Seemingly bulletproof equities motored to new highs on Friday, as the MSCI world extended gains to a fresh peak.
The global gauge has risen for three consecutive weeks as trade optimism and, frankly, a lack of sh*t to worry about in the very near-term, finds market participants seeing little in the way of impediments headed into year-end.
News flow has died down into the holidays, unless you count the impeachment of a US president. But even there, Nancy Pelosi’s gambit to secure concessions from Mitch McConnell around the forthcoming Senate trial has brought the previously manic effort to oust Donald Trump to a comparative standstill. It’s quad witching, for whatever that will or wont’ be worth in terms of volatility.
US equities have risen in 10 of the last 11 weeks. Chinese stocks are riding a three-week win streak. All’s well, apparently. During a Friday speech in Macau, Xi warned that he wouldn’t allow foreign interference in Hong Kong. Carrie Lam was in the audience. It was a subtle reminder that the phase one trade deal doesn’t end the Sino-US cold war. Beijing has variously accused the US of being behind the unrest in Hong Kong, and the US Congress of course passed legislation supporting the demonstrators. Trump signed it because he had to, not because he wanted to. Still, Xi won’t forget that, even if the violence in the once bustling financial hub eventually abates.
Beijing kept the loan prime rate steady on Friday, as expected, although some folks were looking for a small cut, despite the unchanged MLF rate this month (the latter guides the former). Since the LPR was revamped in August, there have been three cuts, and now two holds. “We think this is a pause, not the end to the steady downward trend in the 1-year LPR, which has dropped by a total of 16bp since the new LPR framework was introduced”, SocGen’s Wei Yao wrote Friday, adding that she “still expects LPR to continue its downward trend in 2020 [as] the latest credit and monetary data still suggested soft credit demand and very little drop in actual lending rates [while] growth stabilization remains fragile”.
It’s the same story everywhere you look for equities. The DAX and the Nikkei, for example, are both gunning for their fourth consecutive monthly gain.
One potential stumbling block for the macro narrative (assuming narratives can “stumble”) is Brexit. Boris Johnson will get a vote on amendments to his withdrawal agreement Friday. The vote itself will likely be a non-event for the market, but this has been an awful week for sterling.
The prime minister’s rekindling of a possible a crash-out scenario was not welcome by traders, even if the next “D-day”, so to speak, is a year from now.
In other news from across the pond, former Bank of England deputy governor Andrew Bailey will be the central bank’s new chief.
“The 60-year-old is in many ways the ultimate BOE insider and was seen as the top contender in every Bloomberg survey of economists”, Bloomberg said Friday, on the way to noting that “he was once so hotly tipped that online oddsmaker Betway stopped accepting bets on his appointment”.
Now, carry on. There are stocks to buy.