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Clouds Loom as Chinese Economy Falters - EMEA Brief 14 Jan


Guest JoeIG

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  • 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)

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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

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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

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