Weekly Market Wrap 20/01/2020-24/01/2020

Marius Paun | London, UK | Senior dealer | Friday, 24th January 2020

On Tuesday, world leaders in finance and politics gathered in Davos, Switzerland where the World Economic Forum kicked off. The USPresident Donald Trump held a speech and compared Tesla CEO Elon Musk to inventor Thomas Edison. He added ‘we have to protect our geniuses’ after Tesla’s shares more than doubled since September last year.

Climate activist Greta Thunberg was also present and she reiterated the need for urgency to solve the climate crisis. German Chancellor Angela Merkel warned the conflict in Libya could become another proxy war between global/regional powers. JP Morgan CEO Jamie Damon said the only bubble for him is in sovereign debt and that the real negative surprise would be inflation.

The International Monetary Fund has downgraded the global growth forecast figures to 3.3% from 3.4% late last year after a faster slowdown in India.

World equity market was rattled following rising concerns over coronavirus in China. Lunar New Year brings the biggest human migration due to people travelling to visit relatives but the outbreak could dampen the mood. Towards the weekend, although Chinese shares remained under pressure, elsewhere pessimism eased as the World Health Organisation tempered fears of the virus spreading worldwide.

Back in the UK, the pound sterling was on firm footing, crossing above 1.31 to the US dollar after the jobs report was well received by the markets, coming in better than initially anticipated. On top of that, UK Services PMI data released on Friday surpassed expectations at 52.9 vs 51.1 predicted. Elsewhere, investors were less convinced that the Bank of England will cut interest rates next week when they meet.

As the US-China trade deal lifted some of the uncertainties, sentiment improved also in Germany where ZEW index came in better than expected. In its latest monetary policy decision, the European Central Bank left its key interest rate unchanged. Amid a dovish tone, Christine Lagarde launched a strategic (first in 16 years) review and promised to make inflation target and climate change their top priorities.

Bank of Canada also left its benchmark interest rate unchanged at 1.75% saying the economy is resilient and they will ‘watch closely to see if the recent slowdown in growth is more persistent than forecast’.