Summary for the 23rd of January 2019


The S&P 500 fell by -1.4% yesterday. The stock index of European stocks, Stoxx600 fell by -0.4%. Asian stock markets also fell due to the trade conflict between the U.S. and China. A positive surprise is that the Asian stock markets didn’t fall as steep as most feared.

The ILO Unemployment rate in the UK for September-November 2018 comes in as 4%. Down from 4.1% for the June-August 2018. There are 141 000 more people at work, above market’s expectation of 85 000. Claimant for unemployed benefits increased by 20.8 thousand in December 2018, higher than expectation of 20 thousand. The data shows the same development as in 2017 and 2018. The unemployment rate is at the lowest in the UK, it hasn’t been this low since December 1974 to February 1975. This affects the wage growth, the average earnings incl. bonus(3 months) rises by 3.4%. Excluding bonus, the wage growth stays the same as previous three months of 3.3%, but still highest growth in 10 years. With low productivity rate, a high capacity utilization and wage growth can lead to rising prices. The Bank of England will thus need to balance it’s monetary policy in a situation with rising prices and risk of economic downturn due to Brexit.

German’s ZEW Survey rises somewhat in January, but from an already low number. The number for the current economic situation falls sharply. The ZEW Survey is the survey from investors and analysts. The surveys have a high correlation with the stock market in Germany, though it doesn’t predict GDP as well. The rise in January is good news and shows that the market is getting more optimistic.

The Japanese central bank announces that it will keep the interest rate unchanged at -0.1%. It has adjusted inflation prediction for 2019 from 1.4% to 0.9%. The goal of keeping the 10 years treasury bond yield at 0% is also unchanged. The central bank will still maintain an expansive monetary policy until the inflation is at or over 2%.

The U.S cancels trade meeting with two Chinese vice ministers. The reason for the cancelation is said to be due to the disagreements over intellectual property rules. U.S advisors comment that China’s offer to purchase more American products is positive, but not enough to solve the trade conflict. The central themes in the discussion are forced intellectual transfer, patents theft and ownership restrictions on foreigners. These are the areas President Trump has the highest priorities for.  The meeting between the two countries will continue when Liu He, the Chinese economist and politician is visiting the U.S. for trade talk.

Indices on 22nd and 23rd of January.

Dow: -1.2% (22nd)
S&P 500: -1.4%(22nd)
Nasdaq: -1.8% (22nd)
Nikkei: -0.7% (23rd) 



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