Jump to content

Clouds Loom as Chinese Economy Falters - EMEA Brief 14 Jan

Sign in to follow this  
JoeIG

  • Asian stocks fell as China's export data indicated a shock contraction, declining by 7.6% since July 2016. This points to deepening cracks in the world's second largest economy and increased fears of a significant slowdown in global growth and businesses. 
  • The CSI 300 was down 0.8%, falling from a 3 week high reached on Friday. The Hang Seng slipped 1.4% as both the financial and technology sectors took a hit.
  • US equities ended Friday with marginal losses, however the S&P 500 maintained a weekly gain of 2.5%. 
  • The US Dollar Index was 0.1% lower after reaching a 3 month low last week, whilst the safe-haven Yen was 0.4% stronger at 108.09 to the dollar. The Australian dollar, sometimes viewed as a proxy for China's economic outlook, was down 0.4%.
  • Oil prices also took a hit following disappointing China trade figures - one of the largest global importers of oil. Both Brent Crude and WTI was down 1.1%, at $59.83 and $51.03 a barrel respectively. 
  • Gold edged 0.3% higher to reach $1,290.

Asian overnight: A bearish overnight session saw losses across China, Hong Kong and Australia, while the Japanese markets were closed to observe a bank holiday. Today is all about the Chinese trade data, with both imports and exports deteriorating sharply in December. However, with imports falling -7.6%, while exports hit -4.4%, the overall balance actually shifted further into surplus despite the disappointing figures. Interestingly, despite the imposition of tariffs on Chinese goods, the Chinese surplus has grown significantly, hitting the highest level since records began in 2006.

UK, US and Europe: Theresa May is set to warn Eurosceptic MPs today that Brexit could be blocked by parliament if they fail to give their backing in tomorrow's historic "meaningful vote" on the withdrawal agreement. The agreement is strongly opposed by certain Conservative MPs due to the plan for a backstop to avoid a hard Irish border that involves the UK being in a customs union with the EU.

Looking ahead, keep an eye out for eurozone industrial production in the morning, with precious few notable releases other than that. With tomorrow’s UK parliamentary Brexit vote looming large, there is also likely to be some positioning ahead of that momentous occasion.

South Africa: Global markets are trading mostly weaker this morning with US Index futures down 0.81% and the Shanghai Composite down 0.78% today so far. Markets are trading cautiously ahead of US bank earnings releases this week as well as the all important parlimentary Brexit vote on Wednesday. Gold is trading 0.4% higher this morning while brent crude is 1.1% lower today. The rand has managed to maintain some short term strength having stabilised below the R14/$ mark. Tencent Holdings is down 2.9% in Asia, suggestive of a similar star for major holding company Naspers. BHP Billiton is down 0.25% in Australia, suggestive of a flat to softer start for local diversified resource counters.

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

image.png

Source: Daily FX Economic Calendar

1.30pm – US trade balance (November): deficit to narrow to $54 billion. Market to watch: USD crosses

3pm – US new home sales (November): forecast to rise 2.9% MoM from an 8.9% fall a month earlier. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • PageGroup expects annual performance to be in line with forecasts, as gross profit for the final three months of the year rose 15.4%, allowing gross profit for the full-year to rise 15.9% to £815 million.
  • Restore said that it forecasts annual results to be in line with expectations, as strong trading in the records management division offsets weakness in the shredding unit.  
  • JD Sports expects profits to be at the upper end of forecasts, as weak growth in the UK is offset by a better performance by its international division. Like-for-like sales rose 5% for the cumulative 48 week period to 5 January. 
  • Michelmersh Brick said that it expects annual underlying revenue and profit to meet market expectations. Year-end debt will also be below forecasts due to strong cash generation. 

Brooks Macdonald upgraded to buy at Shore Capital
Safilo upgraded to neutral at Mediobanca SpA
Engie upgraded to buy at Berenberg
Mowi upgraded to buy at Fearnley

3i Infra downgraded to hold at Jefferies
Countryside cut to underweight at JPMorgan
Heineken cut to underweight at Morgan Stanley
Next downgraded to underperform at Credit Suisse

IGTV featured video

Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

  • Like 1
Sign in to follow this  


1 Comment

Recommended Comments

didn't think this required its own thread, but thought it was interesting. Saw it on reddit today. "In the 1640's the Dutch inhabitants of New Amsterdam built a 12' wall to keep the bad hombres out. In 1664 the British ignored the wall and took New Amsterdam by sea. It's now called New York. They took down the wall and built a street. It's called Wall Street"

also, If you visit the street there is still a piece of the original wall in the ground.

1078468882_2019-01-1408_55_20-https___untappedcities-wpengine.netdna-ssl.com_wp-content_uploads_2017_01_Wall-S.png.c2d10e48633049fa22f4eec0c7378c46.png

and then some non-finance related dutch/NYC facts :

  • Coney Island = Conyne Eyland, meaning rabbit island (Konijn Eiland in modern Dutch).
  • Staten Island = named in honor of the Staten-Generaal, a government body.
  • Nassau = Name of the royal Dutch house (think "Windsor").
  • Brooklyn = Breukelen in province Utrecht.
  • Harlem = Haarlem in Noord-Holland.
  • Rhode Island = Roode Eylandt (red island in Dutch). 
  • Yankees = the common first names of Dutch men, "Jan" and "Kees" slurred together. Yell that at any Dutchman and you were likely to guess his name.

 

...thus concludes our history lesson for the day :D

  • Like 1
  • Great! 1

Share this comment


Link to comment

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Blog Statistics

    • Total Blogs
      3
    • Total Entries
      586
  • Latest Forum Topics

  • Our picks

    • A US-China trade deal?; hope for Brexit breakthrough; IMF updates on economic outlook - DailyFX Key Themes
      UK Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar stirred hope when they both offered enthusiasm after their meeting, saying there was a “pathway” forward as they discussed the contentious border. That was followed by a meeting between the EU’s main negotiator Michel Barnier and UK Brexit minister Stephen after which it was stated they 'look forward to these intensified discussions in the coming days'. Though nothing material has yet been agreed to, this seems like a meaningful break owing to the language alone. Neither side has voiced confidence in their discussions for some time, so this does represent a significant change. 
      • 0 replies
    • Dividend Adjustments 14 Oct - 21 Oct
      Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 14 Oct 2019. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video. 
      • 0 replies
    • Trade wars; recession fears grow; gold's position - DailyFX Key Themes
      We have been unofficially engaged in a global trade war since March 2018. That is when the United States moved forward with a tariff on imported metals (steel and aluminum) from any destination outside of the country.

      As it currently stands, we are still awaiting another wave of products receiving a hefty tariff rate upgrade in approximately two months’ time while talks are set to resume on Thursday between the two parties. That said, reports over the weekend indicated China was not impressed with the Trump administration’s most recent efforts to find middle ground.
      • 0 replies
×
×