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.
- Retail Sales (MoM, Dec)
- Import Price Index (MoM, Dec)
- Export Price Index (MoM, Dec)
- Federal Reserve Beige Book Release (Jan)
- Germany CPI Report (Dec)
- 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)
- Industrial Production (MoM, Dec)
- University of Michigan Sentiment Index (Preliminary, Dec)
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.
Credit ratings are published rankings based on detailed financial analysis by a credit bureau specifically as it relates to the bond issuer’s ability to meet debt oblications. The highes rating is AAA, and the lowest is D. Securities with credit rating of BBB and above are considered investment grade.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.
All performance referenced is historical and is no guarantee of future results.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
Index data obtained via FactSet
For Public Use – Tracking #1-812488 (Exp. 01/20)