The value of investments and any income from them can fall and you may get back less than you invested.

US raises interest rates as economy powers ahead, while UK manufacturing growth slows

The US Federal Reserve raised interest rates again this week. The hike means that the world’s largest economy is the first in the developed world to “normalise” its interest rates to such an extent that it has officially removed its “easy money” policy, introduced during the financial crisis. The move takes the Fed funds rate to between 2%-2.3% and was accompanied by a forecast that suggests a further three rate rises in 2019 and one in 2020, taking rates to around 3.4%. 

Officials say the economy is performing strongly, and data shows that the economy grew at an annual rate of 4% in the second quarter, while unemployment remained at a near record low of 4%. Fed Chair Jerome Powell said that he was hearing a “chorus” of concerns about the trade tariffs but said the impact was small and that he “didn’t see it in the numbers”.

UK consumer confidence dropped in September amid Brexit fears, according to a survey released on Friday by GfK. It showed that sentiment fell to -9 in September from -7 in August. The outlook for household personal finances also weakened from +8 last month to +5 in September. If the widely respected survey continues to report falling sentiment about household finances it could herald a slowdown in consumer spending ahead of the Brexit deadline in March 2019.

Meanwhile, the UK manufacturing sector continues to suffer and orders have fallen to a four-month low, according to data released by the Confederation of British Industry (CBI) on Monday. It said manufacturing orders fell to -1 in the three months to September from +7 the month before.

Another survey released by BDO, the consultancy, showed UK export growth was the worst among the largest five EU economies in the last three months. It follows a PMI survey by IHS Markit earlier in September that showed manufacturing activity at a two-year low.

Sam Tombs at Pantheon Macroeconomics said that the stimulus to growth in production from sterling’s depreciation is fading.

"Admittedly, growth in total orders is weakening from a high rate," he said, with the overall balance still is consistent with year-over-year growth in manufacturing output of about 2%. But the official manufacturing data has been much weaker than the surveys this year, with output falling by 0.1% quarter-on-quarter in Q1 and by a further 0.9% in Q2.” 

Labour promised to nationalise water companies at its annual conference on Tuesday and said the company bosses would have to reapply for their jobs at a maximum of 20 times the salary of the lowest paid workers. John McDonnell, shadow chancellor, said that he also wanted to put workers on the boards of big firms and give workers equity in their companies. 

Click here to read this week's Market Roundup and Company Focus

Important Notes:

Main source of information: Company Report and Accounts, Bloomberg

The value of investments and any income from them can fall and you may get back less than you invested. Past performance is not a guide to future performance and performance is shown before charges, which would reduce the illustrated performance. No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. Any tax advantages or allowances mentioned are based on personal circumstances and current legislation which are subject to change. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

Brewin Dolphin Ltd, a member of the London Stock Exchange, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Smithfield Street London EC1A 9BD. Registered in England and Wales no 215876.

Share