News & Analysis

Week Ahead – Looming deadlines – Trade Talks, Border Wall and Brexit

February 11, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Market Overview

Risk sentiment soured towards the end of the week as fears of global growth resurfaced. There were more downgrades from central banks- the Reserve Bank of Australia, the European Central Bank and the Bank of England.

Week Ahead – Looming deadlines: Trade Talks, Border Wall and Brexit

Trade Talks

A new round of trade negotiations will begin in Beijing on Monday. The focus will be on Intellectual Property, and it is reported that the U.S negotiators will be pressing China to make structural reforms. Last week, it was made public that President Trump will unlikely meet President Xi Jinping before the trade deadlines denting the fragile trade optimism in the markets. The lack of progress on the trade front is keeping investors on edge given the looming deadline as they are questioning whether a breakthrough is possible even if a presidential summit does not take place before March 01.

Another US Shutdown Looms

 The talks to avoid another government shutdown stalled and the White House is not taking a shutdown off from the table. The 35-day closure, which is the most extended shutdown in the US history came to a halt late January, and federal agencies are currently operating on a stopgap bill. Towards the end of last week, there was renewed confidence that there might be a compromise on border security but there was a U-turn during the weekend regarding the funding on the Wall which will likely overshadow the markets’ sentiment across the week until Friday’s deadline.

Brexit

The Prime Minister, Theresa May is appealing for more time to get Brexit deal. Last week the Bank of England (BoE) has lowered the growth forecasts for its economy due to Brexit uncertainties and raised warnings of adverse consequences of Brexit. It will be a big week for the UK with the releases of a few lagging and leading indicators that will provide more insights on how the economy has changed during Brexit jitters and how it will likely perform over time. 

  • Monday: GDP preliminary figures, Manufacturing and Industrial Production
  • Wednesday: Retail Price Index, PPI and CPI data
  • Friday: Retail Sales

The markets are expecting Manufacturing and Inflation ddata to reflect the economic slowdown indicated by BoE’s warnings. Any significant deviations can cause more volatility in the Sterling pairs.

Central Bank

 The Reserve Bank of New Zealand (RBNZ) will make its first interest rate decision for the year 2019. Markets participants are expecting the RBNZ to convey the same dovishness we have seen lately by major central banks like the RBA, the Fed, the ECB and the BoE. The New Zealand dollar was already under pressure last week in anticipation of the same dovish tones from RBNZ.

We will see the Press Conference from RBNZ on Tuesday followed by the Rate Statement and Monetary Policy Statement on Wednesday. Other notable economic data will be the Electronic card Retail Sales on Monday and Business PMI on Thursday.

Economic data

  • Inflation Data: We will have new CPI figures for the UK, US, and China across the week. The US CPI data will stand out as the Fed has become more data-dependent.
  • Gross Domestic Product: Aside from the UK, GDP figures for the Eurozone area and Germany will b released on Thursday. Germany’s GDP contracted by 0.2% for the third quarter in 2018 and the fourth quarter figures will help to assess the outlook for the economy. Analysts are predicting a slight rebound of 0.1%.

Commodities Markets

The renewed worries on slowing global growth will probably keep oil prices on the downside. However, buoyant oil reports supported oil prices lately, and we also expect this week reports to provide a temporary lift if they surprised to the upside.

 

Tuesday, 12 Feb 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
1.123 0 0.2 0.049 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 1.409