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D-PIMS Weekly Market Update - Week of 7th to 13th October 2019

Today’s Monday Update:

Well, the last week was certainly a bit of a roller-coaster week on both Brexit and Trade:

• On Tuesday, there were leaked reports of a conversation between Boris Johnson and Angela Merkel describing her saying that a deal was now ”overwhelmingly unlikely” and that her change of approach (NI needs to stay in the EU Customs Union) had now made a Brexit deal ”essentially impossible”. What followed was a blame game between the UK & the EU. Not surprisingly the Pound fell in value – again.

• On Wednesday, exactly a week since Johnson’s initial bid for a last-minute deal, the EU bluntly told London that it would have to make further significant concessions.

• Thursday was a busy day! First we saw the release of UK GDP figures for the three months to end August come in higher than expected and the previous set of figures to the end of July, were revised upwards. This now makes the previously reported ‘imminent UK recession’ unlikely.

Then Trade talks between US & China resumed for the first time since July! The mood going into them would not have been helped by the US Government this week choosing to blacklist 28 Chinese entities it said were "implicated" in human rights abuses and also imposing additional visa restrictions for Chinese government officials. Without progress, the US was due to increase tariffs on $250bn worth of Chinese goods from 25% to 30% the next Tuesday – 15th Oct.

Boris Johnson met the Irish PM- Leo Varadkar, at an undisclosed location in the North West of England. This was seen as a last-ditch attempt to revive a British proposal for a Brexit deal, that the European Union had said falls far short of what is needed for an orderly divorce. In a joint statement afterwards the two leaders said - ”They agreed that they could see a pathway to a possible deal,” they also said – ”Both continue to believe that a deal is in everybody’s interest”. The Pound took heart and rose.

After the meeting Varadkar told Irish reporters “I think it is possible for us to come to an agreement, to have a treaty agreed, to allow the UK to leave the EU in an orderly fashion and to have that done by the end of October” – maybe there is light at the end of the tunnel!

• Friday (11th Oct) saw Brexit Secretary Stephen Barclay meet Michael Barnier, the EU’s Chief Negotiator. Afterwards, European Council President Donald Tusk said ”a Brexit deal may be possible”. Tusk said he had previously told Johnson that unless a workable solution came from London by Friday Oct. 11th, he would announce that a deal was all but impossible at a summit of all EU leaders the next week - Thursday 17th and Friday 18th . Technical talks continued…..

All the apparent good news gave the Pound the biggest push up in value that has seen in a long time.

What happened over the course of the week was seen as critical, due to the EU Leaders meeting at the European Council summit the next week 17th -18th Oct, which is seen as the final chance to ratify any new EU Brexit agreement.

Markets were also encouraged on Friday when Trump said that U.S.-China trade talks were going well. He also tweeted ”Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!”

• Indeed over the weekend there was a ‘Partial’ trade deal announced. There was a lack of detail and it left a lot of unanswered questions about what would happen around all the issues that were not agreed. However the imminent US tariff hike on Chinese goods was postponed and at least some progress seemed to be made which can only be a good thing!

• German Chancellor Angela Merkel and French President Emmanuel Macron met on Sunday at the Elysee Palace to prepare for upcoming EU Summit (17th to 18th October) where Brexit will top the agenda. If the EU is to make a breakthrough concession, it would require the blessing of the bloc’s two most influential members.

• Overall the week was seen as positive for Global Stockmarkets, but as the Pound rose strongly it meant returns on overseas Markets were down and the calmer mood also saw Bonds pulling back from their recent strong run upwards. Therefore, the D-PIMS Portfolios had a mixed week with some up some down, mainly at the lower risk end due to the Bond pullback after a period of good returns.

The value of investments and the income from them can fall as well as rise and you may not get back the original amount you invested.

Past Performance is no guarantee of, or guide to future returns.

The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.