Concerns over Chinese economy keep indexes down

The FTSE started the day with a marginal decline but after a few initial bouts towards the higher end of the daily range it plunged mid-morning and remained in a lower range for the rest of the day. The London index, like Asian and US gauges, got spooked by weaker than expected Chinese December trade data indicating a 4.4% annual decline in the country’s exports. But despite the decline the country’s December exports remain the third strongest for 2018.

The FTSE started the day with a marginal decline but after a few initial bouts towards the higher end of the daily range it plunged mid-morning and remained in a lower range for the rest of the day. The London index, like Asian and US gauges, got spooked by weaker than expected Chinese December trade data indicating a 4.4% annual decline in the country’s exports. But despite the decline the country’s December exports remain the third strongest for 2018.

Citigroup shares rally after results

Citigroup surprised the market with a better than expected set of profits in the fourth quarter – although the bank’s revenues declined to their lowest level in two years – as it managed to cut operating expenses by 4% because of lower compensation costs and due to a lower tax rate. The decline in income came mainly from lower fixed-income sales and trading earnings and could be a sign of what can be expected in the coming quarters given the volatility in the US bond and equity markets.

The rest of the week will be dominated by banking earnings as JP Morgan Chase and Wells Fargo report their results on Tuesday followed by Goldman Sachs and Bank of America on Wednesday and Morgan Stanley on Thursday. US banking giants are expected to turn in decent results not only based on the growth in the previous quarters but also the latest retail sales numbers and historically low unemployment levels in the US. The Fed’s recent U-turn on rates for this year will also work in favour of further retail spending. However, like Citigroup, the other banks may have registered some trading losses during the volatile pre-Christmas trading weeks.

Oil prices decline despite Saudi production cuts

Two key factors are battling it out in the oil market at present. On one side of the coin is Saudi Arabia’s production cut which has already removed 800,000 barrels of oil a day from the market since the OPEC decision in December and is expected to increase to 1 million barrels a day throughout the first quarter. On the other is the slowdown in China’s manufacturing and industrial production and, as of Monday’s data, a decline in exports. So far, the China factor seems to be winning and Brent crude is notching lower towards the $60 level. The contract slipped today almost 0.5% but could lose more ground if Chinese data continues to be weak or if the trade talks between China and the US show no significant signs of improvement.

Theresa May speech helps pound perk up

The pound perked up as the Prime Minister made a last ditch appeal to MPs to vote in favour of her Brexit proposal tomorrow. Sterling gained 0.4% against the dollar and 0.37% against the euro, spiking in the afternoon after a day of fairly range-bound trading. The vote Tuesday is still expected to go against the PM and if it does she will have three days to come up with a plan B for Brexit. The pound is gaining ground as investors are beginning to bet on a delay in Brexit or an outright challenge either against the Conservative party or the result of the Brexit referendum.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.