Financial market research and analysis

Only yesterday we were discussing the weaker sentiment from increased US – Sino tensions, as the US took aim at Huawei. Overnight rumours went into reverse. Talk of easing tensions were helping lift riskier assets. It seems almost impossible to sensibly gauge where US – China relations stand. Yet the market hangs on each headline, highlighting just how sensitive it is to the ongoing trade issue.

Last night, Wall Street surged higher on reports that US Treasury Secretary Steven Mnuchin is pushing for rolling back some tariffs levied on Chinese imports. Trade tensions have been weighing on investor sentiment for months, dragging equity, and more specifically industrials, on a roller coaster ride. They are a significant headwind for the Chinese economy and the wider global economy. Concerns are also growing that the trade war could be damaging the US economy. Although strong US data earlier on Thursday calmed nerves that the world’s largest economy was at risk from contraction.

This would not be the first time that we have heard reports of thawing trade tensions. The markets have been here before, so there is going to be a level of caution. That said, the jump higher reflects the extent of the damage trade tensions are causing from the markets view. Any evidence that the US and China are close to a trade agreement will result in a sustained move higher in risker assets.

Trade related optimism boosted Asian markets overnight, as well as European futures. US futures were also moving higher, despite being initially held back by Netflix’s numbers.

Netflix Results Don’t Quite Make The Cut

Subscriber growth is the big number to watch with Netflix, and it just missed estimates for Q4 2018. This sent shares 4% lower in the grey market. Netflix added 8.8 million subscribers in the last quarter, just short of the 9.2 million forecasts.

As costs for programming at Netflix have soared, Netflix executives regularly justify soaring programming costs as an investment for attracting new subscribers. This is why subscriber numbers are considered to be so important. Whilst this quarter was a little off, 2018 as a whole showed the strategy to be working. 29 million new subscribers in 2018 made it Netflix’s best year yet for customer growth. The results come just days after Netflix announced an above forecast increase to membership fees, a move that saw the stock rally almost 7%. Even after today’s 4% loss in the grey market, Netflix is still net higher across the week.

Pound Reaches $1.30 As Brexit Talks Enter New Stage

The pound was the top performer of the G10 currencies, surging to fresh 2-month highs versus both the dollar and the euro. As Theresa May continues with cross party talks, in order to attempt to put together a Brexit deal that is more palatable for Parliament, the market is growing increasingly convinced that Brexit will be delayed, softer or may just not even happen. Sterling moved through $1.30 for the first time since mid-November as investors try to find a price that reflects the increased possibility that these more favourable outcomes come about.

The pound could find that it continues to be supported with the release of retail sales data. Sales are expected to remain steady at an impressive 3.8%. Given that retail sales are considered an indication of future inflation, a print at this level could send sterling higher.

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