Market sentiment seems to be on tenterhook today as the latest round of trade negotiations between the US and China swing round. Whilst traders have been more confident of progress over recent weeks, the fact that the US has filed criminal charges against Meng Wanzhou (the finance director of Huawei) will hardly ingratiate the Chinese delegation for the two day meetings that begin on Wednesday. So far there has been little reaction to this, however, it may hamper progress towards an agreement. In Europe, the Brexit bandwagon rolls back into town once more and it could be a crucial day for the direction that the UK takes. The UK Parliament debates and votes on a number of amendments to Prime Minister May’s deal that she secured from the EU. Amendments (which are yet to be confirmed) possibly include a move to delay Article 50 beyond 29th March, a change to the contentious Irish backstop, a demand to take the prospect of “no deal” off the table, and perhaps even a second referendum. Whichever of these amendments get a majority (perhaps none of them), could then shape Mrs May’s next step with regard to what she goes back to the EU with. Sterling traders will be watching closely, as several of the amendments could force Mrs May into a shift away from a “hard” Brexit which would continue to boost sterling.
Wall Street fell over again last night with the S&P 500 -0.8% at 2644 whilst futures are also ticking a shade lower. However, Asian markets were relatively mixed (Nikkei +0.1%, Shanghai Composite -0.1%) whilst European markets appear to be mildly higher with FTSE futures +0.3% and DAX futures +0.1%. In forex, there is a mixed outlook for the dollar with little real move. Sterling is a shade lower ahead of a crucial day for Brexit, whilst the Kiwi is outperforming. In commodities, with the dollar still sluggish, gold has retained its break above $1300, whilst silver is also still holding its gains. After a big drop yesterday, oil has rebounded around a percent amid reports that Russia will do more to comply with the OPEC+ production restrictions.
The US data will be of interesting in the afternoon with the S&P Case-Shiller House Price Index for December at 1500GMT which is expected to remain at +5.0% (+5.0% in November) having fallen for the past seven months. The Conference Board’s Consumer Confidence for January is at 1500GMT which is expected to drop back to 124.0 (from 128.1 in December) which would be a third month in a row of decline but also the lowest since December 2017. There could also be considerable volatility in the evening with the UK Parliament voting on amendments to the Government’s Withdrawal Agreement.
Chart of the Day – Brent Crude
The oil price has been coming under a degree of pressure in recent days as the market has consolidated. However, it is interesting to see that the outlook for Brent Crude has been deteriorating more than WTI and could be a move that is leading WTI lower. The recovery uptrend since the latter stages of December was broken last week after the market fell over to leave resistance at $63.15. On a technical basis there is worry for the bulls coming through with the marked deterioration in the Stochastics (which have posted a sell signal). A