US tech stock rally helps Asian European markets

European gauges took their cue from Asia and from US tech stocks to start the last trading day of the week on a higher note. South Korea’s tech-heavy KOSPI index benefited the most from the US rally, followed by the Nikkei, while Chinese stocks bounced up after the government started counteracting the ongoing economic slowdown with new measures to prop up banks’ capital. Next week Chinese markets will start slowing down ahead of the country’s New Year which will see markets closed between 4th and 8th February.

In London an overnight rise in commodity prices helped miners and metal trading houses onto a higher footing but Vodafone shares dropped after the firm reported a 7% decline in full year revenues.

US government shutdown to start playing bigger role

Up until now the US markets have to a large extent ignored the battle of wills going on in Washington between President Donald Trump and the Congress. Though the government shutdown is now the longest on record, stock markets have happily rallied since the start of the conflict 35 days ago with the DJIA trading 9.4% higher and the S&P 500 rallying more than 15%.

The impact has been negligible so far partly because a good portion of investors think that some of the governmental institutions are superfluous and a drag on state finances. That could start changing next week when US jobs data is released, a number that is closely followed both by the market and the Fed to establish whether there is a need for a rate change. The jobs that are at stake are not only the direct jobs in government agencies which have now been closed for over a month but also several million worth of private-sector jobs that depend on federal contracts. Any sign of a slowing economy is likely to be punished by the markets with a selloff – even a hint of a slowdown had the bond stock markets in a spin before Christmas.

Dollar losing ground as concerns grow

The shutdown and concerns over its economic impact are beginning to nibble on the dollar and the currency is weakening against the pound, euro and the yen. Sterling has reclaimed the ground above $1.30 as the flow of negative Brexit news has slowed for the moment. Yesterday’s warning from the ECB about the risks to the Eurozone economy has not dented the euro and the common currency is trading at $1.1328 against the greenback.

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