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The Market Last Week

Global equities ended mostly weaker last week, following news that US Senate Republican’s tax bill could delay a major tax overhaul. UK markets ended the week on a negative footing, amid losses in retail sector stocks after data indicated that UK’s annual BRC like-for-like retail sales fell in October, reaching its lowest level since 2008. Furthermore, the nation’s construction output dropped more than market forecast on a monthly basis in September, weighed down by a decline in commercial work and housing repairs. Meanwhile, trade deficit surprisingly narrowed in the same month. In major news, the European Commission slashed its forecast for economic growth in the UK to 1.5% from 1.8% in 2017, amid rising uncertainty over the outcome of Brexit negotiations with EU. European markets ended the week in negative territory, led by disappointing corporate earnings releases. On the data front, Eurozone’s final Markit services PMI was revised upwards in October, while Germany’s final Markit services PMI advanced at a slower pace in the same month. Meanwhile, Germany’s industrial production dropped more-than-expected on a monthly basis in September. US markets ended the week in red, on signs that US tax reform bill would likely be delayed. In economic news, US preliminary Michigan consumer confidence index surprisingly eased in November, as expectations increased that interest rates and inflation would rise. Further, initial jobless claims rose more-than-expected for the week ended 4 November 2017. Asian markets closed mostly stronger last week. On the macro front, China’s consumer price index (CPI) advanced more than market anticipations on an annual basis in October, notching its highest level in nine months, while the nation’s producer price index rose more-than-expected on a yearly basis in the same month. Meanwhile, the nation’s trade surplus widened less-than-anticipated in October.

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Currency Update

The Euro strengthened against the greenback, after the European Commission raised its growth forecast for the Eurozone to 2.2% in 2017, up from the earlier projection of 1.7%. Further, the currency was supported after Eurozone’s Sentix investor confidence index surged to its strongest level since July 2007 in November. Moreover, the region’s monthly retail sales painted a positive picture for September. The GBP ended firmer against the USD, after UK’s NIESR estimated gross domestic product (GDP) expanded in the August-October 2017 period. Additionally, monthly manufacturing soared more-than-expected in September and the nation's industrial production also rose at a stronger pace in the same month, led by an increase in production of machinery and equipment. The US Dollar ended weaker against its major peers, amid uncertainty about the US tax reform bill.

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ECB’s Draghi defended central bank’s ultra-easy monetary policy…

The European Central Bank (ECB) President, Mario Draghi, indicated that most of the financial stability issues associated to low-interest rates did not materialize and there is hardly any proof that current negative interest rates are undermining the Eurozone banks’ profitability. Draghi also stated that various reforms undertaken by European banks have strengthened the EU banking sector. Separately, in its economic bulletin, the ECB stated that robust economic growth in the Eurozone is likely to continue in the second half of the year, boosted by rising domestic demand and increasing investments due to favourable financing conditions and improvements in corporate profitability.

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The Week Ahead

Going ahead this week, investors will keep a tab on speeches by the Federal Reserve Chair, Janet Yellen, the ECB President, Mario Draghi and the Bank of England Governor, Mark Carney for further cues. On the data front, German and Eurozone GDP data and China’s industrial production data along with US and UK’s CPI figures will be on investors’ radar.

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