting between the two sides since the trade war's rapid escalation in recent weeks. The face-to-face discussions will resume in "early October," according to a statement released in China on Thursday morning by the country's Commerce Ministry. Chinese authorities added that China Vice Premier and chief trade negotiator Liu He has spoken with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin over the phone about the talks.

The US president appears to be getting rattled by the economic fallout from the trade war. Donald Trump took to his Twitter account to warn Beijing that any delay in resolving the trade war will make a deal tougher. “Think what happens to China when I win. Deal would get much tougher! In the meantime, China’s supply chain will crumble and businesses, jobs and money will be gone!"

Chinese President Xi Jinping urges the ruling Communist Party to brace for a “long term” struggle against a variety of threats, including a more confrontational US.

Huawei accused the US government of "using every tool at its disposal" to disrupt its business. In a press release on Tuesday, the Chinese tech giant said the US is unlawfully detaining its staff and launched cyber-attacks to infiltrate its internal information systems. It also claimed that FBI agents were being sent to the homes of its employees to pressure them to collect information on the company.

The smaller trade war between Japan and South Korea is getting serious. Japanese car sales in South Korea slumped in August by 57% year-on-year as consumers continued to boycott goods made in Japan. Toyota's South Korean sales fell 59%, while Honda's sales plunged 81%. Also, South Korean imports of beer from Japan plunged 97% in August from a year earlier. The situation between the two countries has deteriorated after South Korea's top court ruled that its citizens can sue Japanese companies for using forced Korean labour during World War II.

Garry White argues that China is winning the trade war here.


US companies' hiring stumbled in August, boosting the chances of a second straight Federal Reserve interest-rate cut. Total nonfarm payrolls climbed 130,000, which was below boosted by 25,000 temporary government workers to prepare for the 2020 Census count. This was lower than expectations of 160,000.News flow from the global manufacturing sector made grim reading this week, as the trade war and an easing of growth hit the sector:

  • The US manufacturing sector shrank for the first time in three years in August, as trade tensions and a global economic slowdown weighed on factory output. The purchasing managers’ index (PMI) from the Institute for Supply Management (ISM) fell to 49.1 last month, its lowest score since the start of 2016. A figure below 50 indicates contraction. The reading was considerably below economists’ forecasts of 51.1.
  • UK manufacturing output slumped to a seven-year low last month as uncertainty over Brexit and a global economic downturn hurt demand. The IHS Markit/CIPS purchasing managers index (PMI) fell to 47.4 in August from 48 in July. This was its fourth consecutive month of contraction. Only German manufacturing fared worse among the national PMIs produced for Europe by data company IHS Markit.
  • German factory orders fell in July. Demand fell 2.7% from June, as orders from outside the euro region plunged. The figure was worse than expected.
  • Japan’s August manufacturing PMI fell to 49.6 due to weak demand from China.
  • South Korea’s manufacturing PMI last month managed to rise to 49 from 47.3, but remained in contraction territory.
  • Taiwan’s manufacturing PMI for August fell to 47.9 from 48.1.
  • John Redwood looks at reasons for the weak manufacturing data here

The UK’s services PMI figures were also a concern, with growth in the UK's largest sector slowing to a crawl in August.  According to data from IHS Markit/CIPS, the Services PMI slipped to 50.6 from 51.4 in July. This raised concerns that the UK was in danger of slipping into a recession.

However, US services PMI was more upbeat and suggested the US economy is performing reasonably well. The Institute for Supply Management said its non-manufacturing activity index increased to a reading of 56.4 in August from 53.7 in July.

Christine Lagarde, president-elect of the European Central Bank, called on European governments to co-operate more closely on fiscal policy to stimulate the stuttering Eurozone economy. “Central banks are not the only game in town,” she said. 

China hinted at more stimulus ahead as it attempts to boost lending. China will implement both broad and targeted cuts in the reserve requirement ratio (RRR) for banks “in a timely manner,” China’s cabinet said.


