Five Things You Need to Know to Start Your Day
Five Things You Need to Know to Start Your Day
(Bloomberg) --
Good morning. The U.S.-China trade process reaches a milestone, Vladimir Putin is shaking things up in Russia and the stock rally rolls on. Here’s what’s moving markets.
China Trade
For more than three years, Brexit was the saga that moved European markets and looked like it would never come to an end. Now it appears that the U.S.-China trade negotiations are taking over that role. Sure, the two nations signed a phase-one deal Wednesday in Washington, clearing one hurdle. But that looks like it’s just the end of the beginning. President Donald Trump said he’s turning his attention right away to the next phase, when all sorts of thorny issues will have to be addressed, such as allegations of China’s state-backed hacking of American companies and government institutions and the vast web of state subsidies that form the spine of China’s model of state capitalism. The U.S. plans to maintain tariffs on roughly two-thirds of imports from China while second-round talks are under way. So enjoy this moment while you can, and buckle up for more volatility.
Putin’s Premier
What is Vladimir Putin up to? The Russian president surprised the world Wednesday when he replaced his long-serving prime minister and called for sweeping constitutional changes, fueling speculation that he’s moving to extend his grip on power beyond the end of his term in 2024. The upheaval for now isn’t really a market event—the ruble and Russian stocks were little changed on the news—but it adds to the backdrop of geopolitical turmoil facing investors.
Markets Gain
Markets, meanwhile, just keep climbing that wall of worry represented by trade, Middle East tensions, uncertainty in Russia, Brexit, impeachment you name it. For all the geopolitical factors that cause sleepless nights for investors, the backdrop is still supportive: Economies are growing, interest rates are low and oil is still below $60 a barrel. The S&P 500 finished at another record on Wednesday and almost every market in Western Europe is up for the year. Stocks may be due for a breather, though, given how relentless the rally has been. For today, stocks in Asia are mixed and European stock-index futures are little changed to higher.
U.K. Rates
Keep an eye on U.K. stocks and the currency. Bets are piling up that the Bank of England will cut interest rates this month as the economy falters. Weak inflation data Wednesday provided the latest impetus, and now the market has become the most aggressive since 2016 on an imminent rate reduction, pricing in a more than 60% chance. Some currency strategists are counseling caution, advising traders to wait to see next week’s purchasing managers indexes for another gauge of how the economy is doing. The pound has been hammered this month after a flurry of dovish statements from BOE policy makers seemed to put a January move in play. The U.K. is already one of the better-performing big stock markets in Europe early in the new year, and further weakness in the currency should provide more support for the dollar-earning companies that dominate the FTSE 100 Index.
Coming Up…
The pace of trading updates from U.K. companies is picking up, with Associated British Foods Plc, Whitbread Plc and Pearson Plc among those on the agenda today. On the continent, French grocer Casino Guichard Perrachon SA announces sales after the market closes; the stock has been a battleground for years between short sellers and CEO Jean-Charles Naouri. Interest-rate decisions are due from the central banks of South Africa, Turkey and Egypt, the U.S. announces retail sales for December and there’s another big U.S. bank — Morgan Stanley — on the earnings calendar.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- The European Union is going to miss the U.K. when it’s gone. Really.
- Lagarde’s year of listening may see ECB get earful on inflation
- ECB president likely to unveil strategic review on Jan. 23.
- From Rio to Singapore, here are the world’s priciest cities.
- Toronto, the ideal city to move to if you want to become less famous.
- London’s future now really up for grabs in next Brexit phase.
- Here are five trends MSCI sees leading growth in ESG investing.
- What is natural wine? (Besides delicious).
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net
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