Market themes of the Day: China's trade slows as trade tensions bite

What you need to know before markets open
Main themes:

  • The UK manufacturing fell -0.3% over the month in November while monthly UK GDP rose above expectations by 0.2%. 
  • ECB Governing Council member and Austrian central bank governor Ewald Nowotny said growth rates will be slower but stay in positive territory in the Eurozone with Germany likely to see a slowdown in fourth quarter 2018.
  • “Stable US consumer inflation will permit the Fed to measure its policies by looking ahead for economic and political risks rather by glancing over its shoulder to see if prices are gaining,” Joseph Trevisani, a senior market analyst at FXStreet commented on the data.  
  • China’s December trade balance data saw a sharp deceleration in both exports and imports indicating softer global demand amid ongoing trade tensions with the US.                                                                                                                                                                   

China

  • China's trade balance reached a record surplus of $57 billion, with exports down -4.4% over the year and imports down -7.6%. Despite gloomy December data, the overall 2018 China’s total global exports rose 9.9%, its strongest performance in seven years, while imports increased 15.8%.

Europe

  • The Austrian Prime Minister Sebastian Kurz said that with Brexit stalemate the options are to delay Brexit date.
  • The European Commission President Juncker is expected to send a letter confirming Irish backstop assurance on Monday in attempt to help Prime Minister’s Brexit deal to pass in UK parliament on Tuesday.
  • The Eurozone industrial production is expected to fall -1.0% m/m in November while decreasing -1.4% over the year. 

UK

  • UK Foreign Minister Hunt admitted a no Brexit possibility coming into the sight as Brexit deal impasse weighs.
  • The UK manufacturing output fell -0.3% over the month in November while the monthly UK rose by 0.2%. The UK manufacturing sector is set to have no contribution to GDP growth in the final quarter of 2018.
  • The UK Prime Minister Theresa May is set to give a speech ahead of the UK parliament voting on her Brexit deal tomorrow.

US

  • The US inflation remained above target at 2.2% in December with core inflation stripping the consumer prices off food and energy prices rising stable 1.9% y/y. Stable inflation buys the time for Federal Reserve to monitor the economic and political risk while deciding on policy.   

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