22 January 2019
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London’s FTSE 100 Index has opened marginally lower this morning, but has broadly continued on its upward trend since the turn of the year. Last week, the Prime Minister’s government survived a no-confidence vote after her Brexit deal was overwhelmingly rejected by a 432 to 202 vote in the House of Commons. Whilst May’s defeat was historic in its magnitude, it did raise hopes for a “soft” Brexit as May is now compelled to build cross-party consensus to avoid the risk of no Brexit at all. The positive reaction from UK assets reflects the real potential for Brexit to be delayed.
In Europe, data showed that Germany’s economy decelerated sharply last year due to slowing consumer spending and weakness in key export markets. Gross domestic product (GDP) grew by 1.5% in 2018, the weakest rate in five years, compared with 2.2% in 2017. Reasons cited for the slower growth included a globally weaker economy, sales problems in the car industry as a result of tougher pollution standards, and special events including an outbreak of flu and strikes.
Hopes for better US–China trade relations nudged shares globally higher last week and continues to be a significant driver of sentiment. On Thursday, markets appeared to jump on reports that US Treasury Secretary Steven Mnuchin had suggested lowering tariffs on some Chinese goods as a gesture of goodwill in trade negotiations. The White House did, however, later deny the accounts.
On Friday, shares surged again following a report that Chinese officials had proposed a six-year buying spree of US goods with a combined total of more than $1 trillion to eliminate the country’s trade surplus with the US by 2024. The general positive sentiment, in combination with favourable economic data, has lured investors away from the perceived ‘safe haven’ assets like Gilts and Treasuries.
Despite the growing momentum toward a possible resolution in the US–China trade standoff, China reportedly plans to lower its official annual growth target to a range of between 6.0% and 6.5% this year, down from roughly 6.5% in 2018, as it copes with weakening domestic demand and the impact of US tariffs.
Finally, crude oil prices have continued to recover, with the Brent crude price settling $60 per barrel and West Texas Intermediate (WTI) rose to just above $53 per barrel. Much of the positive momentum here has been generated by the supply-side, with Iran’s output especially continuing to slide.
|Share||Closing Values at 14/1/19||Year high||Year low|
|DJ Industrial Average||24,706||26,952||21,713|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||62.74||-0.43||-0.69|
Budget airline easyJet has this morning warned markets that revenue per seat, an important metric for airlines, fell by 4.2% in its first quarter. With around 40% of all potential bookings secured for the second quarter, it anticipates further declines.
Kier chief executive Haydn Mursell has resigned this morning with immediate effect, following pressure from key stakeholders to step down as debts soared at the construction group.
BHP, the world’s biggest miner, warned this morning that a series of operational outages affected its production during the second half of last year, leading to a roughly $600m “negative impact”.
British defence giant BAE Systems has sold a majority stake in its Land UK tank and combat vehicle division to German rival Rheinmetall for £28.6m. The new joint venture gives Rheinmetall a 55% stake, with BAE owning the rest.
Ryanair has cut its profit forecast, blaming lower-than-expected air fares. The airline’s chief executive, Michael O’Leary, said the company could not rule out having to cut fares further, with fares expected to fall by 7% this winter. Lower fares are already causing problems for rivals, including Flybe which was rescued last week.
Education publisher Pearson, which cut thousands of jobs and sold assets including the Financial Times, has said revenue at its key US business fell by 5%. It has forecast a possible similar drop next year as the company undergoes a major restructure to focus on boosting digital content.
|Date||Category||Country||Event||Reuters poll||Prior estimate|
|22/01/19||Labour Market||United Kingdom||
United Kingdom-Claimant Count - Claimant Count Unem Chng
|22/01/19||Surveys & Cyclical||Germany||
Germany-ZEW - ZEW Economic Sentiment
|22/01/19||Industry Sector||United States||
United States-Existing Homes - Existing Home Sales
Japan-Trade - Trade Balance Total Yen
|JPY -29.5b||JPY -737.7b|
|23/01/19||Surveys & Cyclical||France||
France-Business confidence - Business Climate mfg
|23/01/19||Surveys & Cyclical||United Kingdom||
UK factories face global slowdown as well as Brexit-CBI data due - CBI Trends - Orders
|23/01/19||Surveys & Cyclical||Eurozone||
Euro Zone-Consumer confidence - Consumer Confid. Flash
|24/01/19||Surveys & Cyclical||Eurozone||
Euro Zone-PMI Flash - Markit Comp Flash PMI
Euro Zone-ECB rate decision - ECB Deposit Rate
|24/01/19||Labour Market||United States||
United States-Jobless - Initial Jobless Claims
Japan-CPI Tokyo - CPI, Overall Tokyo
|25/01/19||Government Sector||United Kingdom||
UK mortgage data due amid signs of housing market slowdown - BBA Mortgage Approvals
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