Donald Trump became the first US President to return to the UK for a second state visit. Served with all of the trimmings, there was also some politics thrown in. Keir Starmer welcomed the President to Chequers for the signing of a ‘Tech Prosperity Deal’, which could potentially bring as much as £150 billion to the UK economy. Many of the more contentious areas were skirted over with the special relationship between the UK and US intact.
Global markets were also in a positive mood with global returns of 1.6% and 1% in sterling and local currency respectively. Whilst relations between the UK and US remained positive, markets diverged with the US hitting new all time highs and the UK falling back a touch.
Chequers was not the sole focus for technology with much of the wider US market performance once again relying on the tech sector. The Magnificent Seven drove returns. Alphabet and Tesla were the standout performers – Alphabet (parent group of Google) moved through the three trillion-dollar mark – only the fourth company ever to do so whilst Elon Musk aided the Tesla share price with a one-billion-dollar purchase!
It was also a big week for central banks. In the US we saw the first cut in interest rates this year – rates now sit in the 4-4.25% range. This was as expected, as was the dissent from newly appointed governor Stephen Miran who argued for a larger half percent cut – no doubt salting his CV to replace Jerome Powell next year.
Closer to home the Bank of England held rates. With a headwind of inflation at 3.8% and wage growth at 4.7% this was not unexpected. However, the vote was split with two members opting for a 0.25% cut, perhaps with an eye on the unemployment rate, which remained at 4.7% although tax records suggested the number of payrolled employees dropped for the seventh month in a row.
The Bank of Japan also announced no change to their interest rate, unlike the US and UK rates in Japan are expected to move upwards, albeit from a lower base. Perhaps of more interest was the announcement that the bank would begin selling its holdings of exchange trade funds and real estate investment trusts. These were originally purchased back in 2010 to help revitalise the economy. With holdings valued at around $700 billion, the current plan could take up to 100 years to complete.
Against the backdrop of central banks, bonds had a relatively poor week with nearly all falling slightly. Unrelated but worthy of mention is the slowing of sales of bonds on the Bank of England’s balance sheet. As in Japan, these were taken on during the financial crisis to stabilise the economy. Sales will reduce from £100 billion to a mere £70 billion.
Looking ahead to next week it is once again all eyes on the US with Jerome Powell speaking on Tuesday along with Manufacturing and Services PMI numbers being announced. Later in the week we have GDP numbers and jobless claims – all of which will undoubtedly be digested by markets.
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