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The meaningful vote: not-so-bad outcome or disaster? - EMEA Brief 15 Jan

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  • Crude oil bounced higher overnight after a free-fall since Friday. WTI floated past $51.50 a barrel, after gaining 1.29%, as the markets struggle to balance out the OPEC production cuts with concerns over global growth and increased US production. 
  • Gold prices held steady as investors balance out the strong trading session in Asia with expectations of fewer interest rate hikes by the US Fed. The yellow metal lost about 0.2%, trading at $1,291.33 at 6am GMT.
  • Asian equities gained as markets recovered after poor economic data in Europe and China. The rebound was helped by Chinese officials’ vow to curb taxes. Hong Kong’s Hang Seng was the top performer with a jump of 1.7%. The MSCI Asia Pacific Index was up 1% at 4am GMT. Will investors hold their nerves during the European session in face of the Brexit vote?
  • Weak China data pushed Yen crosses higher, despite supportive comments from the PBOC and the Ministry of Finance. AUD, EUR, NZD, CAD and GBP all traded higher against CNH. 
  • Bitcoin remained unchanged overnight at $3665.75 as of 7am GMT, after a short rally yesterday. As Russia is reportedly planning to replace US dollar reserves with Bitcoin, investors interest towards cryptocurrencies seem to increase. While the Winklevoss twins are waiting for the SEC to approve their ETF, last week Bitwise Asset Management filed to sell shares of a fund that would own a mix of short-term treasuries, US dollars and Bitcoin. As a speculative asset in its infancy, Bitcoin might not have found price stability just yet.

Asian overnight: Asian markets have been on the rise, with Chinese indices leading the charge higher with gains of almost 2%. Japanese markets have returned after yesterday’s national holiday, with both the Nikkei and Topix in the green. As market fears spurred by weak Chinese trade data fade, we have seen sectors such as the mining and energy sector rebound on Tuesday.

UK, US and Europe: Looking ahead, today is a hugely momentous occasion for UK politics, with UK Parliament finally afforded the opportunity to vote on Theresa May’s Brexit proposal. The meaningful vote seems to be headed towards a disastrous outcome later today as at least 70 members of the Conservative Party pledged to join opposition. As Theresa May already postponed the vote in December, she might not have much more room for maneuver to avert a disorderly Brexit. The British pound could feel the hit, or the relief, before anything else. Looking ahead, today is a hugely momentous occasion for UK politics, with UK Parliament finally afforded the opportunity to vote on Theresa May’s Brexit proposal. Neil Jones, head of hedge-fund sales at Mizuho Bank, sees the sterling fall to $1.225 if the defeat. For the day-time, eurozone trade balance, US PPI inflation, US Empire state manufacturing survey, and an appearance from the ECB will also help provide market volatility.

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

Econ Cal 15 Jan.PNG

Source: Daily FX Economic Calendar

1.30pm – US NY Empire State mfg index (January): previous reading 10.9. Market to watch: USD crosses

Evening – UK Parliament to vote on Brexit deal: the House of Commons will vote on the PM’s Withdrawal Deal. It is still unclear whether it will pass, and the future is uncertain if it does fail. Market to watch: GBP crosses

Corporate News, Upgrades and Downgrades

  • Persimmon said that it expects annual profit to be modestly ahead of current forecasts, thanks to higher home completion numbers and better selling prices. Revenue for the year to 31 December was up 4% to £3.74 billion, while completions were up 3% to 16,449.
  • Provident Financial expects annual profits to be at the lower end of expectations. Profits in the year to the end of December were likely to be towards the bottom end of the £151-166 million forecast. Impairments had been modestly higher than expected, the firm said. 
  • Savills said that it expects to report growth in revenue and underlying profit after strong trading in the final quarter of the year. Results for the year are expected to be in line with forecasts, but the outlook for 2019 is overshadowed by uncertainties around the globe. 
  • Hays saw Q2 performance bolstered by growth in its international businesses. For the final quarter of 2018, total net fees were up 8% overall, and 9% on a like-for-like basis. The firm said that the outlook remained good across most markets. 

DIA upgraded to hold at HSBC
Eiffage upgraded to buy at HSBC
Weir upgraded to buy at SocGen
Ferrari upgraded to market perform at Bernstei

BBVA downgraded to hold at HSBC
IMI downgraded to hold at SocGen
Cairn Energy downgraded to equal-weight at Morgan Stanley
IMI downgraded to hold at SocGe

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