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Market news - 18 January 2019

by  Niloofar Rafiei  |  18 Jan 2019

China

  • Chinese Total Social Financing (TSF) rose slightly to CNY 1.59 trillion in December, above market consensus expectations (CNY 1.20 trillion). Increases in bank loans and corporate bonds were behind the higher reading, even as the contraction in “shadow banking” activity continues, leading to a more challenging financing environment for smaller companies.
  • China's trade data released earlier this week showed weakening exports in December, particularly to the US as the effects of ‘front-loading’ ahead of the imposition of tariffs diminished. Global exports fell 4.4% in December from a month earlier, due to a softening in global growth and as the drag from the US tariffs intensified, but causing little market reaction given the growing expectations for a détente in the trade wars. Overall, China’s trade surplus with the US grew to a record $325 billion in 2018, the highest on record since 2006 and representing a 17% increase vs 2017.

US

  • After a series of downbeat recent business surveys in the United States in recent weeks, the Philadelphia Fed manufacturing index bucked the trend, rose to a seasonally adjusted reading of 17.0 this month, from a 2-year low of 9.1 in December and coming in ahead of expectations. The new orders index was particularly strong. Initial jobless claims edged down against expectations of a small increase.
  • The strong “risk-on” tone seen in markets since the start of the year continued this week, with company Q4 earnings announcements, whether strong or weak, tending to elicit a rally in the stock (in diametric opposition to the price action during the Q3 earnings season). Reasons cited include the improving outlook for US/Chinese trade negotiations, ongoing Chinese stimulus, the more dovish recent tilt of the US Federal Reserve, and a general sense that the weakness in markets in Q4, and in particular the plunge in December, had run well-ahead of the (admittedly softening) fundamentals.

UK

  • After Theresa May’s widely expected defeat this week in the “meaningful vote” in the House of Commons on the Brexit Withdrawal Agreement negotiated with the European Commission, an extension of the Article 50 exit date looks increasingly likely. The UK Prime Minister acknowledged that an extension to the agreement would only be agreed by EU member states if “it was clear there was a plan that was moving towards an agreed deal”, which has subsequently been confirmed by the EU with indication that it may come with conditions attached. Mrs May has sought meetings with leaders of other opposition parties and has committed to make a statement on her new approach on Monday.