Financial market research and analysis

Asian markets traded higher on Chinese stimulus hopes following slowing GDP growth. Investors also demonstrated confidence that trade tensions would ease as they looked towards talks later this month with optimism.

Asian markets moved higher on reports that China had put forward a plan to eliminate is trade balance with the US. Meanwhile US futures slipped away from recent highs at the start of the week on separate reports that talks with China covering intellectual property have stalled.

Confusing headlines have become synonymous with US – China trade discussions. This is highlighting the complex nature of the relationship between the two powers. Whilst Asia is looking on developments optimistically, US markets are taking a glass half empty approach today. The fluid nature of these trade talk developments means that the tone can switch from one end of the scale to the other extremely quickly, creating volatility in the markets. Whilst the Dow closed 2% higher on Friday thanks to trade optimism, futures are pointing to a 0.2% decline on the opening bell, whilst the safe haven Japanese yen is also firmer.

Chinese GDP slows

Chinese GDP data printed in line with expectations at 6.4% in Q4. This represents the slowest rate of growth since the financial crisis. Full year growth was above expectation at 6.6%, the softest since 1990. Weak investment and faltering consumer confidence is inflicting damage on the Chinese economy. The market’s positive reaction to the data comes from growing hopes of further stimulus from Beijing. The economy is slowing, the markets know that. However, they expect Beijing to act with more supportive policies. Should data continue to worsen going forwards, then we could start to see increased pressure on riskier assets, not just in Asia, but globally; as fears for the global market grow.

Pound traders await Brexit plan – B.

The pound was steady versus the dollar but continued to slip away from two-month high reached in the previous week versus the euro, as traders look towards Theresa May’s Brexit Plan- B. A move lower in the pound at the start of the week reflects low market expectations for the new Brexit plan. With cross party talks achieving little towards a workable alternative Brexit, Theresa May is expected to continue with more of the same; she will carry on trying to seek changes to the Irish backstop part to the deal that she negotiated with Brussels.

There is a growing concern among pound traders that there is no Plan – B. Just more of the same from May as she runs the clock down. After crossing above €1.14 last week, for the first time since November, the pound is slipping lower, targeting €1.13.

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