ALPHA Market Update 10 January 2019

10.01.2019

Market Update

 

 

 

United States

  • Goods Trade Balance and Initial Jobless Claims data will be published at 13:30
  • New Home Sales data will be released
  • Fed Chair Powell Speaks will be held at 17:00
  • The China-US trade consultation has ended and the news will be released soon.
  • Federal Reserve: the Fed can be patient with interest rate hikes; Market and economic risks make the policy outlook uncertain
  • The hawkish Boston Fed President Rosengren said that given the risk factors that have disrupted financial markets, the Fed can wait patiently to wait for clearer data before adjusting its policies. If the economic outlook is in line with expectations, then the two interest rate hikes proposed in the Fed’s December meeting in 2019 may be correct.
  • Brad warned that the Fed should pay attention to the pessimistic attitude of the financial market on the impact of interest rate hikes; the yield level of the bond market shows that “if interest rates rise, there may be some recession risks in the future.”
  • Trump told reporters on Wednesday that if he could not reach an agreement with the Democrats, he would declare a “national state of emergency” and bypass Congress to allocate funds for the border wall. And calling the meeting with the Democratic Party is a waste of time.
  • Fitch said that if the government’s lockout continues until March 1, and the debt ceiling will become a problem in a few months, it will consider whether the US has reached the AAA level. “From a rating point of view, the problem is the debt ceiling.”

United Kingdom

  • Data from KPMG and the British Retail Consortium shows that retail sales data is the worst experienced since December 2008, the data stalled with no growth despite retailers slashing prices to bring customers in. However, it is worth noting that this data does not include data from big online retailers like Amazon and EBay. It is therefore clear that within the physical retail space performance is dropping off.
  • Theresa May may be able to gain the support of about 30 Labour MPs by accepting a amendment which would mean that she provides enhanced guarantees on environmental and workers’ rights. If she can get the support then it shows flexibility; the growing pressure for labour MP’s to cross party lines for the stability of the country may encourage some to support her deal.

Europe

  • Brexiteer MP Andrew Bridgen detailed how France is “slipping into recession” and Germany is suffering “its biggest slow down since 2008” while explaining how the UK can leave on no-deal terms with up to 10 years of tariff-free trade. Andrew Bridgen pointed out failures in the EU economy, referring specifically to France heading towards a recession and Germany experiencing its greatest slow down since the Great Recession. The Brexiteer MP also outlined how trade with the UK is “hugely” within the EU’s interest. Mr Bridgen told France 24: “The EU sell us twice as much stuff as we sell to them, one in three of the lorries travelling back from the UK to the continent are actually empty. So it’s hugely in the European Union’s interest, especially at a time when quantitative easing has just been stopped before Christmas in the Eurozone.

Commodities

  • Oil prices fell by about 1 percent on Thursday on swelling U.S. supply and amid a cautious reaction to trade talks between the United States and China, the world’s two largest oil consumers, that finished without concrete details to ending their dispute.
  • S. West Texas Intermediate (WTI) crude oil futures were at $51.80 per barrel at 0432 GMT, down 56 cents, or 1.1 percent, from their last settlement. International Brent crude futures were down 0.9 percent, or 57 cents, at $60.87 per barrel. Both oil benchmarks rose by around 5 percent the previous day as financial markets around the world surged on the hopes that Washington and Beijing may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and its possible impact on global growths.

Australia & New Zealand

  • AUD is forecast to return to its December low, according to analysts at Australian lender Westpac, as the Brexit clock runs down in London and negotiators close in on an agreement to end the so-called trade war between the the U.S. and China.
  • Pound Sterling has been volatile in recent months as markets have fret over the likely outcome of the Brexit process, while the Australian Dollar was the worst performing G10 in 2018 as it fell victim to the tariff fight between the U.S. and China.
  • The next trigger for a major move in GBP/AUD is likely to be the key parliamentary vote on Prime Minister Theresa May’s Brexit deal on Tuesday, January 15 which most observers are confident she will lose which will likely in turn trigger a vote of no confidence in the government, motioned by the opposition Labour party.
  • “The GBP mood will of course be largely driven by Brexit developments. We doubt that UK PM May’s compromise bill will pass Parliament on 15 January,” says Sean Callow, a currency strategist at Westpac, in a recent note to clients. “This could see GBP/AUD re-test the Dec lows around 1.7200.”
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