Market Update

In the midst of political standoffs in the US and the UK, equity markets experienced another fruitful week, sustaining their positive momentum from the start of the year.
However, this buoyant atmosphere contrasts sharply with the plight of around 800,000 federal workers in the US, who faced a bleak Friday without pay. The US government's partial shutdown persisted as President Donald Trump insisted on funding for his proposed border wall with Mexico, making this shutdown the longest in US history, a milestone reached tomorrow. Despite this, equity markets seemed undeterred, remaining focused on factors such as US interest rates, corporate earnings, and US-China trade relations.
Federal Reserve Chairman Jay Powell played a role in lifting market spirits once again this week. He emphasized the absence of a predetermined path for interest rates, indicating the Fed's willingness to remain patient and monitor economic data. Powell also dismissed concerns of an impending economic slowdown, citing last week's surge in nonfarm payrolls as evidence, and reassured that the risk of a recession in the near term was not a significant worry.
Meanwhile, there were positive developments in trade talks between the US and China in Beijing. Progress was made on crucial issues like market access and intellectual property protection, potentially averting the March deadline for increased tariffs on Chinese imports by the US. While there are lingering challenges, China's commitment to purchasing a substantial amount of American goods and services was noted.
In the UK, particularly among domestically oriented companies, equity markets thrived as the government faced setbacks in Brexit-related amendments. These developments reduced the likelihood of a no-deal Brexit. MPs passed an amendment to the Finance Bill, limiting tax changes post a no-deal Brexit without explicit consent from Parliament. Additionally, a provision was adopted mandating the government to outline their next steps to Parliament within three days if the current EU withdrawal agreement is rejected.
Prime Minister Theresa May intensified efforts to garner support from Labour MPs by pledging enhanced guarantees on workers' rights and the environment. As Parliament engaged in five days of debate, rumors circulated about a potential postponement of next week's vote and a likely extension of the Article 50 deadline. Although Downing Street played down these speculations, UK domestic company shares rallied, and the value of sterling rose.
The focal point of the upcoming week will undoubtedly be Parliament's vote on the EU withdrawal agreement. Alongside this, UK inflation data is slated for release on Wednesday, while US Retail sales data might face delays due to the persisting government shutdown. The week ahead holds significant anticipation and potential for market movements.