Market Wrap: A Fresh Brexit Breakthrough and Chinese Growth in Focus

by | 8 Dec, 2017

Brexit talks are finally proceeding to phase 2 and GBP traders are bullish

Brexit Talks Gain Ground and so Does the Pound
A fresh breakthrough in Brexit talks has made the Pound move higher against the Euro to €1.484 this Friday morning.

Gains came quickly after heads of the EU announced that ‘sufficient progress’ had been made in discussions over the Irish border and Brexit bill. Now the talks can move onto trade, which is likely to be an even tougher negotiation.

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Data
We get non-farm payroll figures for the US later today which will give an insight into the health of the US economy, by showing whether wage growth is going up, down or flattening, whether new jobs are being created at a good pace and whether unemployment is rising or falling. Remember – non-farm figures can make the value of the Dollar go up or down depending on their strength, so today could be a good day to trade the USD and make some profits!

Chinese trade accelerated by a big margin last month according to new data. Exports for November rose 12.3% from a year earlier while imports expanded by 17.7%!

This helped boost the SSE Shanghai Composite index this morning, making it one of the best performers in the Asian trading session. However it was outperformed by India’s NIFTY50 which gained almost 100 points in a single day.

The economy of Japan expanded at an annual rate of 2.5% in the three months to September, new figures showed. This growth rate was faster than expected, and higher than the initial estimate of 1.4%. This means Japan’s economy is in its longest growth streak since 1994.

The solid growth figures come after more than four years of economic stimulus by Prime Minister Shinzo Abe. His strategies are known as ‘Abenomics’.

In geopolitical news in the region, in a move that could further increase tensions in East Asia, Japan is set to acquire air-launched missiles that would be capable of striking North Korea.

Joint Strike Missiles will be mounted on F-35A stealth fighter jets according to reports on Reuters. This would be an unprecedented step for a country that renounced the right to wage war, but likely a necessary one given that North Korea has repeatedly fired missiles that landed in the sea of Japan, and one that flew over the Japanese mainland.

Euro stocks
The DAX, FTSE100, CAC40, FTSE MIB and Stoxx50 all went higher at the open today.

The President of China Xi Jinping and Chinese First Lady Peng Liyuan

Is Chinese Growth as Good as it Seems?
A noted finance professor at one of China’s top universities says that China’s growth rate will be far lower once the government in Beijing gets debt under control.

Speaking to CNBC, Michael Pettis of Peking University said, “I have absolutely no doubt that once Beijing is able to get control of the growth in credit – which they are a long way from doing – growth rates are going to be much, much lower.”

Right now, China has targeted a growth rate of 6.5% for 2017. Indeed, China hit GDP growth of 6.9% in the first three quarters of 2017, and is set to end the year at 6.8%, ahead of its targets. However Pettis thinks these impressive numbers don’t tell us the full story. He says unlike in the US, in China “local governments are encouraged to borrow however much is necessary in order to generate that GDP growth.” He also pointed out that the number is “astonishingly stable”, even more so than Switzerland.

Pettis thinks that due to this over-reliance on debt to spur growth, rates of 2 to 3% are more realistic once the government reigns in debt levels, much closer to other world economies, particularly those in the West. So is China’s incredible growth somewhat of a mirage? The professor said, “China is the biggest arithmetical component to global growth, but it’s not really the biggest contributor to global growth. What the world needs is demand, that’s the most scarce resource.”

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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