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UK Weekly Commentary

BlackRock |17-Feb-2020

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UK weekly commentary from BlackRock covering week highlights, what we’re thinking about the markets and what your clients may be asking this week.

Week past - highlights Week ahead – highlights

 


What we think

Rick Rieder, Chief Investment Officer of Global Fixed Income, on what the US payroll report says about the economy

“There are certain payroll reports where we might think about repositioning portfolios, but this is one isn’t one of them. There are other things in the world that are more important. What we need to know is whether we are continuing the current growth path. In that respect, these numbers are impressive.”

“The Federal Reserve can, to some extent, sit back and put its feet up. There’s nothing to do from the central bank’s perspective. The US economy is operating extremely well and is in good shape. It is a notable contrast to the German data that also emerged this week, which saw the greatest rate of descent in their economy since 2009.”

Week past

British Retail Consortium – There was scant evidence of the so-called ‘Boris bounce’ in the British Retail Consortium’s retail sales figures for January. Total sales rose 0.4%, but this was driven by retailers adding space.1

UK economic data – The UK economy saw no growth in the final three months of 2019, even though more recent surveys have suggested an improvement in economic conditions. Office for National Statistics (ONS) figures for the fourth quarter showed manufacturing contracted for the third quarter in a row and the service sector also slowed. The economy grew by 1.4% overall in 2019.2

US Institute for Supply Management (ISM) non-manufacturing PMI (January) – The ISM index rose to 55.5 in January, higher than expected, reflecting a more optimistic outlook for manufacturing after the US/China trade deal. It was the highest level since August.3

US initial jobless claims - The number of Americans claiming unemployment benefit dropped to a nine-month low, with initial claims dropping to 202,000. This continues to be a strong support for the US economy.4

Coronavirus – The virus continued to spread across the world, with more than 40,000 people infected in China alone and cases reported in many other countries. It continues to hit Chinese stock markets, the travel sector and energy funds.5

1. British retailers yet to benefit from 'Boris bounce', says BRC, The Guardian, February 2020
2. UK economy saw zero growth at the end of 2019, BBC, February 2020
3. US services sector growth picks up in January, CNBC, February 2020
4. US weekly jobless claims drop to a 9-month low, CNBC, February 2020
5. Coronavirus mapped: the latest figures as the outbreak spreads, Financial Times, February 2020

Week ahead

US inflation (January) – US consumer prices are slated to rise 2.4% year on year and 0.1% month on month, while ‘core’ inflation is due to rise 2.2% year on year and 0.2% month on month.

Eurozone Gross Domestic Product (GDP) (Q4, preliminary) – Growth continues to be sluggish across the Eurozone, in spite of some revival in the German economy. Year on year growth is expected to be 1%, while quarter on quarter growth is expected to have slowed to 0.1%.

US retail sales (January) – The US consumer continues to be the engine of the economy, as employment and wages grow. Retail sales are expected to rise 0.3% month on month.

UK wages and unemployment – UK jobs growth and wages have continued to defy a weakening economy. Economists are expecting wage growth to continue to outpace inflation.7

6. IG Index, week ahead, January 2020
7. FX Street, Economic Calendar, January 2020

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The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

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