Hong Kong chief executive Carrie Lam said she would formally withdraw an extradition bill on Wednesday that has sparked month of protests and plunged the territory into its biggest political crisis in decades. The Hang Seng rallied, as did UK equities with exposure to the former British colony including insurer Prudential, Standard Chartered bank and luxury goods retailer Burberry. However, credit rating agency Fitch downgraded the city’s rating one notch from AA+ to AA and the city’s outlook from stable to negative, which will have implications for the borrowing costs of companies and the government.

The political situation improved in Italy. Italy's Prime Minister Giuseppe Conte unveiled his new cabinet on Wednesday, uniting two rival political parties in an unlikely coalition between the anti-establishment Five Star Movement (M5S) and the centre-left Democratic Party, shutting out the right-wing League Party and its leader, Matteo Salvini.

India and Russia signed a range of energy, defence and agricultural supply deals, as Moscow tries to deepen its links with New Delhi. Russian leader Vladimir Putin said the two countries were preparing a ten-year military-technical co-operation programme.


WeWork’s parent company We Company is considering a dramatic reduction in its valuation as it aims to go public while facing widespread scepticism over its business model and corporate governance, reports suggested. We Company is considering putting a price tag on its IPO that would value it somewhere in the $20bn to $30bn range, potentially at the low end. This would be less than half of the $47bn valuation in its last private fundraising.

Saudi Arabia named Yasir al-Rumayyan, head of the Kingdom’s sovereign wealth fund PIF, as chairman of Aramco, replacing Energy Minister Khalid al-Falih, as the state oil giant prepares to go public. Mr al-Rumayyan is an ally of the country’s de facto ruler Crown Prince Mohammed bin Salman. The move diminishes the sprawling authority of Mr Falih, who retains control of the energy portfolio. Mr Falih had overseen more than half the Saudi economy through a super-ministry, which was created in 2016 to help streamline new reforms.

Sweden’s EQT Partners confirmed plans to list in Stockholm, as the private-equity investor, looks to expand globally. The company is believed to be targeting a valuation of about €4bn. 

Three of Wall Street's top-performing IPO stocks in 2019 tumbled after the companies' quarterly results failed to justify their high valuations:

  • The IPO of US-listed software group Slack Technologies has been relatively unsuccessful so far. Its shares plunged this week after its first earnings report as a listed company disappointed. Second-quarter results exceeded Wall Street estimates but management forecast a slightly larger-than-expected loss for its current quarter, renewing concerns about its road to profitability and revenue growth.
  • Cyber-security group Crowdstrike fell almost 10% despite reporting better-than-expected results, as it issued a less upbeat assessment of its prospects than hoped.
  • Business software group Medallia tumbled after its results, although they had rallied before the announcement.

FTSE reshuffle

This week marked the end of an era after Marks & Spencer shares were demoted from the FTSE 100 after being in the index since its inception in 1984. There are now just 27 of the original constituents left. Also demoted to the FTSE 250 were insurer Direct Line Group and troubled software group Micro Focus. Promoted to the blue chip index are Hikma Pharmaceuticals, Meggitt and Polymetal International.

Other shares entering the FTSE 250 are: Airtel Africa, Finablr, Foresight Solar Fund, Sirius Real Estate, Trainline and Watches of Switzerland Group.

Other shares exiting the FTSE 250: Amigo Holdings, Funding Circle Holdings, Intu Properties, Metro Bank, Ted Baker and Woodford Patient Capital Trust.

Profit warnings

Shares in Halfords fell after management warned that its summer sales were weaker than hoped after the bicycle and car maintenance retailer suffered from poor weather and a lack of consumer confidence. As a result it reduced its profit guidance for the second time this year.  The company said it expects “political and economic uncertainty” to hit customers’ spending habits for the rest of the year.

