February saw a continued recovery in equity markets following December’s sharp downturn. The US Federal Reserve (Fed) reinforced its dovish stance at the latest FOMC meeting, with Chairman Powell signalling that there was no clear time limit on the Fed’s current rate-hike pause. US economic data was mixed, with strong labour market data but general financial conditions less supportive of growth. US-China trade talks continued, with an increased possibility of resolution. February also saw the commencement of various 2020 US presidential campaigns, with a notably progressive group of candidates, including Bernie Sanders, announcing their intentions to run for nomination as the Democratic candidate.
In Europe, the run of weak data continued, with concerns over growth lingering. This could be exacerbated further when the results of a US report into auto imports from the EU are revealed, with the possibility of President Trump imposing tariffs on European vehicles as they present a ‘threat to national security’. In the UK, Brexit uncertainty weighed on sentiment, after Prime Minister Theresa May’s deal was defeated in the Commons in January. Further negotiations with the EU have yielded little change to the Withdrawal Agreement, with an extension to Article 50 as well as a second referendum being mooted as options. Theresa May delayed the key vote, due at the end of February, to 12 March in the hope of winning more support for her deal. With no clear outcome even at this late stage, the path of Brexit continues to be uncertain, even as the ultimate 29 March Deadline looms.
Chinese credit growth, a key measure used to determine the shape of the economy, slowed in February after a January surge, continuing to impact both developed and emerging markets. However, authorities implemented stimulus measures to shore up growth and sentiment. The Fed’s reinforced dovishness will also continue to benefit emerging markets.
All information as at February 2019, unless stated otherwise.