Market movers today

US markets are open again today after being closed yesterday due to Martin Luther King Jr. Day.

In the UK, focus is on the amendments to Theresa May’s Brexit Plan B and whether the members of parliament can get behind one or more of them. So far, the problem has been that there is no majority for anything in the House of Commons. The UK jobs report for November is also due, where we estimate both the unemployment rate (three-month average) and the annual growth rate in average weekly earnings (three-month average) were unchanged at 4.1% and 3.3% y/y, respectively.

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In Germany, focus is on the ZEW survey data for January. The current situation index has been falling over the past three months, which was likely also the case in January.

Selected market news

Yesterday, US President Trump urged China to make a trade deal in order to support the Chinese economy on the back of the weaker Chinese economic data. On top of the comments from Trump, Chinese President Xi Jinping came with an unusual warning to the Chinese leaders about ‘sharp and serious dangers of a slackness in spirit’.

Hence, there is little doubt about the seriousness of the slowdown in the Chinese economy. The IMF cut its global economy forecast for 2019 on expectations of the lowest growth in three years, warning about the threat to the global economy from the trade tensions as well as weak demand in the eurozone economy. Hence, growth was revised down from 3.7% to 3.5%.

The Asian equity market has reacted negatively to comments from Trump and Xi Jinping as well the softer growth outlook from IMF this morning. 10Y JGBs are trading at a yield below 0%. Hence, we expect a negative opening in the European equity markets as well as a positive opening in the bond market with lower yields this morning.

As expected, PM Theresa May’s Brexit plan B did not really give us any new information or clarification. It seems like May’s strategy is to find out how to get her supporting party, Ulster’s DUP, on board, as it would mean bigger support also within her own party. Now, focus is on the amendments, where our focus is on these four topics: (1) a customs union or not, (2) a possible extension of Article 50, (3) preparation of a new EU referendum and (4) new deadlines for Theresa May. The main problem with Brexit is that there is no majority for anything, so it is not a given that any of the amendments will get support from the majority of the MPs. Focus is also on the EU, where we no can no longer rule out a long extension of Article 50, giving time to negotiate the future permanent relationship, which would be the best way to avoid ever having to activate the much-hated Irish border backstop.

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