US share prices were boosted during November by hopes that the US and China might find a resolution to their protracted trade conflict. However, relations between the two countries received a further blow from the news that President Trump had signed the Hong Kong Human Rights and Democracy Act into law. China’s Foreign Ministry warned that the law could result in “negative effects on China-US relations and cooperation in important areas”.
- US interest rates are unlikely to rise in the short term
- US economic growth was stronger than first estimated in Q3
- Impeachment hearings continued during the month
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US share prices were boosted during November by hopes that the US and China might find a resolution to their protracted trade conflict. However, relations between the two countries received a further blow from the news that President Trump had signed the Hong Kong Human Rights and Democracy Act into law. This law specifies US policy towards Hong Kong, directs assessment of political developments, and prohibits exports of police equipment to Hong Kong. In response, China’s Foreign Ministry accused the US of “disregarding facts and distorting truth” and warned that the law could result in “negative effects on China-US relations and cooperation in important areas”.
“At this point … I see the glass as much more than half full” (Fed Chair Jerome Powell
The Dow Jones Industrial Average Index rose by 3.7% during November, while the S&P 500 Index climbed by 3.4%, and the Nasdaq Index increased by 4.5%. Impeachment hearings regarding President Trump’s dealings with Ukraine continued during the month.
Federal Reserve (Fed) Chair Jerome Powell indicated that US interest rates are unlikely to increase in the near term, but stressed that policymakers remain “strongly committed” to meeting its 2% inflation target. Consumer price inflation rose at an annualised rate of 1.8% during October. The Fed cut its key rate to a range of 1.5% to 1.75% in October, when it also signalled a pause in its tightening cycle. Chair Powell said that the Fed’s current monetary policy stance was likely to remain “appropriate” for as long as the “generally good” backdrop endures, commenting: “At this point … I see the glass as much more than half full”.
The US economy grew more strongly than initially estimated during the third quarter, posting annualised growth of 2.1% compared with a preliminary calculation of 1.9%. The economy expanded by 2% in the second quarter and by 3.1% in the first quarter. Third-quarter growth was boosted by upward revisions to private inventory investment, non-residential fixed investment, and personal consumption. Looking ahead, however, there are concerns that growth will flag during the fourth quarter, dampened by a decline in consumer spending and business investment.
Credit ratings agency Fitch affirmed the US’s rating at “AAA” with a “stable” outlook, but warned that the country’s “formidable” credit strengths – including the US’ dollar’s status as the preeminent reserve currency and the US’s “extraordinary” financing flexibility – would fall under pressure in the medium term from widening budget deficits.
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