General election fallout, US-China trade relations

The market finds itself in an interesting place in what will be the final full week of trading in 2019.

UK
So, Boris Johnson has won a resounding majority in the 2019 general election, shooting Brexit right back to the top of the agenda. The pound was jubilant in response to the Tory victory, surging to levels last seen, ironically, around June 2016.

Now we are all set to leave the EU on January 31st. The question is how fast will that reality take to make itself felt on the market? Or is sterling so desperate for the issue to be dealt with that it will take any form of Brexit, regardless of how hard?

If that wasn’t enough, there’s a traffic jam of data waiting to be released this week. The flash manufacturing and services PMIs – which weren’t too pretty last time out – arrive on Monday, alongside the latest bank stress test results.

There’s then the jobs report on Tuesday, inflation figures on Wednesday and retail sales on Thursday, a day that also sees one of Mark Carney’s few remaining appearances as Bank of England chief. Friday then ends with the final look at the UK’s third quarter growth.

US
At the time of writing – Friday afternoon – the reported trade agreement between the US and China is yet to be confirmed. The outcome of that tense situation, and whether or not Sunday’s scheduled tariff hike went ahead, will dictate how the markets move on Monday morning.

If a deal (or, at least, a tariff delay) doesn’t materialise then there will be hell to pay – after all, the Dow Jones hit a record high on the expectation that it would. If it does, however, then the US markets will find themselves in a curious position. For the last few months trading has been defined by the waxing and waning fortunes of these ‘phase one’ talks – what lies on the other side of any agreement?

Beyond all that there’s the flash manufacturing and services PMIs on Monday, industrial production data on Tuesday, the Philly Fed manufacturing index on Thursday and the core PCE price index and final Q3 GDP readings on Friday.

Eurozone
It is hard to see the Eurozone looking past the US-China trade situation this week. If it does want to, however, there is plenty for it to chew on. For example, the flash manufacturing and services PMIs, set to be released on Monday, have regularly posed a problem to the region’s indices.

Elsewhere there’s the Eurozone-wide trade balance number on Tuesday, German Ifo business climate and inflation readings on Wednesday – alongside a speech from new ECB head Christine Lagarde – and the current account numbers on Friday.