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Weekly Alpha

This Weeks Market Brief…

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Last week the markets went from fear of a war with asset prices driving lower in risk off developments to a bull run with Trump showing signs of wanting peace between the two nations and the markets reflecting this positive rhetoric as US and China approach a trade deal.

The most anticipated macroeconomic data was on Friday, the US non-farm payrolls which resulted in employers adding 145,000 jobs in December and unemployment has stayed at a 50-year low of 3.5%. Wages continue to be subdued and only up by 2.9% from a year earlier. It is just above inflation and very modest relative to other periods with historically low unemployment. So overall, America is still hiring but offers fewer jobs with modest pay.

After briefly topping the 29,000 milestone on Friday, the Dow looks set to firmly regain the level today as futures start the week with a 100-point advance. More movement will likely be seen during the week as earning season begins with major Wall Street banks.

The situation in the Middle East took an unexpected turn over the weekend when Iran admitted it mistakenly shot down a Ukrainian passenger jet carrying 176 people. The country has since witnessed two nights of protests as its leadership is put under pressure. With events in the Middle East continue to be the focus, investors will also look to this week for confirmation of a trade deal with the U.S. and China on course to sign an initial trade accord on Wednesday.

On the data front, inflation releases are the order of the week, with the latest CPI prints due from the UK, US and eurozone. All are expected to show a relatively slower pace of price increases, though inflation in the UK is set to remain depressed due to the recent lowering of the energy price cap. Elsewhere, the health of the US consumer will be in focus, with December’s retail sales and January’s preliminary consumer sentiment reports due. Retail sales for the crucial Christmas shopping period are also due from the UK, amid on-going reports of struggles on the High Street.

In regards to monetary policy, most G10 central banks likely to leave policy on hold this year. While no policy decisions are due this week, investors are set to closely examine minutes from the ECB’s December meeting as well as the Fed’s latest Beige Book for any hints on the policy outlook.

After a strong week in Bitcoin and most altcoins such as Ethereum and Bitcoin Cash due to risk off developments, there has been profit taking at resistance levels. As Bitcoin halving nears, the bulls have become more vocal in expressing their enthusiasm and optimism. Signs of adoption of Bitcoin are beginning with institutions and crypto options are coming into play. China has reportedly published a second printing of its textbook guide on blockchain and cryptocurrencies. It educates readers about their future usage and potential impact on the world.

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