Week ahead promises turmoil

The FTSE and other European indexes are higher at the start of the week which promises turmoil as the Brexit situation shows no sign of a solution, the US government potentially heads for another shutdown and the key global trade dispute with China remains unresolved.

Weaker sterling is proving helpful to London blue chips while travel operator TUI is bouncing back from a selloff late last week. Miners and oil companies are also gaining ground as Brent crude stabilised around $62 following last week’s plunge.

China reopens, US to shut down?

Just as China reopened and settled back into a trading routine after a week long celebration of Lunar New Year the US markets will have to potentially deal with another government shutdown.

Funding for the US government will run out on February 15 and given that the weekend talks between US Democrats and Republicans have failed it is fully possible that US government agencies will be forced into another unpaid holiday from next week.

A resolution to the Sino-US trade talks is also looking less likely despite two top US negotiators heading for Beijing later this week given Trump’s negative comments earlier in February. The negative implications for US stocks are clear, particularly technology stocks, at a time when global economies are already slowing.

UK GDP and the pound

The pound is gently heading lower against the dollar this morning indicating low expectations for UK GDP data that is due to come out later today. But while GDP numbers would have carried reasonable weight in a normal week, now with the Brexit deadline approaching and the likely outcome not being any clearer there is actually little chance for sterling to turn the corner.

Brussels is proving reluctant to engage in any serious renegotiations of the current Brexit proposal while the Labour party is trying to nudge the PM Theresa May in the direction of customs union, one of her red lines.

Though there is a 13 Feb deadline to vote on a Brexit proposal in Parliament there is no compromise deal in sight. Eventually something, or somebody, will have to give, as the deadline of 29 March approaches like a speeding train.

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