Duncan Donald

Mon, Apr 22

KYLIN TALK | Weekly Markets Update 22.04.2019

Last week brought the slow lethargic week, often seen in a week of national holidays with even the monotonous Brexit saga delivering little in the way of market stimulus. With the UK Parliament taking a break from session for Easter, there was little in the way of progress and developments of any significant nature. Therefore, it was hoped that economic could revert to be the driver for the UK market. However, this didn’t turn out to be the case as the Pound struggled to make any clear headway despite a strong showing in UK Retail sales which grew 1.1%. The upturn, which was attributed to seasonally warmer weather did little to support the Pound as it remains heavy closing the week at the bottom end of its weekly 1.3000-1.3120 range. UK Prime Minister Theresa May will address Parliament and take questions on Wednesday which could offer foresight of the cross-party negotiations as she attempts to form a government consensus.

In the US we also saw delivery of Retail Sales date which again showed a positive return of 1.6 versus the 0.9 forecast bringing the US Dollar some positivity. The release of the details of the Mueller probe into President Trumps campaign whilst seeming to prove links between Trump and Putin via high profile Russian business men has not proven too damning for the President as yet and coupled with a positive start to earnings season has led the Dow Jones to a close on the week at fresh highs of 26,600.

In the Eurozone we saw the Euro fall with several contributing factors. Firstly, was the release of data with the continued slowdown of German Manufacturing data. This led Germany to announce that the 2.1% growth estimate presented just over a year ago, which had already seen a revision to 1% now looks more probable to be around 0.5%. This dramatic fall from one of the global economies most progressive economies can be attributed to firstly the emissions scandals which has blighted the automotive industries. Additionally, the EU-US trade negotiations could heavily affect this beleaguered sector as Trump looks to increase tariffs on Eurozone Exports. Whilst not immediately impacting the economy as yet, the potential fall out from a No-deal Brexit also weighs heavy on the sector with the UK being a big importer of German cars and white goods. The Euro finished the week down nearly a cent at 1.1240 versus the US Dollar whilst the currency weakness and global stock climb saw the German DAX climb to 12,247.

A major factor in the positivity in the global stock markets came after continually strong data out of China as GDP, Industrial Production and Retail Sales data released last Wednesday all showed positive monthly gains. When coupled with the positive sentiment from both the US and China in the trade negotiations to date, the outlook is looking more optimistic for Chinese growth for now.

The Week Ahead

Monday - National holidays in most regions. IN the US session we receive the Chicago Fed National Activity Index and Existing home sales data

Tuesday - UK Industrial trends survey at 11am. In the afternoon we get Canadian Wholesale sales and US Redbook followed by House price index, New home sales and Richmond Fed Manufacturing Index. At 3pm its Eurozone Consumer Confidence.

Wednesday - Big data for Australia early in the session with their Inflation numbers. At 9am we receive the main Eurozone release of the German IFO data. At 10.30 UK Public Sector Net Borrowing Data. In the afternoon at 3pm we get the Bank of Canada monetary policy meeting determining the next steps for Canadian interest rate policy.

Thursday - The day kicks off with the monetary policy meeting from the Bank of Japan. In the UK we get Mortgage approvals then CBI surveys. In the US session we get Durable Goods data and Non-Defense Capital good orders. Late in the session New Zealand Trade and Export Data.

Friday - A raft of data from Japan early in the session with Employment, Industrial Production and Retail trade data. In the afternoon we get US GDP data, Consumption and Michigan Consumer sentiment data.