Thu, Dec 03, 2020 @ 14:21 GMT
Home Contributors Fundamental Analysis Markets Update: Investors Await Brexit Plan B as Chinese Economy Slows Further

Markets Update: Investors Await Brexit Plan B as Chinese Economy Slows Further

With the US markets closed, and economic calendar fairly light, it has been a dull Monday so far. But that could all change when Theresa May unveils her revised Brexit plan to the parliament later this afternoon. Her initial Brexit plan was rejected overwhelmingly by the parliament last week in a humiliating defeat for the PM. So, it remains to be seen how she will approach the situation in light of that defeat and given that the time is fast running out. Will she intentionally run the clock down, so we are headed towards a no-deal Brexit? Or is she using the threat of a no-deal Brexit as a weapon to win more favours from the EU, but will the latter call her bluff? There are a lot of questions, but very few answers. I am hopeful that there will be some clarity by the end of the day, but honestly can’t see how she will be able to come up with a plan without ruling out the prospects of a no-deal Brexit.

Meanwhile, the latest economic data out of China confirmed what we and many other analysts had suspected: slowdown in growth. While annual GDP grew at a still-strong 6.6%, this was the lowest rate since 1990. On a quarterly basis, growth slowed down to 6.4% in the last quarter of 2018, compared to a year earlier, down from 6.5% in Q3. Growth was undoubtedly held back by China’s ongoing trade dispute with the US, which has weighed on business and consumer sentiment. However, the growth figures were in line with analysts’ expectations and although European stock markets have started on the back foot, this could be due to profit taking and concerns elsewhere including, as mentioned, Brexit. What’s more, industrial production unexpectedly grew more robustly than anticipated at 5.7% y/y. Still, the consistent slowdown in China’s economic growth is worrying nonetheless with GDP easing now for the third consecutive quarter. Some market commentators have suggested investors will be concerned that the slowdown in China and other emerging market economies may hurt growth in developed economies such as the US, and therefore weigh on company earnings. So far, there has been little evidence to suggest that may be the case, although we have seen lots of disappointing numbers from Germany and heard warnings from a couple of tech giants whose sales of high-end smartphones have disappointed in China. Those concerns already played a big part in the stock market sell off towards the end of last and start of this year, but since then investors have shown few concerns. Could that change this week?

Forex.com
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Featured Analysis

Learn Forex Trading