Market Update

Despite President Donald Trump's characterization of his meeting with Chinese President Xi Jinping as a "BIG leap forward," equity markets expressed disappointment due to the lack of specific details following their 90-day truce. The negative sentiment intensified with the arrest of Wanzhou Meng, Huawei's Chief Financial Officer, in Canada at the request of the US Department of Justice, alleging violations of US sanctions on Iran. This move sparked outrage in China, emphasizing that trade tensions between the world's largest economies are far from resolution.
However, it's essential to maintain perspective: although the timing of Meng's arrest was unfortunate, it's improbable that Chinese authorities would halt trade talks with the US solely based on a legal violation. Especially given signs of an economic slowdown in China and the substantial value of Chinese exports at stake. Moreover, Meng's arrest coincided with the talks between Trump and Xi in Buenos Aires. If the Chinese were genuinely upset, they wouldn't have conveyed the positive signals they did in the past days. China confirmed deals in agriculture, autos, and energy, and announced the resumption of imports of US soybeans and LNG.
Regarding Brexit, this week's Parliamentary vote indicating the government's contempt underscores the challenges faced by Prime Minister Theresa May in securing approval for her Brexit deal. However, the vote also implies that if May's plan, even with numerous tweaks to garner support, fails to pass this Tuesday (December 11, 2018), the likelihood of a no Brexit scenario is higher than a no-deal Brexit. Most MPs oppose a no-deal Brexit, making this outcome more probable.
Looking ahead, the coming week features an ECB monetary policy meeting, US and Chinese CPI inflation and retail sales data, as well as UK GDP and employment data, all of which will be closely watched by global markets.