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25 October 2019


Are the global equity indices on the verge of breaking higher or are they simply back at the top of their trading range? Should we lighten up on positions here?

What should push us higher, besides optimism on the Brexit deal and US-China trade discussions? Is it investors’ too hawkish stance on markets. Perhaps all of this, but the data are still as mixed as ever. The PMI data in Germany continue to point to weakness and if it wasn’t for better French data, the composite figure for the eurozone would look bleak. That said, the global manufacturing PMI looks to be bottoming out. Since the low of 49.3 in July, we climbed back to 49.7 in September. Japan and Germany seem to be the weak links in global manufacturing. Next up in Germany is this morning’s Ifo.

The fiscal stimulus debate still seems to be raging in Germany. An article in the FT suggests that the founder of the ‘Schulden Bremse’ or the debt break, averting the German budget going into the red, is now hinting at investments to turn the tide.Reform of the current law would permit investments in new technology, climate change projects and infrastructure. Few seem to be convinced, however, that politicians in Berlin will change tack on this matter anytime soon.

From the micro front we’re also getting mixed signals. In the US, Caterpillar refuses to give any outlook for the fourth quarter and 2020, while issuing its third-quarter results, signaling prudence. And Amazon is hinting at not so strong end-of-theyear retail sales. That’s about the US consumer, of course.

Still, at this point, investors do not seem to care. Is that because today 85% of global central banks are easing rates while at the exact same time last year 50% of them were hiking rates? But how far can central banks go and how much structural support will markets get from them?

Meanwhile, the price of gold is trading back at levels above USD 1,500 per ounce. The safe haven indicator getting a new bid might deter some investors and leave them worried. But most of them have been worried for the better part of 2019 already.