The largest US productivity drop since 2015 | Flow Traders Investment Competition | Week 2

The European stock market appreciated quite a bit the past week, with the AEX gaining 2.73% and Eurostoxx 50 increasing by 1.87 percent. In the US little change occurred concerning that matter, S&P 500 and NASDAQ both respectively increased by 0.86 and 0.41 percent. The Dow Jones Industrial Average gained 1%, and the VIX decreased by a mere 4% in the past week.

US workers’ productivity has unexpectedly fallen by the most in nearly four years, according to figures from the US Labor Department. The 1.2% difference from what economists had expected came as the number of hours worked increased 2.4%, while output only grew 2.1%. It’s the biggest fall since the fourth quarter of 2015. Regardless of the fact productivity decreased, US jobs growth beat the most recent forecast by over 30,000 jobs, despite the GM strike impact. The Fed lowered the target for its benchmark rate by a quarter-point, to a range of 1.5% to 1.75%. This is the third cut in four months, hoping to shield the economy from the impact of trade wars and a global slowdown. Some argue over the current policy of the Fed, saying it is too conservative, yet looking at the most recent economic signals, for example, the US economic growth slowing to an annual rate of 1.9%, the idea of rate cuts are not that bad. Moreover, China is now pressing Trump to remove more tariffs in the first phase of the new trade deal. Currently, it looks like Washington is going to drop 15% tariffs on about 125 billion dollars worth of Chinese goods that went into effect on September first, as well as another 25% on about 250 billion of imports of machinery.

Trump also has negotiations about tariffs across the pond and has until November 13 to decide whether to apply new duties on European car makes. The current trade relationship between the US and the EU is quite tense since the president ended negotiations for a trade deal with Europe that the previous administration was conducting. Italy is considering a new “web tax” on tech giants, mostly as part of its draft budget for the European Union. The struggling government, currently mounting in debt, may impose a 3% levy on internet transactions on major tech companies like Google and Facebook. The only alternative to this idea is a rise in sales taxes worth around 23 billion euros, which could cripple the country’s economy even more. Due to the fact the country has risked sanctions for its excessive debt twice, it is in dire need of some new cash flow.

On to the Flow Traders Investment Competition. After the first full week, Hermanszoon Capital has kept its first place while enjoying a return of 3.46%. Merx has taken second place from Basura, and currently has the highest change in return of 2.36 percent. The winner of last year’s edition, Victoria, is closing the top 10 with a return of 0.71%.

 

Sebastian Cornielje