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May Day: Theresa survives but for how long?

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  • Theresa May's government holds onto power, winning a no-confidence vote in parliament last night by 325 votes to 306. The Prime Minister has now set out to reach a cross-party solution for Brexit, although this will be extremely difficult as the PM was snubbed by the leader of the opposition last night saying that she is in charge of a "zombie government".
  • Sterling remained steady as the currency traded around the 1.2875 mark against the dollar after, as expected, Mrs May's government won the vote of no-confidence.
  • US equities closed higher on Wednesday after strong quarterly earnings by Bank of America and Goldman. The S&P 500 rose by 0.2% whilst the Dow increased by 140 points, both driven by the financial sector. The Nasdaq followed and increased by 0.15%.
  • Stock markets in Asia were mixed as concerns continue over rising tensions between the US and China. Japan's Topix gained 0.4% at the close, followed by the MSCI Asia Pacific Index which added 0.1%. On the other side of this, the Shanghai Composite and the Hang Seng both slid by 0.1%.
  • Oil slipped 0.5% down to near $52 per barrel as the US reach record output levels, counter-acting the signs of shrinking supply by OPEC+.
  • Gold traded slightly lower at $1,291.65 per ounce.

UK, US and Europe: Calls from the opposition and some leading Brexiteers for the Prime Minister to resign seems to have fallen on deaf ears. Last night, Theresa May's government survived a vote of no confidence tabled by Jeremy Corbyn, winning the vote by 325 to 306. It's unclear what is going to happen next in these extraordinary circumstances. Mrs May will seek further concessions from the EU in an attempt to get her 'Plan B' deal through the House of Commons, which the PM must layout to parliament next week. Looking ahead, earnings season continues with Netflix, Morgan Stanley and Taiwan Semiconductor posting results later today.

South Africa: Last night saw US markets trading in positive territory led by gains within the banking sector after The Bank Of America reported better than expected earnings. Asian markets and US Index futures are however trading lower this morning tempering the previous days gains somewhat. Last night saw British Prime Minister Theresa May surviving a vote of no confidence in parliament, helping restore some stability in the British Pound. Oil and precious metal prices are trading modestly lower this morning, while base metals are trading positive on the day. Tencent Holdings is up 0.8% in Australia, suggestive of a similar start for major holding company Naspers. BHP Billiton is down 0.2% in Australia suggestive of a slightly weaker start for locally listed diversified resource counters. The South African Reserve Bank (SARB) concludes its monetary policy meeting today where no change in lending rates is the expected outcome.

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

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Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Primark announce this morning that like-for-like sales fell in the 16 weeks to the 5th of January caused by reduced footfall during November, according to the retailer.
  • Fiserv is set to acquire payment processor First Data in a deal worth $22 billion in one of the largest deals we have seen in the financial technology industry.
  • Bank of America shares soared by 7% yesterday after quarterly profit reached a record level of $7.3 billion.
  • Goldman Sachs also beat expectations yesterday as earnings per share reached $6.05, beating estimates of $4.53, and posting revenue of $8.08 billion for the quarter.  In a statement, CEO David Solomon said "We are pleased with our performance for the year, achieving strong top and bottom line results despite a challenging backdrop for our market-making businesses in the second half".
  • Asset manager firm BlackRock profits fell short of expectations as the company's assets under management has fallen 5% over the last 12 months down to $5.98 trillion.

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