Financial Market Review for January 22 2018 In Germany, Germany's Social Democratic Party voted in favor to start official coalition negotiations with Chancellor Angela Merkel's Christian Democrats on Sunday. The vote, which took place at a special party convention, was tight with 362 party members voting in favor and 279 against the coalition, according to local reports. Chancellor Merkel was handed another term by the German people in the September election but has been unable to form a majority government since. The SPD and CDU have a history of coalition governing but butted heads on topics like immigration and taxes this time around. With no material stats released through the Asian session this morning, the markets were focused on political events, with the failure of the Senate to reach a vote in favor of extending government funding through to next month one the main events of the weekend. With talks being extended through to Sunday and the Senate adjourning until Monday, where a 2nd vote is expected to pass, there was little impact on the markets through the Asian session. Previous shutdowns have been relatively short lived and with muted impact on the U.S and, more importantly, the global economy and the financial markets have generally been unscathed. Asian markets were steady today in their first trading session of this week, MSCI’s broadest index of Asia-Pacific shares outside Japan managed to erase slim losses earlier to eke out gains of 0.1 percent, hitting a record high for six days in a row. Japan’s Nikkei also ended up 0.03 point. Wall Street stock futures and the dollar pulled back slightly on Monday after the U.S. government was forced to shut down amid a dispute between President Donald Trump and Democrats over immigration. U.S. S&P500 mini futures dipped just 0.1 percent, still clinging near a record high hit on Friday. A U.S. government shutdown will enter its third day on Monday as Senate negotiators failed to reach an agreement late on Sunday to restore federal spending authority and deal with demands from Democrats that young “Dreamers” be protected from deportation. The Senate set a vote for 12 p.m. (1700 GMT) on Monday on advancing a measure to provide temporary government funding through Feb. 8, end the shutdown and allow hundreds of thousands of federal employees to return to work. In the currency markets, for the Pound, it’s another quiet day on the macroeconomic data front, which leaves focus on the UK government and Brexit. With the House of Commons having already passed the EU Withdrawal Bill, the House of Lords are expected to vote this week and talks of bringing an end to the House of Lords will likely resurface in order to keep any dissent at bay. Any negative chatter on the Bill will likely weigh on the Pound, with Merkel soon to be free from the domestic political drama to focus on the EU and Brexit, which will unlikely be a positive for the Pound. Spain and the Netherlands have looked to take a softer approach on Brexit, but following the latest election, Merkel will likely take a harder stance to regain popularity and Macron may well go down Merkel’s path. At the time of writing, the Pound was up 0.03% to $1.3895.
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Financial Market Review for January 22 2018 Across the Pond, focus will be on the Senate and this evening’s vote on extending government funding through to the second week of February. While the markets are less than impressed with the inability of a Republican House and Senate to be able to agree on terms for an extension, the Dollar will likely be the only victim of another failed vote. The dollar’s index against a basket of major currencies dropped about 0.2 percent from late last week to 90.465, not far from three-year low of 90.104 touched on Wednesday, before edging back to 90.63. The euro opened the day 0.4 percent higher at $1.2275, but it stopped short of testing Wednesday’s threeyear peak of $1.2323 and pared back much of the gains to trade at $1.2225. The common currency was also helped after Germany’s Social Democrats (SPD) voted on Sunday to begin formal coalition talks with Chancellor Angela Merkel’s conservatives, moving Europe’s economic powerhouse closer to a stable government after months of political deadlock. The safe-haven Swiss franc gained 0.3 percent to 0.9619 franc per dollar. It hit a four-month high of 0.9536 to the dollar on Friday. The Japanese yen was little changed at 110.83 yen to the dollar, not far from Wednesday’s four-month high of 110.19. For the Loonie, November Wholesale Sales is in focus, with sales growth forecasted to slow, which will be a negative for the Loonie, though the any impact with be short lived, with market focus being on NAFTA talks, which kicked off on Sunday. In the commodity markets, Oil prices ticked up, pushed higher by comments from Saudi Arabia that cooperation between oil producers who are currently withholding supplies in an effort to prop up the market would continue beyond 2018. Brent crude futures were at $68.75, up 0.2 percent, from their last close. Brent on Jan. 15 hit its highest since December, 2014, at $70.37 a barrel. U.S. West Texas Intermediate (WTI) crude futures were at $63.53 a barrel, up 0.3 percent from their last settlement. WTI marked a December-2014 peak of $64.89 a barrel on Jan. 16. View our full economic calendar for a daily roundup of major economic events.
Tel. (+357) 250-288-6163 general@vinsonfinancials.com www.vinsonfinancials.com