28 October to 3 November: Unambiguously positive macro data in the US

The strength of the US economy shined through the latest set of macro data releases, surprising investors positively. The 3Q19 real GDP growth print was – in our view – significantly stronger than the median market estimate. The latest report showed that the US economy expanded 1.9% in annualised terms. Pessimists would argue that the growth story has only two legs, i.e. strong domestic demand and a supportive Fed, whilst the story is missing its third leg, due to the loss of momentum in manufacturing activity, which is further amplified by the trade tensions between the US and China. We, however, see the glass half full, since the US’s economy is largely domestically focussed, and the labour market remains hot (proven by the stronger-than-expected jobs report on Friday).

Eyes turn to the front of the trade negotiations between the US and China, again. The APEC Summit in Chile has been cancelled due to civil unrest. There was optimism in the market that Presidents Trump and XI would use that meeting to sign an interim ‘Phase One’ deal. Although signing an agreement lacks a venue right now, it does not necessarily mean that a deal will not get signed – especially if there is a credible commitment by both parties. President Trump has already signalled that he is happy to sign the deal wherever. Now, the ball is in the Chinese administration’s court.

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