MacroWatch – “Risk on” theme extends

Intermediate
  • After the tensions that began 2020 between Iran and the US with the Middle Eastern airstrikes, a quick and significant de-escalation has seen markets focus back on global economic conditions.
  • The signing of the US-China phase one trade deal on Wednesday had little market impact as we had suggested in last week’s MacroWatch, though markets have continued to focus on the positivity that comes from the lack of certainty that impacted markets for the past 1-2 years from the trade war.
US China Trade deal signing
President Trump and Vice Premier Liu He, China’s top trade negotiator, sign a “Phase 1” trade agreement between the U.S. and China at the White House on Wednesday.
  • Global data has been mixed through the week, with a more negative tone from the UK, which has seen members of the Bank of England Monetary Policy Committee indicate potential for a rate cut.
  • This has seen the Pound Sterling (GBP) under negative pressures, with GBPUSD lower through last week.
  • On a wider front, equity indices remain very strong as earnings season has kicked off in full in the US, with financial companies starting the reporting cycle.
  • JP Morgan, Citigroup, Bank of America and Morgan Stanley have all performed well in the financial sector, as has United Health.
J.P.Morgan
  • This solid earnings performance thus far has encouraged the major US stock averages to hit new record highs, whilst in the Forex space USDJPY pushed back higher, through the 110.00 level to multi-month highs, echoing the “risk on” theme.
  • The U.S. impeachment process has moved to the Senate now and the trial has been set in motion, however, as we have continued to stress, a two-thirds majority of Senators is required to convict Trump on either of the two articles of impeachment, which is unexpected given the Republicans’ firm control of the Senate.

Key this week

  • The main focus this week will likely be on microeconomics, with the continuing Q1 earnings season.
  • Key stocks to watch reporting earnings this week will be American Express (AXP) on Monday, Netflix (NFLX) and IBM (IBM) on Tuesday, Johnson & Johnson (JNJ) on Wednesday, Intel (INTC) and Comcast (CMCSA) Thursday and finally Abbot Labs (ABT) Friday.
  • Central Bank activity see the Bank of Canada (BoC) interest rate decision and statement Wednesday, the European Central Bank (ECB) decision and statement Thursday, then the Bank of Japan (BoJ) Meeting Minutes on Friday.
  • The macroeconomic data spotlight will be on the UK Employment report on Tuesday and then on Friday we get preliminary data for January from Markit for global Purchasing Managers Index (PMI) data for Manufacturing, Services and Composite.
  • On the geopolitical front the focus will be on the Davos World Economic Forum, although we are not expecting anything that will likely impact markets significantly.
  • Plus, the US impeachment trial needs to be monitored to see if any Republicans could possibly vote against President Trump.
Date Key Macroeconomic Events
20/01/20 Martin Luther King Holiday, US markets closed
21/01/20 Davos World Economic Forum begins until Friday; UK Employment report, German ZEW survey
22/01/20 Canadian Consumer Price Index, BoC interest rate decision and statement
23/01/20 Australian Employment report; ECB interest rate decision and statement; New Zealand CPI
24/01/20 BoJ Meeting Minutes; Markit Manufacturing, Services and Composite PMI data

Steve Miley

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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