Central banks were active on both sides of the Atlantic in September 2019. Despite commentary in the previous month suggesting no further cuts were necessary for the remainder of 2019 the US Federal reserve acted again during the month hopefully as a reaction to a deterioration in the macro economic data rather than the goading of an ever-vocal President. In Europe the ECB made further strident measures to support the ailing Eurozone economy where GDP growth prospects remained anaemic at best. The focus was on the banks with a range of measures to support liquidity as well as the announcement of further asset purchases. The amount involved at €20billion per month was relatively modest but the open-ended duration was viewed positively by observers. This was Mario Draghi’s final act as ECB president and it remains to be seen if his successor Christine Lagarde will follow a similar path.
Such moves by the authorities only serve to highlight the perilous state of many of the world’s economies not least Europe’s largest, Germany. Here talk has now surfaced of potential budget stimulus measures prompted by what can only be described as woeful manufacturing data with PMI’s now having indicated a decline for the past 7 months. Although faring better, the services sector is now also showing signs of weakness, making any government action all the more appropriate. Brexit news continued unabated with Boris Johnson’s suspending of Parliament ruled as unlawful amid the Prime Minister calling for a General Election. Neither events appeared to move the situation any further forward with a stale mate remaining while further attempts are made for a new deal while the 31st October deadline looms ever closer. The US/China trade talks looked similarly moribund as both players waited for talks scheduled for October. Italy finally saw some reasons for hope as Prime Minister Giuseppe Conte manged to cobble together a coalition with the 5 Star Movement heading off the threat posed by Eurosceptic Matteo Salvini. The result is an Italian Government 10-year yield now below 1.00% something unthinkable only 3 months ago.