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Signs of stabilisation in manufacturing sector activity raised hopes that the global economic slowdown might be coming to an end. This is the view of Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’.

In the United States, orders for capital goods improved slightly in October although corporate investments have weakened considerably since the beginning of the year. In the eurozone, the manufacturing sector activity indices recovered a little, nonetheless remaining in contraction territory. “In Germany, real gross domestic product growth was positive in the third quarter after the decline recorded over the previous three months”, underlines Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments, “saving the eurozone’s leading economy from falling into recession”.

Japan: strength of domestic consumption is unlikely to persist

In Japan, real GDP grew by 0.1% in the third quarter despite the drop in exports. “However, the strength of domestic consumption is unlikely to persist following the value-added tax hike at the beginning of October”, says the Luxembourgish economist. In China, economic growth continues to slow, with the public authorities’ moderate stimulus measures showing little sign of any significant impact so far.

New ECB President seeking consensus

As Fed Chairman Jerome Powell appears satisfied with the economy’s current trajectory, interest rates could remain unchanged at the FOMC’s next meeting in December after the three cuts in July, September and October. In Europe, the new President of the European Central Bank, Christine Lagarde, is preparing for her first meeting in December. After the discord surrounding the additional quantitative easing measures announced by her predecessor Mario Draghi at the end of his term of office, the primary objective will be to “re-establish consensus within the Governing Council to avoid the eurozone’s highest monetary authority losing credibility”.

Tech stocks posted the best performances in November

In November, expectations of economic acceleration in 2020 and the hope that ‘Phase 1’ of a partial trade deal between the United States and China will be signed soon helped the equity markets continue their upward trend. The leading indexes in developed countries were all up over the month. Just emerging market equities bucked the trend. ”Once again, tech stocks posted the best performances, followed by the healthcare and industrial sectors. In the absence of bond yields easing further, companies in the consumer staples sector barely participated in the recent equity market rally”, concludes Guy Wagner.

 
Guy Wagner
Chief Investment Officer at BLI - Banque de Luxembourg Investments
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