News & Analysis

A Busy End of the Month

January 29, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

US Government Shutdown

President Trump has agreed to temporarily end the shutdown, putting an end to the most extended shutdown in US history. The three-week pause initially lifted investor sentiment and helped Asian stocks push higher on Monday’s open. It is reported that the shutdown cost the economy $11 billion, which includes approximately $3 billion of permanent loss.

Economists are predicting a drop of 0.2% in GDP for the first quarter of 2019. There are still some negative effects that may not immediately be identified or quantified at this stage. Despite the temporary halt, there are a number of reports such as new home sales, construction spending, durable goods and factory orders are being postponed.

The release of fourth-quarter GDP data which was initially scheduled for Wednesday will be delayed.

However, the monthly non-farm payrolls reports will still be issued on Friday.  The data void has made it difficult for traders and the US Federal Reserve to assess the health of the US economy. The FOMC will hold their first meeting on Wednesday, and the lack of economic reports can compromise their outlook.

US-China Trade Talks

The trade talks resume this week amid the chaos surrounding the criminal charges against Huawei’s CFO. Both parties are facing increasing pressure to come to a trade deal as China’s economy is taking a hit and President Trump need to deliver some of its election promises especially as the funding of the Wall is on hold. Investors will probably monitor any information/headlines emerging from the high-level groups of delegations. The willingness to engage has increased the chances of some sort of a deal, but it is unlikely to be a quick- fix.

Since the start of the year, there is more optimism on the trade talks, but the reality in the state of negotiations are still far from conclusive given the looming deadline.

Earnings Season

It will be a busy week with more than 300 companies reporting earnings. After Caterpillar missed estimates for the first time in a decade and Nvidia downgraded revenue forecasts, investors appear to be on edge as it has exacerbated fears of slow global growth. Apple will release earnings on Tuesday while Boeing, Microsoft and Visa earnings are due on Wednesday.