The big news today is of course Brexit, with parliament expected to vote on plan A some time within the next 48 hours. With prospects bleak, the actual d-day for Brexit could be pushed back to the end of March. Otherwise in the UK, Thursday presented a bleak roster of red results, with manufacturing down, goods trade deficit up and only the GDP exceeding expectations at 0.2% month on month for November. Other European data shows an adjusted industrial output figure for Portugal decreasing by 2.6% and contracting by 2/6% in Italy.
In China we’re seeing a strengthening of yuan thanks to optimism over trade talks with the US. The dollar, on the other hand, is weakening due to internal mayhem and a growing dovishness in the FED. Talks wrapped up last week with an extension called for; apparently both sides would like to see some kind of deal hatched. So far, China has extended grain import categories and Citigroup is set to open a joint venture on he mainland. China also announced tax incentives last week for small to medium enterprises and other steps to boost consumer spending. This morning, the nation published a $13bn expansion of its trade surplus, even as both imports and exports contracted by 7.6 and 4.4% respectively. JAPAN’S trade deficit for November on Thursday increased by 230bn yen.
Risk aversion is being blamed for Friday’s drop in equities as trading ended. Consumer inflation fell to 1.9% in December from 2.2 the month before; and the national economic & social institute published a .1% drop in its GDP estimate. Add to that S&P, which estimates that the government shutdown has so far cost the economy $3 1/2bn. On the other hand, it would seem that the Federal reserve is caving into white house pressure, as Jerome Powell and friends get more and more dovish by the day regarding further interest rate hikes.
Oil turned south on Friday as investors took profit at $53 per barrel. After seeing its best week in 2 years, we’re opening THIS week at 51, with what seems to be a mid-term trend developing. Saudi production is down nearly 900 million daily barrels from November’s highs. Meanwhile gold continues to consolidate sideways towards 12-90 as dollar weakness is not quite taking hold yet.
Earnings season is beginning with profit warnings from Apple, Samsung and other market leaders. Today we’ll be getting results from Citigroup, with JP Morgan tomorrow and Goldman and bank of America on Wednesday. Netflix – Thursday.
Still ahead today, Industrial production from the EU at 10 this morning, and business confidence from New Zealand at 9pm.