ALPHA Market Update 16 January 2019

16.01.2019

Market Update

 

 

 

United States

  • Core Retail Sales will be released at 13:30
  • Business Inventories and Factory Orders will be published at 15:00
  • S. PPI fell by 0.2% in December, which is the biggest drop in more than 2 years
  • The Federal Reserve’s Great Eagles and Kansas City Fed President Esther George suddenly delivered a dovish speech on Tuesday, saying that they need to be more patient and cautious in raising interest rates so as not to stifle economic growth. She said that after two years of almost uninterrupted quarterly interest, the cost of borrowing is close to “neutral.”

United Kingdom

  • Last night Theresa May’s Brexit deal was voted down by 230 votes, the largest loss from a sitting government in history. However, the reaction of the pound was largely positive hitting highs of 1.2895 this morning from lows (as the vote was announced) of about 1.267.
  • The large upswing comes back the vote was always expected to fail, so the downside was limited, the real unknown factor is what was to happen next. The expectation is the sitting government to fall apart and triggering a general election, perhaps a second referendum or even a modified negotiation under new tory leadership.
  • Immediately after the vote the DUP and ERG (both ardent brexiteer groups) both threw their support behind Mays government and Boris Johnson even said he would do anything to avoid a Jeremy Corbyn government (despite these groups voting down the deal). Therefore GBP recovered well as the probability of the government remaining stable is high.

Europe

  • The European Union’s chief Brexit negotiator has opened the door to re-opening talks about the EU and UK’s future relationship if Theresa May ditches some of her negotiating red lines.
  • Speaking the morning after MPs rejected the prime minister’s deal, Michel Barnier said that the European Council “unanimously” agreed and had “always said that if the UK chooses to shift its red lines in the future, and if it makes that choice to be more ambitious and to go beyond a simple free trade agreement, then the EU will be immediately ready to go hand in hand with that development and give a favourable response”.
  • Ms May has said she wants to end freedom of movement, leave the single market, customs union, and jurisdiction of the European Court of Justice – limiting the scope of her planned future trade deal with the EU and ending frictionless trade

Australia & New Zealand

  • AUD  was unmoved by a steep fall in the Westpac Consumer Sentiment index Wednesday but selling the Antipodean currency is still a “top” investment idea for the 2019 year, according to analysts at DBS Bank.
  • Australian consumer confidence plummeted by -4.7% to 99.6 in January, according to the Westpac index, which is its largest one-month fall since the September of 2015 when financial market volatility and weakening growth data cast a cloud of gloom over the economy.
  • The Westpac index is now sat below the key 100 level, which means pessimists are outnumbering the optimists down under, with consumers less confident in their prospects for both the short as well as long term. Consumer confidence about family finances also deteriorated notably too.
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