Digital inkjet technology developer Xaar said that full-year trading looked set to be weaker than initially expected. Management revised its expectations as a result of lower sales volumes of Xaar 1201 and Xaar 2001 printheads, slower than expected new printer installs by original equipment manufacturers and credit and sales channel issues.

Coffee behemoth Starbucks released a weaker-than-expected forecast for its 2020 earnings. Starbucks said that it expects fiscal 2020 earnings per share to be below its “ongoing growth model of 10%.”

US beef and poultry producer Tyson Foods cut its full-year earnings forecasts, citing the impact of a recent fire at a key factory, as well as commodity market volatility.


Shares in global chip makers including Micron, Broadcom and Texas Instruments rallied after JP Morgan said it expected to see a rebound in the second half of the year.

Alphabet’s Google faces another investigation into the search giant's dominance after a significant number of US states joined forces to investigate whether the company has behaved anti-competitively. More than half of the US attorney generals, lawyers that represent each state, are expected to be involved in the investigation, which will be announced in Washington on 9 September, according to the Washington Post. The company also paid $170m to settle allegations by the Federal Trade Commission and the New York Attorney General that it earned millions for illegally collecting personal information from children without their parents’ consent via its YouTube video site. It was also revealed that an Irish data regulator is investigating whether Google secretly uses hidden web pages to track and feed its users’ personal data to advertisers, in breach of EU privacy regulations.

Apple will launch a lower price iPhone in China in an attempt to recover some of the ground it has lost to Huawei as Chinese consumers switch to Chinese made products in “patriotic consumption” as a response to Donald Trump’s trade war. The new, cheaper iPhone would be the first low-cost model from Apple since the iPhone SE, which launched in 2016 with a starting price of $399, according to the Nikkei Asian Review.


Brent crude prices rose 0.8% over the week to trade at about $60.80 a barrel on trade war resolution hopes.

Opec’s crude production rose in August, the first increase since the group and its allies started a new round of output cutbacks at the start of the year to shore up a weak global market. Nigeria and Saudi Arabia led the boost, which collectively increased by 200,000 barrels a day to 29.99 million a day, according to a Bloomberg survey.

The trend for disinvestment in oil producers continued. A $20 billion fund in Denmark, MP Pension, is selling its stakes in the 10 biggest oil companies after deciding they haven’t done enough to meet climate goals set out in the Paris accord. The divestment, which represents a total of $95m in equities, means MP Pension will no longer hold shares in ExxonMobil, BP, Chevron, PetroChina, Rosneft, Royal Dutch Shell, Sinopec, Total, Petrobras or Equinor.

Mining & commodities

The copper price hit a two-year low this week. The price was hit by the unexpected contraction of US manufacturing, as copper is regarded as an economically-sensitive metal because of its wide range of uses in industry and construction.  

The nickel price hit a five year high and may go higher after the Indonesian government announced it would ban exports of nickel ore from January 1, 2020. The move by the Indonesian government comes two years earlier than expected. The metal is commonly used to make rechargeable batteries, stainless steel, and corrosion-resistant alloys.


Royal Bank of Scotland warned about an acceleration of payment protection insurance (PPI) claims in the run up to the August deadline. As a result, management expect to take an additional charge of between £600m and £900m.

News of an accelerated level of claims hit challenger bank CYBG hard. The owner of Clydesdale Bank, Yorkshire Bank and Virgin Money, said it expected to increase its provisions for legacy PPI costs by £300-£450m following a large volume of complaints in the run-up to the deadline on 29 August.

Shares in Just Group plunged after the life insurer revealed profit fell more than a quarter in the first half of the year. The company suffered a hit after new rules from the Prudential Regulation Authority, which require more capital behind lifetime mortgages, one of its key products.

Tesco agreed to sell its residential mortgage portfolio to Lloyds Banking Group at a 2.5% premium to its book value.


