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  • The Federal Reserve (Fed) reduced short term interest rates by 0.25%. This was the third cut of 0.25% this year and Powell was at pains to highlight that a fourth cut should not be automatically assumed. In essence, the Fed indicated to investors that there would be a pause in monetary policy as they await the lagged economic impact of previous cuts and future developments with regards the US Chinese trade war.
  • US economic releases from last week supported the Feds actions and their subsequent messaging. Employment data, taking into account the distortionary impact of the GM strike, was better than expected as was the Q3 GDP figure. Whilst inflations expectations remain subdued the general wellbeing of the consumer provides support for those who maintain a bullish position in risk assets.
  • Eurozone Q3 GDP also met analyst expectations but an economy who’s growth has greater exposure to trade will suffer to a larger extent as a result of the uncertainties associated with Brexit and the US China trade war. Notably the new head of the ECB, Christine Lagarde, was explicit in identifying the Netherlands and Germany as two European countries that could avail of fiscal stimulus.
  • The Chinese private sector manufacturing PMI (see chart) was better than expected but we still believe that the authorities will continue to provide only measured stimulus and we anticipate that they will shortly begin the process of managing future expectations of growth.