Gerald Fitzgerald’s Market Review November 12th

LAST WEEK IN 30 SECONDS...

The US midterm elections last week saw Democrats gain the upper hand in the House of Representatives whilst Republicans strengthened grip on control of the Senate. Markets responded favourably following the result, with the S&P500 +2.1% for the week and global markets up +1.4%. With investor risk-on sentiment returning, safe haven assets pared recent gains with gold down -1.7%.

Meanwhile, discussions between the Italian government and the European Commission on a redraft of the Italian budget grow increasingly unlikely with little sign that the coalition government are willing to cede on any of their proposals. Spreads between Italian and German bunds once again widened to the 3% mark following earlier tightening.

THIS WEEK IN 30 SECONDS...

The week ahead sees the release of a number of significant metrics including updated inflation data for the US and Eurozone. Investors will additionally look to US retail sales and industrial production figures towards the end of this week as a guide to the continued
health of the US economy.

The deadline for the resubmission of Italy’s budget to the European Commission is tomorrow, November 13th. With Italy defiant further uncertainty within European markets is anticipated.

CHINA’S PROPERTY HOARDING

House purchases in China have seen a significant shift from those purchasing their first homes to multiple homes. In excess of 2/3rds of housing sales in China are now by those with existing property holdings. However, this has contributed to an increase in China’s property vacancy rate to over 50m empty properties, some 22% of the overall housing stock. Given the impact on China’s GDP, authorities will be keen to avoid a hard landing in the property market. It sounds all too familiar.