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Global Equities Cautious In Last Full Week Before Christmas

Published 17/12/2018, 08:01
Updated 25/04/2018, 09:10

European bourses are set to open higher, after being hit by a bout of risk aversion in the previous week. Global equities were hammered on global growth fears following weak data from China and the eurozone. Investors are now looking ahead to the Fed’s policy announcement on Thursday for further clues. Whilst a fourth hike this year is broadly expected, investors are more concerned with what lies ahead for 2019.

May Firm on No Second Referendum

After 5 consecutive weeks of loses, the prospects for the pound aren’t looking much better this week. All things Brexit will continue driving movement in the pound. With Theresa May under increasing pressure to end the Brexit deadlock, currency markets are only too aware that things could quickly spiral towards a no deal or even a general election.

Suggestions of a second referendum are growing in volume as an increasing number of senior minister’s view this as the only way out of the current impasse, whilst avoiding a hard no deal Brexit. Theresa May is vocally against the idea. We would expect a second referendum to boost the pound, the fact that the pound remains on the back-foot shows this is not being priced in as a realistic possibility right now.

Housebuilders to Struggle Following Disappointing House Price Data

The impact of Brexit on the housing market was exposed on Monday. Rightmove data showed that house prices declined for a second straight month in December. Brexit uncertainty combined with the seasonal Christmas slowdown saw UK house prices experience the biggest two month fall since 2012.

The sluggish housing market is unlikely to improve across the early months of 2019 as investors await clarity on Brexit. The UK housing market is clearly going nowhere fast as no deal Brexit fears have sucked any cheers out of any seasonal buying. The disappointing data and dismal outlook for housing prices amid Brexit uncertainty is expected to weigh on house building stocks in trading on Monday.

Euro in Focus as Italy Agrees Budget in EU limits

The euro will remain in focus on Monday as investors look towards Eurozone inflation data and digest reports of Italy finally coming to an agreement with the EU over its budget. After months of wrangling, Italy has softened its stance and agreed to produce a budget within limits that should please the EU. A small relief rally was evident in the euro in trading at the start of the week. Some well needed good news for the common currency after Draghi’s dovishness in the previous week.

Eurozone CPI is out later. Eurozone inflation is expected to tick lower to 2% in November, from 2.2% the previous month. Weakness in inflation, following Draghi’s acknowledgement of risks building to the downside in the eurozone economy could keep the lid on any Italian budget relief rally.

Opening calls

FTSE to open 2 points higher at 6847

DAX to open 27 points higher at 10892

CAC to open 4 points higher at 4857

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