Weak Chinese GDP data has dented market confidence, despite the better than expected retail sales and industrial production figures. Meanwhile, the European focus is on UK parliament as the next stage of the Brexit debate takes place.

  • Mixed open for European markets

  • Chinese data proves mixed, yet Yuan weakness highlights market scepticism

  • All eyes on May, with Brexit set to dominate today

European markets have kicked off the weak in typically indecisive fashion, with a raft of conflicting data points from China and a focus on Brexit expected to drive price action through the day. With the US observing Martin Luther King day, European traders are expecting lower volumes and thus potentially higher volatility. That being said, beyond an update from Theresa May, markets are somewhat devoid of market moving events, with the Chinese data released overnight providing the basis for market sentiment outside of the UK today.

The Chinese economy exhibited the lowest quarterly GDP growth rate since 2009 in Q4, with the reading of 6.4% providing the third consecutive fall in the indicator. Promises of a stimulus package for the Chinese economy have certainly helped ease the fears over a continued slowdown, yet the fact is that a trade breakthrough with the US is required to fully appease markets. Despite the headline GDP reading providing precious little reason for optimism, the improved industrial production and retail sales figures for December go some way to showing that there is some form of improvement within the widespread decline in Chinese economic data. Unfortunately, while we saw substantial upside for the Chinese Yuan in the wake of a seemingly positive US-China trade summit, the subsequent upside in USDCNH highlights the resurgent scepticism over whether a deal is anywhere near being reached.

Today will see Theresa May address the Commons, with the PM expected to lay out exactly how she plans to break the deadlock and avoid a no-deal Brexit. Markets will be on the lookout for the amendments that MPs will be expected to table in response to her motion for a vote on 29 January. Key to this will be the possibility of an amendment which takes a no-deal Brexit off the table; something which GBP bulls would celebrate no doubt. Also keep an eye out for talk of a potentially extended article 50; something which is looking like a necessary given the political deadlock that currently dominates parliament.

Ahead of the open we expect the Dow Jones to open 108 points lower, at 24,598.

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