It’s not all bad news from Britain’s retailers. Online retailer Boohoo said trading in the first half was "ahead of expectations with strong revenue growth driving operating leverage across key brands". Results for the current financial year will therefore be ahead of previous guidance given to the market, the Aim-listed company said. This is sharp contrast to rival Asos, which issued its second profit warning in seven months in July.

Furnishing group Dunelm also reported a 23% jump in its annual pre-tax profits. Management said sales rose in June due to a rise in online spending, as well as wet weather driving consumers to visit its out-of-town stores. However, it outlook statement was cautious.

Dixons Carphone reported another big fall in mobile phone sales in its latest quarter, though it maintained its financial guidance for the full 2019-20 year and said its turnaround was on track. Like-for-like sales in its UK & Ireland mobile phones division fell 10% in the first quarter, having fallen 4% in the last financial year.


The Restaurant Group recorded a loss for the first six months of 2019 following its controversial £559m takeover of Wagamama. As a result, it will close at least 88 of its Frankie & Benny’s and Chiquito branches over the next six years, and nearly 100 more longer term after it tumbled to a £79m first-half loss.

Just Eat’s takeover by rival Dutch group Takeaway.com is under pressure after Eminence Capital, a top ten shareholder, said it would vote against the deal, which it regards as grossly undervaluing the business. 

Property & construction

Barratt Developments defied the tough housing market and posted higher full-year profit. However, subdued guidance from management caused the shares to move lower. 

House builder Berkeley Group enjoyed a period of “robust” market conditions in London and the south east of England, despite a weak sector backdrop driven by Brexit uncertainty, management said. Forward sales remained above £1.8bn and set a pre-tax profit target of £3.3bn for the next six years. Profit should be between £500m and £700m per year over the period, it said.

Plumbing supplier Ferguson will spin off its UK division Wolseley and appoint a new chief executive. The FTSE 100 group, which makes most of its sales in the US, will hive off Wolseley as a new company listed in the FTSE 250 with its own board at an estimated value of £600m. The remaining US business will stay listed on the FTSE 100. The move could open the door to a transfer of its listing to the US, the first FTSE 100 firm to do so since Invesco in 2007.


British car sales dropped by an annual 1.6% in August, as demand for diesel models continued to fall. However, there was a 377.5% increase in registrations of battery electric vehicles, according to the Society of Motor Manufacturers and Traders.

Elon Musk’s charm offensive in China appears to have won Tesla a tax break. Currently, the sale of each of the company’s electric vehicles in China is subject to levy of 10% as purchase tax, but this will now be scrapped.

Nissan boss Hiroto Saikawa accepted he was overpaid as part of a company compensation scheme, but denied any wrongdoing. The chief executive of the Japanese carmaker is accused of receiving hundreds of thousands of dollars worth of extra stock option payments in 2013. He will return the money he had wrongly received.

Airlines & travel

Europe's aviation safety regulator will not accept a US verdict on whether Boeing's 737 Max is safe. Instead, the European Aviation Safety Agency will run its own tests on the plane before approving a return to commercial flights. The 737 Max has been grounded since March after two fatal crashes.

Norwegian Air said it no longer expects Boeing's 737 Max jet, which has been grounded since March following two deadly crashes, to return to the skies in 2019.

Transport firm Go-Ahead Group reported lower annual pre-tax profit as earnings at its rail division halved, hit by the loss of the London Midland franchise.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Get in touch

Find out more

Our focus on clients has endured since the foundation of Charles Stanley in 1792 and has helped make us one of the UK's leading wealth management firms. Your interests give shape to everything we do.

Please call us to talk about your circumstances or complete the enquiry form.

020 3797 1783

Make an enquiry

If you have some questions we'd be happy to help.

Get in touch

Coronavirus (COVID-19)

Our latest information

Stay updated

Subscribe to our weekly email newsletter.

Subscribe here

Local Office

Your local office

Your local Charles Stanley office can help advise you on a wide range of investment management services.

Select an office


Newsletter banner signup