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UK Retail Sales Average Flat Heading Into Super Thursday – EMEA Brief 10 Jan

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  • Today is considered ‘Super Thursday’ as a number of large UK retailers are set to release their Christmas sales data. This comes after a report from the British Retail Consortium which said that average retail sales saw 0% year on year growth
  • Jeremy Corbyn is expected to launch an election bid if May loses the Brexit vote, scheduled for Tuesday the 15th. Yesterday saw May suffer another defeat in the house of commons which will mean she will have just 3 days to come up with a plan B if her current deal fails Tuesdays vote.
  • ‘Modest progress’ is said to have been made in the US-China trade talks. The three-day talks have now ended with America announcing that China have pledged to buy a substantial amount of goods and services from the US. Could this see an end to investor fears over the trade war?
  •  Euro pairs are in the spotlight today as Italy are set to release economic data including industrial production. Current estimates are for 0.4% growth but recent announcements from Italy have failed to meet expectations
  • Oil continued to make gains yesterday with a strong surge following the US-China announcement, despite an audit revealing that Saudi Arabia’s inventories are 2 billion barrels larger than reported.
  • Cryptocurrencies have had a large sell off this morning as Bitcoin has lost 5% and Litecoin almost 10% with most of the losses happening in a 30 minute time frame. 
  • Jaguar Land Rover have announced they plan to cut up to 5000 jobs as part of a £2.5 billion savings plan

Asian overnight: Asian markets have dipped overnight, as both US and China emerged from three-days of trade talks with little more than a desire to continue talking. The Australian ASX 200 was the one outlier, rising marginally despite a strengthening AUD. Yesterday’s FOMC minutes provided yet another hint that the committee is happy to be more patient when it comes to rate hikes, thus allowing them the ability to better judge how higher rates are impacting the economy. Overnight data saw Chinese CPI fall from 2.1% to 1.9%, while PPI tumbled to 0.9% from 2.7%. To an extent this frees up the hand of the PBoC, who will likely reach a more accommodative stance in the wake of recent economic strife.

UK, US and Europe: Looking ahead, central banks remain the focus, with the ECB minutes expected to dominate the European session. Meanwhile, appearances from Fed members Bullard, Powell, and Evans should continue to shed light on the future pathway of US rates.

Meanwhile, Trump walked out of a meeting with Democrats leaders yesterday as negotiations to end the government shutdown broke down. Trump called the meeting “a total waste of time’ as he remains defiant on his demands for funding for a border wall. The government has now been shut down for 19 days. Trump later tweeted that when he said “bye-bye” as Nancy Pelosi said no to allocating funds in the budget for increased border security. Fitch have since said that the US is at risk of losing its triple A credit rating if the shutdown continues.

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

Economic Calendar 10.01.PNG


Source: Daily FX Economic Calendar

12.30pm – ECB meeting minutes: these will provide further insight into the views of the central bank. Market to watch: EUR crosses
3pm – US new home sales (November): forecast to rise 2.9% MoM from a 8.9% drop a month earlier. Having declined steadily throughout 2018, US housing data is a key data point for investors at present. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Tesco said that like-for-like sales rose 2.2% over Christmas, but Q3 growth was just 0.7% higher. It said that the environment remained challenging but that it was still confident of meeting expectations for the full year. 
  • Marks & Spencer saw an overall fall of 2.2% in same-store sales for the 13 weeks to 29 December, and while online sales were up 14%, clothing was down 2.4% and food was 2.1% lower.  
  • Jupiter Fund Management suffered a drop in assets under management for Q4, down to £42.7 billion from £47.7 billion at the end of Q3.  
  • Debenhams reported a 3.5% drop in like-for-like sales in the six weeks to 5 January, and were down 5.7% in the 18 weeks to the same date. It said it was still on track to meet expectations for the full year, however. 
  • Halfords fell 29% following a profit warning

AB InBev upgraded to buy at Bank Degroof Petercam
BASF upgraded to overweight at JPMorgan
BBA Aviation upgraded to buy at Jefferies
Eutelsat raised to overweight at Morgan Stanley

Air Liquide cut to underweight at JPMorgan
Ted Baker downgraded to neutral at Goldman
Burberry downgraded to hold at Berenberg
Polymetal cut to hold at Renaissance Capital

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