ALPHA Market Update 28 January 2019


Market Update





  • Oil prices fell 1 percent on Monday after U.S. companies added rigs for the first time this year, a signal that crude output may rise further, and as China, the world’s second-largest oil user, reported additional signs of an economic slowdown. International Brent crude oil futures were at $60.74 a barrel at 0804 GMT, down 90 cents, or 1.46 percent. U.S. crude oil futures were at $52.84 per barrel, down 85 cents, or 1.58 percent, from their last settlement. High U.S. crude oil production, which rose to a record 11.9 million barrels per day (bpd) late last year, has been weighing on oil markets, traders said.

United Kingdom

  • Theresa May would go back to Brussels with “enormous firepower” to renegotiate her Brexit deal if the Commons backed an amendment watering down the Irish backstop provision, a senior Conservative backbencher has said before a crucial series of votes. Graham Brady said he was hopeful of ministerial support for his amendment, which says the backstop should be replaced by “alternative arrangements to avoid a hard border”, even though Ireland has repeatedly stressed such a change cannot happen.


  • Stocks in Europe started the week on a negative note as investors monitored Brexit developments and looked ahead to new U.S.-China trade talks. The pan-European Euro Stoxx 600 index was lower with all major bourses and most sectors pushing lower. Mining stocks bucked the trend, up by nearly 1 percent, with the sector having a heavy exposure to China. This comes ahead of a new round of trade talks between China and the United States later in the week. Rio Tinto shares climbed 2.5percent after a price target upgrade by Jefferies.
  • More generally, there has been some positive momentum on the back of the reopening of the U.S. government — after its longest shut down in history. However, President Donald Trump told The Wall Street Journal on Sunday that another government shutdown is “certainly an option,” expressing doubts that Congress would reach a deal to fund the border wall.


  • The USD/JPY pair extended Friday’s rejection slide from the vicinity of the key 110.00 psychological mark and traded with a negative bias at the start of a new trading week.
  • Despite a general risk-on mood on Friday, further fuelled by the fact that the US President Donald Trump announced to temporarily re-open the US government for three weeks, the pair failed to capitalize on the early uptick and started retreating from the top end of its weekly trading range.
  • Meanwhile, the US Dollar met with some aggressive supply after news reports indicated that the Fed is considering to stop shrinking its massive balance sheet earlier than anticipated and reinforced market expectations that the Fed’s current policy tightening cycle might have already ended.

Australia & New Zealand

  • Broader investor sentiment will likely remain in control of the Aussie Dollar over coming days, with readers urged to pay particular attention to the performance of Chinese stock markets.
  • There remains a strong correlation with the overall health of China and the Australian Dollar owing to the fact China is Australia’s largest export market.
  • “The AUD has proven to be highly correlated with Chinese equities in the last year, acting as a proxy for economic and financial confidence in China. The recent recovery in the AUD has matched the rebound in Chinese equities,” says Greg Gibbs, Analyst at Amplifying Global FX Capital.
  • “The outlook for Chinese and global equities has improved with broad policy stimulus in China, a less hawkish Fed that appears to have entered an extended pause in rates, and hopes for improved US-China trade relations as talks continue with a target date of 1-March for a trade agreement. This has contributed to rebound in the AUD so far this year, and it may see further gains in the AUD,” says Gibbs.
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