The Weekly Update

Last week, IMF global growth forecasts for 2019 were revised lower again with notable slowdowns in Germany, Italy and China. The underestimated challenges of reaching specifics on a trade agreement between US and China were highlighted by Wilbur Ross, US Trade Secretary, perhaps trying to dampen expectations ahead of the forthcoming US visit of Vice Premier Liu He. Resolving contrasting intellectual property attitudes, for example, continues to prove infinitely more difficult: in contrast to recent progress on simpler issues that have often come with overblown press statements. Sterling rallied a further 2.5% as markets gauge a reduced likelihood of a no-deal Brexit. Otherwise markets showed resolve amidst the broadly negative newsflow with the S&P 500 shaving only -0.2% off the strong gains so far in January and the MSCI World Index flat on the week after a similar start-of-year rebound. US 10-year Treasury yields shaved off less than 3 basis-points to 2.76% over the shorter 4-day week (MLK day).

Fourth quarter corporate earnings continued in their droves last week, even if geopolitical news continued to dominate the front pages. Numerous airlines were amongst those showing strong fourth quarter earnings, while IBM jumped +8.2% last week after beating forecasts, having lost almost a quarter of its market value in the last quarter of 2018.

Brazil’s Bolsonaro affirmed his government’s priority on pension reforms while Paulo Guedes, investment banker turned finance minister, purported the country should come close to closing this year’s primary deficit to zero on the back of the current proposals. Also this week the Bank of Japan confirmed a notable increase in share buybacks; the Topix was up 0.55% on the week.

The week is expected to see plenty of activity from Tuesday onwards, starting with the UK Parliament's Brexit amendments and vote on Theresa May’s Plan B. Next is the US Fed’s interest rate decision on Wednesday along with Eurozone business confidence and consumer confidence across Japan and Germany. Thursday ends the month with Eurozone GDP and unemployment data, US jobless claims, Japan industrial production, Germany retail sales and France CPI. Lastly, Friday closes out the week with US non-farm payrolls, Eurozone CPI and PMI data across US, China, EU, Germany, France and the UK.

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