The Weekly Update

Last week global markets began with equities on the front foot with further announcements that a detailed trade deal between the US and China is near completion; the Chinese CSI 300 was up +6% on Monday alone and rallied further to close out the week. Other global equities were also positive performers with the S&P 500 up +0.4% making the ninth week out of the ten this year to yield a positive return. In addition to the positive statements over a potential trade deal, Fed chair Powell reiterated the FOMC’s willingness to be patient before any further rate hikes, and data last week (including US GDP and China PMI) exceeded their (meagre) expectations. US 10-year Treasury yields rose 10 basis points to 2.75% - remaining within the 2.60-2.75% range they have traded on for most of 2019 thus far.

However, it was geopolitical and nuclear issues that saturated headlines: with military retaliation-upon-retaliation between the nuclear powers of India and Pakistan escalating tensions in the Kashmir region to 20-year highs; Brexit brinkmanship continuing with the EU but with Prime Minister May finally conceding power for Parliament to rule out no-deal in a forthcoming vote; and the abrupt curtailment of the nuclear disarmament talks in Hanoi. The summit between the US and North Korea was over even before the planned lunch and joint signing; and all the vague optimism of last year’s summit evaporated as Trump “had to walk”, with Kim wanting nothing short of the US dropping all sanctions without having to give up their nuclear weapons.

Today we have South Korea Q4 GDP, Turkey inflation data, UK construction PMI and Eurozone producer price index. Tuesday sees PMI data across US, Eurozone, UK and China, Eurozone retail sales and Australia’s current account data; US trade balance and factory orders are out on Wednesday. Focus on Thursday will be on the ECB rate decision, and on Friday will be on the US non-farm payroll data. Also on Friday are France industrial production, Germany factory order data, China’s trade balance and Japan’s fourth quarter GDP.

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