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Signs of stabilisation in the manufacturing sector and a potential trade deal between the United States and China boosted hopes for an end to the global economic slowdown.

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, manufacturing activity remains under pressure while services are continuing to expand, albeit at a slower pace”, says Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments. “The brighter picture is due to recovery in the construction sector, with housing starts up by more than 13% year-on-year as a result of the fall in interest rates.”

Manufacturing sector activity indices have stabilised in the eurozone

In the eurozone, manufacturing sector activity indices have stabilised, nonetheless remaining in contraction territory. “As in the United States, services activities are proving more resilient and enabling the economy to continue its moderate growth phase.” In Japan, the statistics are currently hard to read due to the increase in value-added tax introduced at the beginning of October, which precipitated certain purchasing decisions and inevitably led to weaker Q4 figures. In China, economic growth finally seems to be showing some signs of stabilisation as a result of the easing of trade tensions and the government’s moderate stimulus measures.

US Fed keeps key interest rates unchanged

The US Federal Reserve's Monetary Policy Committee (FOMC) met in December and made no change to its key interest rates. Guy Wagner: “Its chairman Jerome Powell is satisfied with the current economic trajectory and suggests that interest rates could remain unchanged for several more months.” In Europe, the ECB met for the first time under the presidency of Christine Lagarde. No changes were announced, and the interest rates and amounts of asset purchases defined by her predecessor Mario Draghi were maintained. However, an extensive year-long strategic review of the ECB’s missions, objectives and resources was announced.

Expectations of economic acceleration in 2020 helped equity markets continue their upward trend

“Expectations of economic acceleration in 2020 and the forthcoming signing of ‘Phase One’ of a partial trade deal between the United States and China helped equity markets continue their upward trend.” The MSCI All Country World Index Net Total Return expressed in euros was up 1.7% over the month. The leading US index, the S&P 500, the Stoxx Europe 600 and the Topix in Japan went up. Emerging market equities amplified the trend, with the MSCI Emerging Markets index soaring by 7.5% (in USD). “Energy and tech stocks posted the best performances whereas industrial sector companies failed to participate in the year-end rally”, concludes the Luxembourgish economist.

Guy Wagner
Managing Director of BLI – Banque de Luxembourg Investments
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