Market Outlook Report – February 2020

Market Overview

February 2020

Coronavirus: China GDP Growth Slowest in 30 Years

The most discussed current event around the globe at the minute is the looming fear of the spread of the coronavirus to anywhere further than China. President Xi Jinping and his government have been faced with one of the most time sensitive struggles since the spread of SARS in 2003 – containing a very contagious unknown virus in the most populated country in the world, whilst maintaining the second largest economy in the world.

Relevance/ Impact 

Bank of England Base Rate Cut

The last time the Bank of England (BoE) met to discuss the current base rate of 0.75%, there was a hint of uncertainty in the air, as the months preceding the decision were at very least, politically volatile. Additionally, inflation rates leading up to the decision indicated that a base rate cut would possibly be due, as a lower inflation rate incentivises a base rate cut in order to lower borrowing costs and encourage spending.

Relevance/ Impact 

Post – Brexit trade negotiations

The UK officially left the European Union on 31st January 2020 after years of political uncertainty following the Brexit vote in 2016. The UK has now entered an eleven-month transition period during which, the UK and the EU must try and come to a trade agreement and establish a new relationship.

The transition period is designed to give businesses enough time to prepare and to allow for both the EU and UK to come to an agreement whilst still trading normally. During the transition period, the UK must abide by EU trading regulations and so continue to trade on the single market and the customs union.

Relevance/ Impact 

Positive 2020 Outlook for Emerging Markets

After an uninspiring performance in 2019, the market outlook for Emerging Markets moving into 2020 includes predictions of increased GDP growth and general improvement of investor sentiment. The new positive outlook on emerging markets is due to past under-performance, the prediction of the US Dollar weakening and further positive negotiating between China and the US.


Coronavirus capable of pushing Japan to recession

Recently released official figures show that Japan has suffered its worst quarter since 2014. The GDP declined 1.6% in the final quarter of 2019. Annualised, this is equivalent to a 6.3% slump in GDP. This is well below analysts’ previous expectations of a 3.7% decline. Forecasters have now cut predictions for the first quarter of 2020 on the back of this data and in anticipation of a further contraction. If this further reduction in GDP does occur, then Japan is facing a technical recession, defined as two straight periods of quarterly contraction. Taro Saito, executive research fellow at NLI Research Institute, said: "There's a pretty good chance the economy will suffer another contraction in January-March.”

Relevance/ Impact 

UK Consumer Confidence at highest level since 2009

With the future of the country looking clearer and with at least some of the uncertainty surrounding the UK now gone. Household’s confidence is at a 10-year high and a ‘Boris bounce’ can be seen in many areas according to a survey by IHS Markit.

Relevance/ Impact 

Rising house prices post-Boris Bounce

There’s a consensus between commentators and market analysts that 2020 will be a better year for UK house price growth, with the main driver of this being the ‘Boris Bounce’ after the election result. According to ONS figures, the early signs of this can be seen by house prices increasing annually across all regions in December for the first time since February 2018,

Relevance/ Impact 

Sources: Information is included in this article has been obtained from a range of sources including seminars, webinars, industry publications and general media comments. 

  • Bloomberg - (4th February, China’s Economy Seen Growing Slowest Since 1990 Due to Virus)
  • The Telegraph - (3rd February, Global growth forecasts slashed as China's coronavirus spreads through the world economy)
  • BBC News - (30th January, UK interest rates held as economy shows signs of picking up)
  • BBC News - (17th February, France warns UK of bitter trade negotiations)
  • GOV – (10th February, The UK has left the EU)
  • The Guardian – (17th February, Coronavirus could push Japan into recession)
  • Reuters – (17th February, Japan on brink of recession as economy contracts - virus heightens risk)
  • The Guardian – (17th February, UK consumer confidence at highest level since 2009)
  • Yahoo Finance – (19th February, House prices increase across whole of UK for first time in nearly two years)
  • The Guardian – (1st February, Brexit day one: Johnson goes for broke with hardline trade deal)
  • Estate Agent Today – (16th January, Boris Bounce: two more signs of an improving market at last)

Disclaimer: This document represents the opinion of Reeves Independent only and is not intended as advice and no investment decisions should be made solely on the back of this email. Always seek independent financial advice before taking any action. Past performance is not a guide to future performance. All investments carry the risk that you will get back less than you put in.