The Weekly Update

Although quite volatile again, the S&P 500 ended last week unchanged from the week before at 2767, US 10-year Treasury yields closed the week at 3.19% (+3bps) and Italian 10-year bonds were slightly stronger by week-end but only after yields touched fresh highs of 3.8% earlier on Friday. The FOMC minutes showed some small changes in terms of overall stance. From a more hawkish tone a wording change from “accommodative” to “restrictive” and speaking of the possibility of raising interest rates above the anticipated “normalization” rate pushed-up average estimates for where the upper bound might be for short-medium-term interest rates. But these comments were tempered with remarks that any rate-hike path is still expected to be “gradual” (which appeared in the text 8 times), stating “members expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.” Also, with Empire Manufacturing and retail sales up on the month the US dollar strengthened. The DXY Index was up 0.5% to 95.7 on the week. Although numerous corporate earnings were better than expected they were overshadowed by geopolitical concerns.

A Brexit deal seems to be either 95% done or 0% done according to differing politicians. According to the FX markets, showing sterling enduring sharp declines once every few days for the past fortnight, money doesn’t seem to believe the first of these accounts of how the negotiations are going. In Europe it became increasingly clear for those obstinate investors in Italy that the EU will reject Rome’s draft budget. The earlier (perhaps technical) bounce in European equities had tapered off by the end of the week. Over in China Q3 GDP and September industrial production slowed as domestic demand waned but retail sales and fixed asset investment improved.

Also last week, the US Department of the Treasury issued its semi-annual report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. In the latest report, the US Treasury named China, Japan, Korea, India, Germany and Switzerland as trading partners whose currency practices require monitoring but refrained from naming any major trading partner as a currency manipulator. The Treasury found that no major trading partner met all 3 of their criteria. Unsurprisingly, despite it only meeting one of the criteria (a significant bilateral trade surplus) the spotlight remained on China. The report noted it ‘constitutes a disproportionate share of the overall U.S. trade deficit’ and ‘As a further measure, this Administration will add and retain on the Monitoring List any major trading partner that accounts for a large and disproportionate share of the overall U.S. trade deficit even if that economy has not met two of the three criteria from the 2015 Act.’

On Monday we have the Chicago Fed National Activity Index; Eurozone PMIs are published on Wednesday; on Thursday we have German IFO, the ECB announce their rate decision and we’ll see if falling US home sales continue for a ninth month (also a number of major corporate earnings releases); on Friday we will see early figures for US Q3 GDP to close out the week.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.