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U.S. Government Shutdown Ends After 35 Days - EMEA Brief 28 Jan

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  • The 35 day partial US government shutdown has ended after Trump conceded his demand for $5.7 billion to build his border wall as a condition for reopening the government. The temporary measure will fund the government for three weeks while Congress try to craft an immigration deal that pleases the president. 
  • US equities closed at a high on Friday as a solution for the partial government shutdown is reached. The Dow closed 0.8% higher at 24,737.20, whilst the S&P 500 also gained 1% and the Nasdaq edged higher on the back of strong earnings from Starbucks. 
  • In Asia, China's CSI 300 and Hong Kong's Hang Seng lost almost 0.2%, whilst Japan's Nikkei closed 0.6% lower, led by a fall in utilities stocks. Australian markets were shut for their 'Australia Day' holiday.
  • The pound hovered around a three-month high of $1.3218 on Friday as optimism arises that the UK can avoid a no-deal Brexit. The dollar slipped 0.2% against the yen at 109.31.
  • Oil prices have fallen as Australia became the latest country to back the Venezuelan opposition leader Juan Guaidó as the major oil-producing country's interim president.  Brent crude was down 1% at $61.02 a barrel, WTI fell 1.1% to $53.09. 
  • Gold reached a 7-month high of $1,304.40 in the early trading session. 

Asian overnight: A largely negative session in Asia saw losses across Japanese, Chinese, and Hong Kong markets. With oil prices one of the biggest movers, Australian markets would have likely joined those losses had they not been closed for Australia Day. Turmoil in Venezuela had largely written off any hopes of a resurgence for the nation, yet with the military chief defecting and urging his fellow soldiers to do the same, the potential for a huge shift is evident. Given Venezuela has the largest oil reserves in the world, the impact on global supply is obvious should the country shift direction. 

UK, US and Europe: Looking ahead, a number of US releases appear to have been delayed despite the resolution found for the funding of government entities. Thus, instead markets will be watching for the appearances from Draghi and Carney in the afternoon. 

South Africa:  Global markets are trading mostly softer this morning with US Index Futures down around 0.3% and the Shanghai Composite down around 0.2%. Today's losses partially temper strong gains in equity markets on Friday, following news that the Peoples Bank of China (PBOC) had freed up nearly $40bn for bank lending.The dollar softened on Friday, which combined with trade optimism, has seen metal prices mostly higher, with Gold now back above the $1300/oz mark. The rand is trading flat to marginally weaker this morning, although remains around its best levels seen in the last few weeks. Tencent is 0.4% lower in Asia suggestive of a slightly softer start for major holding company Naspers.

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

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Source: Daily FX Economic Calendar

3pm – US new home sales (December): sales to rise 0.7% MoM. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Wood Group has sold three non-core assets for $28 million, and has finalised the previously-announced sale of a wind farm.
  • TI Fluid Systems expects annual operating margins to be in-line for the ear, with overall results meeting forecasts. The CFO will also stand down once a replacement has been found.
  • Paragon Banking said it boosted lending volumes by 41% in its first quarter, with total lending volumes rising to £660.5 million.
  • Saudi Aramco plans to invest almost $1.6 billion for a 19.9% stake in South Korean refiner Hyundai Oilbank.

Coca-Cola HBC upgraded to buy at Goldman
Dixons Carphone raised to overweight at Morgan Stanley
Next upgraded to equal-weight at Morgan Stanley
National Express upgraded to buy at Liberum

ABB downgraded to sell at Berenberg
Micro Focus cut to neutral at Goldman
Panalpina downgraded to hold at Baader Helvea
Tod’s downgraded to underperform at Jefferies

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