Those looking forward to a quiet December as companies and investors wound down toward the year end were to be sorely disappointed as 2019 drew to a close.
The calling of the UK general election had already set the stage for a busy month but the continued saga of the US/China trade war also helped add an edge of uncertainty to the final month of the year. In the UK the polls had long indicated a win for the ruling Conservative Party but Boris Johnson’s overwhelming majority came as something of a surprise to all but the most bullish of his supporters. Both UK domestic stocks and European equities re-acted favourably to the event on the premise that it added more certainty to the Brexit outcome. Unfortunately, the certainty is only over the UK’s leaving the EU as the threat of a no deal Brexit remains following the end of the transition period. This realisation likely tempered the market’s enthusiasm. Further certainty over the US/China trade talks was also achieved in December as, not only was stage one agreed upon, but China also announced cuts in import duties for certain products starting 1st January 2020. Although out-with the US agreement, this clearly signals a willingness on the part of the Chinese.
Unfortunately, the Americans were less magnanimous with other trading partners with France the next focus for retaliation as the ongoing argument over a digital tax prompted President Trump to threaten tariffs on a host of French products including cheese, sparkling wine and handbags. In Europe the economic picture remained far from rosy with a continuation of the trend seen throughout 2019 where service strength has offset weakness in manufacturing. No more so than in Germany where German factory orders for November were down close to 5% while the services PMI continued to signal expansion.