A worrying attack on Saudi Arabia’s oil infrastructure saw the price of oil rise by the most it has done in a single day for 30 years.
Elsewhere, central banks around the world are continuing to do ‘whatever it takes’ to keep their respective regions out of recession. This led to positive returns from the markets for September.
Boris Johnson is someone who won’t be smiling though!
State of play – the main world stock market indexes
| Region | Index | Last Month Performance | Last 12 Months Performance |
|---|---|---|---|
| UK | FTSE All Share | 2.65% | -3.48% |
| US | FTSE USA | 3.06% | 1.71% |
| Europe | FTSE Europe ex UK | 2.81% | -4.83% |
| Japan | FTSE Japan | 8.99% | -3.96% |
| Asia | FTSE Asia Pacific ex Japan | 1.97% | -4.44% |
Data sourced from investing.com and up to 25/09/2019.
What’s been going on?
It’s still not entirely clear who is responsible for the drone attack in Saudi Arabia that disrupted 5% of global oil supply. The US is pointing the finger at Iran.
What is worrying though is how easy it appears for a relatively small scale attack to cause such potential damaging consequences without even needing to go for all out war.
The markets seemed to have shrugged off the effects without much volatility. The US announced it would release some of its oil reserves and Saudi Arabia are confident they can fix the damage relatively quickly.
In the UK the news media was taken up with politicians coming back to parliament at the start of the month. They inflicted a number of defeats on the Prime Minister and then left as parliament was suspended for a new Queen’s speech.
It got worse for Boris Johnson as the Supreme Court ruled that he acted unlawfully in proroguing parliament and parliament was sent back to work the day after to inflict more pain on the government.
In terms of economic data, UK manufacturing is still declining which has been the case for a number of months now. There appears to be a lack of orders from those worried about Brexit.
In better news UK wages are still rising and more importantly faster than inflation.
The Bank of England kept interest rates as they were.
Declining manufacturing is not a problem unique to the UK though, it’s happening all around the world including the US, Europe, Japan and China.
US smaller companies are struggling as the impact of the trade war with China means that materials they import from China are becoming more expensive and hitting their bottom line.
The US also added fewer jobs than expected.
This has all led to the US cutting interest rates again this month which keeps the stock market happy.
The EU not only cut interest rates they also restarted quantitative easing (money printing). Europe is on the brink of recession so needs all the help it can get. As a reminder QE is supposed to lower borrowing costs for governments and businesses and inject more investment into the economy. In theory, creating more jobs and economic activity. The jury is still out on whether this really works without worrying consequences.
Japan has tried everything to get its economy moving but is still can’t create the inflation it wants. Part of the problem is the currency of Japan (the Yen) is still too strong which means their exports are not appealing. The Yen remains strong as it’s seen as a safe asset to hold during uncertain economic times.
More business friendly policies are expected by the Chinese government to help keep growing its economy. It seems the US and China are about to get back around the table and discuss a resolution to the trade war soon which will benefit everybody.
There was also good news in Hong Kong where the government finally agreed to get rid of the extradition legislation which had started so much protest and disruption. This is only one of the five key demands of Hong Kong protestors though and China will not be happy with the unrest so time will tell whether everything will settle down.
A POINT TO NOTE:
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Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
