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The Market Last Week

Global equities ended mostly lower last week, amid losses in technology sector stocks. UK markets ended the week in negative territory, weighed down by weakness in the British Pound. In major news, the UK government offered Brussels a larger potential exit payment of up to £50.0bn. Separately, the Organisation for Economic Co-operation and Development (OECD) projected that Brexit could result in a sharp slowdown in UK’s economic growth. Further, it forecasted British economy to grow by 1.5% in 2017, slowing to 1.2% in 2018 and further expects growth of just 1.1% in 2019, when the UK is set to leave the European Union. On the data front, UK’s mortgage approvals dropped more than market expectations in October. Furthermore, the GfK consumer confidence recorded a more-than-anticipated drop in November. European markets ended the week in red. In economic news, Eurozone’s manufacturing activity surprisingly surged in November. Furthermore, unemployment rate recorded an unexpected drop to its lowest level since January 2009 in October. Further, the consumer price index rose less-than-anticipated on an annual basis in November. In contrast, the 19-nation economy’s economic confidence index advanced at par with market forecast to its highest level in 17 years in November. However, business climate indicator surprised with a drop in the same month. US markets ended the week on a positive footing, amid rising optimism over the US tax overhaul and gains in banking sector stocks. On the macroeconomic front, US annualised gross domestic product rose at a faster-than-expected pace in 3Q17. Further, monthly new home sales surprisingly soared to its highest level in a decade in October. Additionally, the nation’s consumer confidence index unexpectedly advanced in November. However, the advance goods trade deficit widened in October. Asian markets closed mostly lower last week. Data revealed that China’s manufacturing PMI recorded an unexpected rise in November.

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Currency Update

The EUR ended weaker against the USD, after the OECD cautioned that increasing interest rates before the end of the decade could weigh on the recovery of the single currency bloc. Furthermore, Eurozone’s growth is expected to peak at 2.4% in 2017, then slow to 2.1% in 2018 and 1.9% in 2019. The British Pound ended stronger against the greenback, as Brexit concerns eased after news emerged that the UK is close to a breakthrough over the Northern Ireland border. On the macro front, UK’s Markit manufacturing PMI recorded an unexpected rise in November, notching its highest level in 4 years. The US Dollar ended mixed against its major counterparts last week. The OECD forecasts that the US economy will grow by 2.2% and 2.5% in 2017 and 2018 respectively and then will drop back to 2.1% in 2019. Data indicated that US initial jobless claims unexpectedly dropped for the week ended 25 November 2017.

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Yellen upbeat on US economic outlook, worried over soaring public debt...

The Federal Reserve (Fed) Chairwoman, Janet Yellen, reiterated that economic expansion in the US is increasingly broad-based and that further gradual interest rate hikes are essential to sustain a healthy labour market and stabilise inflation at the central bank’s target. However, Yellen expressed significant concerns over the nation’s surging public debt and income inequality. Separately, the Fed’s Beige Book report revealed that the US economy grew at a modest to moderate pace in October through mid-November. Further, it revealed that inflationary pressures have strengthened and the labour market has continued to tighten.

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The Week Ahead

Going ahead this week, investors will keep a tab on the European Central Bank President, Mario Draghi’s speech along with Markit services PMI in the Eurozone and UK for further cues. Furthermore, the US ISM non-manufacturing PMI, change in non-farm payrolls and unemployment rate along with the preliminary Michigan consumer sentiment index data will be on investors’ radar.

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