Please find the latest edition of Weekly Digest attached.
Equity markets ended January on a weak note last week as investors fretted about softer economic data and the impact of the coronavirus. In the UK, the FTSE 100 was down 1.3%, while Germany’s Dax was down by the same amount, with weaker than expected European GDP data taking a toll. Later, in the US, the S&P 500 closed down 1.8%, with a disappointing earnings report from Caterpillar adding to the gloom. Friday’s proceedings brought an eventful January to a close, in which the best performing of the major assets was Gold, and the worst Oil.
The Chinese stock market reopened today, having been closed first for the lunar new year and then due to the coronavirus outbreak, and immediately fell 9% as it played ‘catch-up’ before rallying to finish around 7.5% lower. The rally may have been helped by a policy response, with the Chinese central bank announcing numerous measures over the weekend to shield the economy from the effects of the outbreak. This included the injection of $21 billion of liquidity into money markets this morning. Thus far, there have been 361 deaths from 17,205 cases (up from 170/9,692 on Friday), with the fatality rate continuing to hover around 2%. Amid continuing curtailment of commercial activities (Apple has now closed a number of stores), it is reported that Chinese demand for oil has fallen by three million barrels per day (total world output is only around 100 million). Other Asian markets were generally weaker, with Japan, Taiwan and Philippines all down around 1%, although Hong Kong and India both closed in the black.
In the UK, today is the first business day since Brexit and Prime Minister Boris has called for a comprehensive trade agreement that is at least as good as the one the EU has reached with Canada, whilst also asserting his belief that the UK can prosper without. He also reiterated the government’s position that the UK will not align itself with EU rules. This was followed by a speech from Michael Barnier setting out the EU’s position, serving as a reminder of how far apart the sides are ahead of the commencement of detailed negotiations next month. Sterling is down around 1.3% against the euro at the time of writing.
It is a busy week in US politics. Today sees the Democratic Party’s Iowa caucuses, which only account for around 1% of convention delegates but will nevertheless give us a sense of the candidates’ standing and momentum. In national polls (per Real Clear Politics) Joe Biden leads with 27.2%, while Bernie Sanders has 23.5% and Elizabeth Warren 15.0%. In Iowa, however, it is Mr Sanders who has a narrow lead over Mr Biden. We will learn a lot more from Super Tuesday, in just over four weeks, when around one third of delegates are up for grabs. Remember also that it is not too late for other candidates to enter the race.
President Trump’s impeachment trial is expected to conclude this week, with acquittal inevitable after the failure last week of the attempt to call new witnesses. Closing arguments started today, and the whole process is expected to conclude within a few days, but probably not until after Mr Trump delivers his State of the Union address tomorrow.
The earnings season rolls on, with Alphabet (Google) reporting later today, BP and Disney tomorrow, followed by Vodafone, Compass and GlaxoSmithKline on Wednesday.