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Could it be the end of the trade war?- EMEA Brief 07 Jan

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  • US and China meeting in Beijing 7th - 8th Jan, to hold trade talks at vice ministerial level, looking to end the trade war as both economies are affected
  • Theresa May warns the UK of an ‘uncharted territory’ if the Brexit deal is rejected by Parliament. May announces that she has agreed to some ‘changes’ whilst talking to European leaders including specific measures for Northern Ireland, a greater role for Parliament negotiations on the next stage of the future UK-EU relation and additional assurances over the Irish border backstop. MPs are expected to vote on the 14th or 15th January.
  • Trump continues to demand $5.6billion funding in order to build the wall on the Mexican border, and threats to declare a national emergency. Trump announces the idea to build the wall out of steel instead of concrete, potentially hoping the Democrats could therefore claim it is not a wall
  • Asia stocks trade higher Monday morning with the Nikkei 225 rising over 2.4%, Hang Seng Index by 0.66% and ASX 200 up 1.14%
  • Huawei releases a new ‘next-generation’ chipset, despite facing political headwinds, in hope of ‘attracting customers by making good products’, according to its chief strategy marketing officer and director of the board  
  • Apple create deal with its formal top rival Samsung, to which Samsung TVs will support Apple iTunes for movies and TV purchases and playback
  • Tesla to hold its ground-breaking ceremony in Shanghai, its first non-US factory. It is predicted to start partial production in the second half of 2019

Asian overnight: Asian markets have carried on the bullish theme exhibited throughout Friday, with optimism surrounding the direction of trade talks coupled with relatively dovish comments from Fed chair Powell on Friday. With representatives from the US and China meeting for their first formal round of trade talks for months, we are seeing resurgent hopes of a potential breakthrough in relations. With the potential for a substantial risk-on shift, it comes as no surprise to see the safe haven Yen losing ground, helping boost Japanese stocks to over 2% up on the session.

UK, US and Europe: Looking ahead, keep an eye out for German and eurozone retail sales figures, while the US session sees the Canadian Ivy PMI and US ISM non-manufacturing PMI reading dominate proceedings. Obviously with few major events of note, the ongoing wider themes will continue to play into the investor mindset.

Economic calendar - key events and forecast (times in GMT)


Source: Daily FX Economic Calendar

3pm – Canada Ivey PMI (December): expected to fall to 56.7 from 57.2. Market to watch: CAD crosses
3pm – US ISM non-mfg PMI (December): forecast to fall to 59.7 from 60.7. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Dunelm said that it sees profit for the first half ‘modestly’ ahead of forecasts, but  the full year outlook remains difficult due to high levels of uncertainty. Like-for-like sales were up 9% overall for the 13 weeks to 29 December.
  • Staffline has won contracts worth £104.6 million from UK prison tenders. 

Hays Upgraded to Buy at HSBC
Tullow Upgraded to Outperform at RBC
Lundin Petroleum Upgraded to Sector Perform at RBC
Magnit Upgraded to Neutral at JPMorgan

AB InBev Downgraded to Neutral at Goldman
HSBC Downgraded to Sell at Citi
Centrica Downgraded to Hold at Jefferies
InterContinental Hotels Cut to Underweight at Morgan Stanley


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