January 14, 2019
Asia Pacific markets decline as investors react to China data
The Asia-Pacific markets started the week down on Monday, January 14. The major indices of South Korea, China, Hong Kong and Singapore plummeted. Japan's market is closed for a holiday.
Stocks in Asia were bearish, after Chinese government data showed that December exports and imports fell unexpectedly. Concern about a slowdown in the world's second-largest economy is growing.
However, China has announced that its 2018 trade surplus with Washington is the largest in more than a decade. Exports to the United States rose 11.3 percent year-over-year in 2018, while U.S. imports to China rose 0.7 percent during the same period. The Chinese yuan reached its highest level since late July against the dollar, while China and the United States expand trade talks in Beijing.
The chairman of the Federal Reserve has stated that they intend to further reduce their balance sheet, suggesting that they have not finished tightening monetary policy for the time being. The markets, however, do not expect further rate hikes soon. Data showing that consumer prices fell in December, for the first time in nine months, had little impact on the market.
On Friday, the dollar gained against the euro in a volatile environment. It was driven by technical factors after the euro reached key resistance levels. However, investors are cautious about the dollar's rise.
Brent price fell below $60 a barrel during Monday's Asian session after Chinese data showed a weakening of imports and exports.
On Monday's Asian trading, gold rose with Asian markets falling after China's poor economic data. Gold tends to rise in the face of lower interest rate expectations that cut demand for U.S. dollars. This makes the precious metal less expensive for holders of other currencies.
European markets are expected to open Monday's trading session lower.
The U.S. index recorded strong weekly gains
U.S. Markets rise more than 2% during the week.
The U.S. index recorded strong weekly gains in a very quiet week. But the closure of the U.S. government and concerns about the economic slowdown in China led to declines on Friday, January 11.
The Dow Jones Industrial Average and the S&P 500 rose more than 2 percent during the week, while the Nasdaq Composite rose 3.45 percent.
Amazon and Facebook were up more than 4 percent, while Netflix was up 13.45 percent.
The federal government remains partially closed. That's 21 consecutive days and there are still fears that the closure will continue for a long time.
On Thursday, President Trump announced that he would not attend the annual World Economic Forum in Davos at the end of this month due to the closure.
European equities mixed against Brexit and Federal Reserve outlook
On Friday, January 11, the European stock market did not undergo any major changes. Investors are trying to survive amid global political uncertainty.
The pan-European Stoxx 600 remained flat at the end of the session, with sectors and exchanges pointing in different directions.
The automotive and parts sector was the worst performer. Former Nissan Motor president Carlos Ghosn was charged with financial misconduct. Renault shares, which Ghosn still leads, fell by 2.2 percent.
In Europe, the proximity of the Brexit vote in the British Parliament is weighing. Japanese Prime Minister Shinzo Abe said in London that he expects both sides to avoid a Brexit without agreement.
Meanwhile, UK foreign secretary Jeremy Hunt said Friday that Brexit could be stopped if lawmakers do not approve the orderly exit plans.
Partial closure of the U.S. government
It is estimated that if the closing continues for another two weeks, the cost could exceed 5.7 billion dollars.
The partial closure, which has temporarily laid off more than 800,000 public workers, has already cost the U.S. economy more than $3.6 billion, according to calculations by the credit rating agency S&P Global.
The agency describes as 'modest' the impact that this closure may have, compared to the country's gross domestic product.
The impact of such a federal closure has both direct and indirect consequences.
There are the economic costs associated with the loss of visitors due to the closure of national parks or museums. It is also necessary to take into account the cost for those companies that have contracts with the public administration.
S&P forecasts a slowdown in economic growth
Standard and Poor's expects growth to slow in the United States, the euro area and China. However, it does not consider the fears of a recession to be justified.
This is the scenario put forward by the chief economist of the rating agency. Sylvain Broyer said that the US president has a very particular way of negotiating.
With regard to tariffs for example, for the time being everything is a threat, as the applied tariff increase is residual.
S&P predicts a rise in the GDP of the United States of 2.3% this year and 1.8% in 2020.
The greatest risk could come from the level of indebtedness of companies, in the context of rising rates. However, they are not going to rise as much and a collapse in profits is not expected.
In the eurozone, the agency estimates growth of 1.6% both this year and next year. A recession is not expected here either. Employment will rise by around 1%, with higher wages and lower inflation leading to higher purchasing power.
Trump will not attend the Davos Forum due to the partial closure of the Administration
The US president has cancelled his participation in the World Economic Forum in Davos, Switzerland, due to the political crisis caused by the partial closure of the Federal Administration.
The suspension of the trip occurs on the twentieth day of the partial closure of the Administration. Trump continues to insist that Congress approve funds for the construction of the controversial border wall with Mexico, in the face of frontal opposition from the Democrats who control the House of Representatives.
Different agencies have had to suspend some of their functions due to lack of resources. Some 420,000 employees, considered essential, have continued to work without pay. Another 380,000 remain on leave, also without pay.
OECD inflation slows in November
Year-on-year inflation in the Organisation for Economic Co-Operation and Development came to a halt in November, when it rose by 2.7% after rising by 3.1% the previous month.
Inflation was slowed by the moderation of the rise in energy prices, which rose by only 6.8%. In October they rose by 10.4%.
Food prices also slowed, rising by 1.9% from 2.1%.
The Organization highlights the 21.6% rise in inflation in Turkey.
Inflation slowed in Canada, Japan, France, the United States and Germany.
It remained stable in Italy and the United Kingdom.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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