Market Update: Wed, Jan 16, 2019 | LPL Financial Research

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Daily Insights

No deal. Yesterday was another bump in the road for Brexit after more than two-thirds of the U.K. Parliament voted against British Prime Minister Theresa May’s separation deal. Market participants had been largely positioned for Parliament’s rejection of May’s deal, especially after several Brexit-related political resignations and a delayed vote. However, the path to a Brexit is less clear now, and there is a growing chance that May will be ousted after such a large defeat. On the LPL Research blog (available now), we outline the economic and market implications of Brexit volatility, including takeaways for U.S. investors after yesterday’s news.

Beige Book release. The Federal Reserve’s (Fed) Beige Book, a survey of economic conditions in the 12 Fed regions published eight times per year, is scheduled to be released this afternoon. While the Beige Book is normally not a market-moving report, it could provide crucial context on a surprisingly swift decline in U.S. manufacturing over the past few months. December data released yesterday showed the Empire Manufacturing Index, which gauges manufacturing conditions in the New York area, posted its worst two-month slide since June 2011. Other local Fed manufacturing indices, such as the Kansas City and Philadelphia gauges, dropped precipitously through the end of 2018 as well. To us, the recent decline in U.S. manufacturing is a sign that the intangible effects of trade tensions are still weighing on corporate demand. However, we still feel encouraged by the bulk of U.S. economic data we’ve seen over the past few months.

China continues economic support measures. In its latest move to prop up its cooling economy, the Peoples Bank of China injected a net 560B yuan ($83B) into the financial system overnight, the largest single-day liquidity shot on record. Government officials cited peak season for tax payments, which tends to drive increases in interbank rates, as well as ensuring ample liquidity ahead of the Lunar New Year holidays as reasons for the move. However, despite the PBOC’s official stance being one of prudent monetary policy, it continues to ease in the face of weakening data, most recently evidenced by the biggest drop in the country’s exports and imports since 2016.

 LPL Research on CNBC. Senior Market Strategist Ryan Detrick was on CNBC Trading Nations with Mike Santoli yesterday to discuss the impacts of the government shutdown, the recent volatility, and the January strength. Watch the full interview here.

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Click Here for our detailed Weekly Economic Calendar

 Wednesday

  • Retail Sales (MoM, Dec)
  • Import Price Index (MoM, Dec)
  • Export Price Index (MoM, Dec)
  • Federal Reserve Beige Book Release (Jan)
  • Germany CPI Report (Dec)

 Thursday

  • Housing Starts (MoM, Dec)
  • Building Permits (MoM, Dec)
  • Initial Jobless Claims (Jan. 12)
  • Eurozone CPI Report (Dec)
  • Japan CPI Report (Dec)
  • Japan Industrial Production (Nov)

Friday

  • Industrial Production (MoM, Dec)
  • University of Michigan Sentiment Index (Preliminary, Dec)

 

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