Stock pullback on China concerns; Key Brexit vote in focus

Summary:

• Risky assets stumble after disastrous trade data from China

• DE30: Noteworthy reports concerning auto industry

• China’s regulations for blockchain companies imminent

• Where next for the pound as key vote looms large?

• 3 markets to watch - Brexit special

Stock markets have made a negative start to the week in Asia and Europe after the latest trade data from China pointed to an alarming slowdown. This has soured risk sentiment somewhat and US indices are trading in the red ahead on the European close. A slew of trade numbers we were offered overnight pushed risk-related assets substantially lower in response to a fading demand from the world’s second largest economy. In December China’s exports fell 4.4% YoY, the largest monthly decline in two years while imports contracted as much as 7.6% YoY reflecting weakish demand momentum there. It resulted in a trade surplus of $57.1 billion for the last month, well above the market consensus of a $51.5 billion surplus.

As far as the auto industry is concerned it is worth focusing on two companies - Continental (CON.DE) and Daimler (DAI.DE). In case of the former company we got a gloomy outlook from the firm for the first six months of 2019 caused by a range of factors led by a sinking Chinese market. In late 2018 Continental had signalled that a turnaround for the global car market might take place, but this hope was given up during the second week of the new year. In turn, Daimler’s incoming CEO informed that he was open for a collaboration with other carmakers and technology firms in order to share the burden of the industry's costly technology shifts. Note that the company is currently merging its car-sharing offerings with German peer BMW to boost scale and even deeper tie-ups are being mulled over as well.

Investors have started Monday’s trading in the cryptocurrency market rather in upbeat moods. Three largest cryptocurrencies - Bitcoin, Ethereum, and Ripple - have begun the new week with some rises. On the other side, some major digital currencies experienced some noticeable losses yesterday. The capitalization of the whole cryptocurrency market stands around $120 billion while Bitcoin accounts for nearly 53%. The Cyberspace Administration of China (CAC), which is a Chinese internet regulator, outlined a final draft of crypto and blockchain regulations. The document will come into force on February 15, 2019, and it will provide the guidelines for blockchain companies. The regulations oblige such companies to, among others, record activity of users, and to store them for at least half a year.

This week could well be the most important for Brexit in the 2 1/2 years since the referendum, with parliament set to vote on PM May’s deal this Tuesday (15th Jan) at 7PM GMT. This was previously scheduled to take place last month but was pulled at the last minute when the PM realised she would likely face a heavy defeat, and despite seeking reassurances from the EU it’s still seen by many as highly unlikely that she gains the requisite support.

Our 3 markets to watch - Brexit special can be found here.