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Despite the fact that Iran fired missiles at bases used by U.S. troops in Iraq in retaliation for the assassination of Qassim Suleimani, commander of Iranian forces, tensions between two countries mysteriously decreased, pushing oil prices down. Meanwhile, Europe continues to present sign of political instability, in particular in France, where strikes against Macron pension reform plan became longest since May 1968 and, of course, Spain, where the yield on Spain’s 10-year bond rose after the investiture vote that saw Pedro Sánchez returned to power. In the latter case, Barclays believes that this new coalition government could lead to a more rigid labor market, generating tensions with Brussels and compromising Spanish growth in the medium term.
On the positive side, we can mention the approval by Britain’s House of Commons of a bill that paves the way for a departure from the European Union at the end of the month. According to Bloomberg Economics, over the past three years, the economic cost of Brexit has already hit 130 billion pounds or $170 billion, with a further 70 billion pounds set to be added by the end of this year. It is not clear yet how the British economy is going to perform after Brexit but so far the consequences are quite negative: the economy is 3% smaller than it could have been had the relationship been maintained. However, flows into UK equity funds hit their highest level for at least five years in December after the victory of Boris Johnson. Investors put more than £330m into UK equity funds in the two days following the election and over £740m in the 13 trading days in the month after the result. UK property funds, in turn, saw a record £2.2bn of outflows in 2019, with December the second-worst month of outflows ever for the asset class, according to data from funds network Calastone.
Commodity movements
The S&P GSCI was down 3,2% for the week but remained up 6,2% YoY. The Dow Jones Commodity Index (DJCI) was down 1,04% and up 3,3% YoY. Gold decreased 0,3%, WTI Crude Oil fell 6% due to better than expected U.S. inventories that increased by 1.2 million barrels from the previous week. Finally, the Agriculture Index gained almost 2% in one week.
Last week’s market performance snapshot
Macro data of the week
- The ISM Manufacturing Index fell to 47.2 in December, vs. 48.1 in November. New orders, production, and employment contracted for the fifth consecutive month. ISM Non-Manufacturing Index came in at 55.0 for December, above expectations.
- The Conference Board’s Consumer Confidence Index edged down to 126.5 in the initial estimate for December, vs. 126.8 in November (revised from 125.5).
- ADP Employment Change (Dec): 202k vs 160k, 124k prior
- Initial Jobless Claims (Week): 214k vs 220k, 223k prior
- The unemployment rate remained unchanged at 3.5%.
- Home mortgage apps rose 5.0% w/o/w, above the previous decrease.
Events, Releases, speeches to follow this week
Monday
CNY New Yuan Loans CNY (DEC)
UK GDP, industrial production, manufacturing production, and trade balance (November)
Tuesday
Chinese trade balance (December)
US CPI inflation (December)
Wednesday
UK CPI inflation (December)
Eurozone industrial production (November)
US EIA weekly crude inventories change (w/e 10 January)
US-China trade deal signing
Thursday
ECB minutes (December)
US retail sales (December), Philadelphia Fed Manufacturing Index (January)
Friday
Chinese GDP (Q4), industrial production, retail sales, fixed-asset investment (December)
UK retail sales (December)
Eurozone final CPI inflation (December)
eurozone final CPI inflation (December)
