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Global equities ended mostly stronger last week, amid optimism over the global growth prospects in the coming year and followed by an increase in oil prices. UK markets ended the week in green, boosted by gains in energy sector stocks. Meanwhile, news emerged that Britain could join the Trans-Pacific Partnership (TPP) trade bloc after it leaves the European Union to kick-start its exports. On the data front, UK’s Markit manufacturing PMI recorded a more-than-anticipated drop in December. Furthermore, Markit construction PMI fell more than market expectations in December. However, the net consumer credit grew less-than-expected in November. European markets ended the week in positive territory, driven by a rally in oil prices. On the macro front, Eurozone’s consumer price index (CPI) rose at a slower pace but in line with market expectations on a yearly basis in December. Meanwhile, Germany’s unemployment rate recorded a steady reading in the same month. US markets ended the week on a positive footing, supported by gains in technology sector stocks. Moreover, the US final Markit manufacturing PMI surprisingly advanced to its highest level since March 2015 in December supporting the markets. Adding to the positive sentiment, the ISM manufacturing PMI recorded an unexpected rise in the same month. Further, the ADP employment change rose more-than-expected in December. Moreover, factory orders advanced at a faster pace in November. However, the country’s unemployment rate recorded a steady reading in December. Asian markets closed firmer last week. On the macroeconomic front, China’s Caixin manufacturing PMI surged to its highest level in four months in December. Furthermore, Caixin services PMI unexpectedly jumped to its strongest level since August 2014 in the same month.

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Currency Update

The EUR ended stronger against the USD, after Eurozone’s final Markit manufacturing PMI expanded at par with its preliminary reading in December, reaching its strongest level since June 1997. Additionally, services sector advanced to its highest level in more than six years in the same month. Furthermore, Germany’s monthly retail sales rebounded to its highest level since October 2016 in November providing support to the currency. The British Pound ended firmer against the greenback, after UK’s services sector surged higher than market forecast in December, reaching its highest level since April 2017. Additionally, the nation’s mortgage approvals unexpectedly advanced in November. The US Dollar ended weaker against its key counterparts last week, after US non-farm payrolls rose less-than-expected in December. Furthermore, the ISM non-manufacturing PMI recorded an unexpected drop in the same month. Additionally, the nation’s trade deficit widened more than market forecast in November. Moreover, the final Markit services PMI fell less than initially estimated in December, reaching a seven-month low.

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Fed upbeat on US economic outlook, split over the pace of interest rate hike…

The Federal Reserve’s (Fed) 12-13 December meeting minutes revealed that policymakers remained confident that strength in the US economy and labour market would warrant a gradual pace for interest rate hikes in 2018. Furthermore, senior officials discussed whether new tax cuts approved by the US President, Donald Trump will spur inflation and necessitate a steeper path of interest rate hikes, as many expected it to provide a lift to consumer spending and business investment. However, the Fed also revealed disagreement over the pace of rate hikes if inflation struggles to move up towards the central bank’s 2.0% target. Meanwhile, policymakers increased their expectations for 2018 GDP growth to 2.5% from 2.1%.

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The Week Ahead

Going ahead this week, investors will keep a tab on the European Central Bank’s monetary policy meeting for further cues. On the data front, Eurozone’s unemployment rate, UK’s NIESR GDP Estimate and China’s CPI along with German GDP, US retail sales and CPI will be on investors’ radar.

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