Latest from Lyxor
14 Oct 2019: Hopes rise about Brexit deal and US-China trade
Global equities closed last week flat after a weak start. This was spurred by renewed optimism about a Brexit deal and the US-China trade talks at the end of the week. Meanwhile, safe-haven assets fell back somewhat. Both the US and China expressed signs of good will in their talks, and the two countries may finally be set to reach a partial trade deal. German industrial activity showed further signs of weakness, while the UK economy contracted by 0.1% month-on-month in August. Emerging-market currencies recovered over the week on higher oil prices and optimism that the US and China will come to an agreement.
The EU summit in Brussels on Thursday and Friday will be the key highlight of this week as it will determine whether a last-minute Brexit deal can be struck before the deadline on 31 October. In the US, we’ll be watching retail sales data for any signs of slowdown, while the big banks and financial firms are kicking off Q3 earnings season. In China, Q3 GDP figures are likely to show that growth has fallen further, with the industrial sector likely to have been hardest hit by the trade war.
Latest performance
Source: Lyxor International Asset Management. Figures reported in local currency terms. Past performance is no guide to future returns. Data as at
Our key calls
Week commencing 14/10/2019
Upside for US equities
A breakthrough in the US-China trade talks could be within reach. If there’s also a good start to US earnings season, US equities could perform well. The Q3 EPS backdrop remains weak, but there should be some small earnings improvements relative to Q2.
Look to quality income in Europe
European equities have suffered heavy outflows since the beginning of the year, their valuations look attractive, and dividend yields are higher than in the US. And yet the asset class still faces problems: the ECB has less leeway when it comes to monetary policy support and European companies’ profitability is structurally lower than that of US corporates. We maintain our defensive stance towards the market for now, with a preference for stocks with strong balance sheets.
Buy Chinese equities
With a trade deal in sight, there could be a relief rally for Chinese equities and emerging-market assets in general should the US decide not to increase tariffs in the coming week. That’s why we’re long Chinese equities.
Things we are watching out for
The Main Event
Lyxor strategists on the key moments in the week ahead
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US-China trade talks
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Q3 EPS season starts
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