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Good morning. The U.K. election enters the final stretch, the tariff deadline looms and there’s going to be central bank debate aplenty. Here’s what’s moving markets.
The U.K. general election campaign enters its final week with the Conservative Party in the lead but still a distinct lack of certainty when it comes to the nuances of the overall outcome, each of which stands to have a significant and different impact on local assets. The major short-term risk factor for investors is whether there will be a clear majority for the Tories, which is perceived to at least give a degree of clarity on the path for Brexit. Or the polls prove wrong, Labour beat expectations and a hung parliament looms. One would be well-advised to train an eagle eye on the polls, the pound and the FTSE 250.
One would be equally wisely counseled to remember that the U.K. vote is not the only major event this week and indeed, for the global economy, nowhere near as important as the looming deadline for more tariffs to be imposed on Chinese goods by the U.S. The latest Chinese export data released over the weekend demonstrates the impact the tit-for-tat tariff battle is having, with exports to the U.S. falling by 23% in November and overall exports posting a surprise fall. Another underlying source of tension between the two sides is also showing few signs of abating, with pro-democracy protests in Hong Kong over the weekend the largest seen in months.
The next few days will also be dominated by debate on central bank policy, with the Federal Reserve and the European Central Bank policy decisions ahead, the latter the first of ECB President Christine Lagarde’s tenure. Central banks are expected to spend the next decade pumping more money into the economy, albeit at a slower pace than before, but the real discourse will be around what other tools they will be able to employ to ensure that monetary policy can continue to be effective in battling the next downturn, with the “shock and awe”-style methods of the past potentially out of fuel.
The U.K.’s largest supermarket chain, Tesco Plc, is considering offloading its Thailand and Malaysia operations, which could be worth around $9 billion. It would mark a move by the group to refocus itself on its core U.K. business, which continues to face challenges not only from Brexit but from intense competition that has driven down prices and made margins razor thin. At the much smaller end of the U.K. deals spectrum, engineer Senior Plc is said to be exploring a sale of its aerostructure unit.
Asian stocks kicked off the week in a muted, cautious fashion ahead of the flood of central bank meetings and the looming tariff deadline, with European stocks likely to follow suit. Crude prices remain close to 12-week-highs after the surprise move by Saudi Arabia announced on Friday to curb oil output beyond what it had agreed with OPEC+ members, prompting Goldman Sachs to raise its 2020 oil forecasts. German export data and euro area investor confidence will top the economic agenda, with earnings thin on the ground for Europe.
What We’ve Been Reading
This is what’s caught our eye over the weekend.
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