Beaufort Analysis 265 – A Bad Moon Rising?

Last week we witnessed a phenomenon not seen for 152 years; a Super Blue-Blood Moon Lunar Eclipse! The second full moon of January was not only larger than normal, it was a certain hue owing to the total eclipse as seen by some in North America, Australia and Asia.

It marked a week which saw most stock markets lose ground after their strong start to the year, with indices in Asia recording their worst falls since 2016. Both UK and US main indices fell around 4% over the week, with the Dow losing 666 points on Friday. The 10-year Treasury yield, which sets the cost of money for the world, has risen to 2.8%, it’s highest level for 4 years, as US earnings grew at their fastest rate since 2009, driving speculation that the Federal Reserve will lift interest rates more aggressively. Rising bond yields are unsettling equity markets as returns from stocks look relatively less attractive due to their risk.

Manufacturing and construction in the UK has slowed since the start of the year. The Purchasing Managers’ Index (PMI) showed lower readings and prices rising their fastest for 25 years, with car manufacturing in the UK falling for the first time since 2009. Construction activity reduced in 2017 as commercial and infrastructure projects came to an end and in January, housebuilding fell due to muted demand and supply, with approved mortgages by lenders now at a three-year low following the interest rate hike last November. The shortage of properties helped push house prices up 0.6% over the month. Consumer confidence, however, jumped by its largest margin in a year in January, although it is still lower than a year ago as with job security remaining a concern.

Meanwhile, Theresa May, while on a trip to China securing £9bn worth of new trade deals, had to rebuff criticism of her leadership and Brexit negotiations saying she is not a quitter. The Prime Minister insisted that European nationals arriving during the post-Brexit transition period will not have the same rights as those who arrive before, contrary to EU’s insistence, and that she is committed to taking Britain out of the EU customs union.