Weekly Digest - INVESTEC
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Markets rallied strongly into the end of last week, helped by positive developments in the US-Chinese trade dispute and a brightening outlook for the US consumer. Reports indicate that the US and China have reached a consensus in principle on the main topics in their trade negotiations, with talks set to resume this week. 1 March remains the US deadline to raise tariffs on $200bn of Chinese goods from 10% to 25%, and Trump has indicated he will extend this deadline if the two sides are close to striking a deal. This has helped propel Asian stocks to their highest levels since October, easing competing concerns about a Chinese slowdown. Last week, US consumer confidence rebounded from a two year low, bolstering the case that the poor retail sales data released early last week was perhaps a one-off. In the UK, the latest retail sales figures came in well ahead of expectations.
Potential clouds on the horizon include a freshly announced snap election in Spain, after the minority Socialist government failed to pass a budget. Italian government bonds also suffered last week, after a fresh bout of anti-EU rhetoric from government officials. In domestic politics, a number of MPs have resigned from the Labour Party today in a protest against Corbyn’s leadership.
This week, minutes from the latest European Central Bank meeting will bring more detail on the January gathering at which policymakers acknowledged the weakening economic backdrop. We also see Theresa May go to Brussels to continue efforts to negotiate changes to the Withdrawal Agreement. There is now a consensus that Parliament will vote again on 27th February and on this occasion, being as close as we are to our supposed leaving date, MPs may seize control of the process and either rule out a No Deal Brexit or extend Article 50 or both. This is something they have baulked at doing until now, but with just a month to go at that point MPs may be more inclined to act.