The signing of the phase-one trade deal between Beijing and Washington, though only a basic arrangement, served last week as the backdrop for the bull case in equity markets. For now, US customs duties will be maintained at USD 360bn worth of goods. A rosier outlook on the global economy plus some upbeat indications on corporate earnings chimed in to guide equity indices up to new all-time highs. Even European equity markets gained, despite the prospect of suffering from the Sino-American trade deal.

Over in the US, housing starts for December were robust, rising by 16.9% month on month, while retail sales edged forward by 0.3%. In Europe, new vehicle registrations shot up by 22% in December 2019. In China, macroeconomic conditions have levelled off, with GDP increasing by 6.1% in 2019. Industrial production was up 6.9%. Better manufacturing stats and business confidence led the price of Chinese stocks higher last week.

The numbers reported by US banking majors were encouraging for the economy, flying in the face of lower interest rates and the more subdued rate of economic growth seen recently. Consumer lending and investment banking drove growth higher. The record revenues and profits (USD 9bn in 2019) booked by Morgan Stanley are particularly worthy of mention. In the tech stable, Taiwan Semiconductor issued a positive business outlook on the adoption of 5G. The group will increase capital spending in 2020 – news which put wind in the sails of other sector stocks such as Nvidia, AMD and Qualcomm. Having shot up by over 10% this year alone, Alphabet (Google’s parent) last week joined Apple and Microsoft in the elite trillionaires’ club by market capitalisation. With the other two members of the FAANG club, they now account for one-fifth of the S&P 500’s capitalisation.

Plentiful liquidity is still encouraging risk-taking, with central banks in no hurry to raise interest rates – especially as inflation shows no signs of quickening.
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