New Brexit extension, US earnings better than expected, Draghi steps down, EU’s PMI disappoint, Zuckerberg is grilled in the Congress, no additional Chinese fiscal stimulus
Issued by Labis Michalopoulos, CFA
Major events of last week:
- UK: Boris Johnsons’s draft agreement with the EU has been supported in principle by the UK’ Parliament. 285 Conservatives – including all 28 hardliners who never backed Theresa May’s deal – 25 Independents and 19 Labor MPs had approved the bill in principal, the first bill that has been backed by the Parliament (329-299 vote). The EU is set to announce on Monday or Tuesday the length of the Brexit deadline extension. The debate is between a 2 weeks extension (French proposal) or an extension until 31 January 2020.
- USA-EU-Turkey-Russia: Last week’s US sanctions on Turkey have been lifted. Erdogan and Putin had reached an accord over Syria. Under this deal, Kurdish fighters are dictated to withdraw from almost the entire northeastern border, from the Euphrates River to the Iraqi border. Russian and Syrian forces will ensure the pull back. On October 29 joint Russian-Turkish patrols will begin. Turkey will keep the control of the section that has invaded. No arrangement has been made for the town of Qamishli that has the largest Kurdish population.
- US-China: On Monday Liu He commended that “substantial progress” has been made on phase I part of trade agreement. On Thursday, Mike Pence made a speech that was postponed since June. He criticized NBA and Nike for failing to support freedom of speech and compromising to the Chinese government will. He supported the protests in Hong-Kong, accused China for being a surveillance state, and accused China for the Muslim Uighurs treatment.
- Canada: Justin Trudeau, the Canadian Prime Minister and leader of the liberal party, won the Monday’s general elections but has lost the parliament’s majority. The Canadian economy is growing close to potential GDP growth, with inflation on target. The housing market has rebounded in the last couple of months and the major source of concern remains the weak consumption.
- US-North Korea: Statement was issued by the North Korean foreign minister, speaking of an end of year deadline.
- Russia-Africa: The first ever summit of these countries has been held in Sochi.
- Protests : Protests in Hong Kong, Chile, Lebanon and Catalonia continue. China was thinking of replacing Carrie Lam, but the reports have been dismissed.
- Cryptos: Following the grilling of Facebook’s CEO, Mark Zuckerberg, over Libra, and the subsequent fall of the cryptos on Thursday (total market cap reached $205bn) the cryptos have rebounded (the total market cap increased to $244bn, +12% w/w, -32% from the 2019 high, -70% from the all time high of January 2018).
Major events of next week:
- General elections in Argentina. Populist Alberto Fernandez is leading
- Length of Brexit extension
- The “Davos in the Desert” conference in Saudi Arabia begins on Tuesday. Steven Mnuchin will attend before his visit to India.
- Monetary meetings of Bank of Canada and the FED on Wednesday. The probability of an additional rate cut stands at 93%. On Thursday it is the Bank of Japan’s turn. BOJ has signaled additional QQE.
- US earnings: Google on Monday, Apple and Moody’s on Wednesday, Western Union on Thursday, Alibaba, Exxon, and Chevron on Friday. So far, 80% of US listed companies are reporting EPS above estimates.
- Stress tests for EU banks will be published on Saturday