Market Analysis Nov 2019

US equities saw a rise in November, propelled by hopes of progress in a preliminary trade deal with China. However, tensions between the two nations remained evident following President Trump's support for protests in Hong Kong SAR. Positive economic data further bolstered investor sentiment, with Q3 GDP growth at 2.1%, outperforming expectations.

Despite over 70% of companies reporting better-than-expected Q3 results, absolute earnings saw a decline of -2.4% year-on-year. While IT stocks thrived due to trade optimism, less economically sensitive sectors like utilities and real estate struggled. Cyclical stocks, favored during economic strength, performed well.

Eurozone equities experienced gains in November, largely due to improved economic indicators. Despite the flash composite PMI dipping to 50.3, the manufacturing PMI improved to 47.1. Notably, Christine Lagarde took over as president of the European Central Bank, advocating increased public investment to stimulate domestic demand.

Sectors such as IT, healthcare, materials, and industrials led the advance, while utilities and communication services faced negative returns. Corporate actions included Deutsche Telekom's dividend reduction for 5G investments and LVMH's acquisition of Tiffany & Co for $16.6 billion. Spain's inconclusive election and leadership changes in Germany's Social Democrats added political complexity.

Domestically-focused areas of the UK equity market performed well in November, boosted by reduced Brexit and political uncertainty. Sterling's recovery persisted as the Conservative Party maintained a comfortable lead in opinion polls ahead of the December 12 general election. This lead, if translated into votes, could pave the way for an orderly Brexit by the end of January.

UK GDP growth of 0.3% quarter-on-quarter in Q3 averted a technical recession, driven by household spending. With expectations of increased government spending next year, the economic outlook improved.

The Japanese equity market experienced a 1.9% gain in November, accompanied by a slight weakening of the yen against major currencies. Trade concerns and unrest in Hong Kong SAR contributed to fluctuating sentiment. Economic data, including the consumption tax increase and a typhoon's impact, complicated readings on consumption and retail sales.

Asia ex Japan equities saw modest gains, with Pakistan leading as the best-performing index country. China's positive return stemmed from stimulus measures in response to soft economic data. Philippines and Indonesia underperformed due to currency weakness, while protests in Hong Kong SAR and currency depreciation affected sentiment in South Korea and India.

Positive sentiment in November was driven by hopes of a US-China trade deal and an improved economic outlook. This resulted in rising government bond yields, while corporate bonds fared better. The US 10-year Treasury yield increased by 9 basis points to 1.78%, influenced by encouraging US data and tempered by tariff threats.

European yields followed suit, with Germany, France, Italy, and Spain all recording increases. The UK 10-year yield rose due to improving sentiment surrounding the general election. Corporate bonds, especially high yield, performed well. Emerging market government bonds faced declines due to currency weakening, while EM corporate bonds benefited from high yield.

Convertible bonds gained 1.6% in US dollar terms, with varying regional performances.

Remember, past performance isn't indicative of future outcomes. The sectors, securities, regions, and countries mentioned serve illustrative purposes and shouldn't be taken as trading recommendations.