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Global equity markets ended mostly stronger last week, amid confidence over global growth. UK markets ended mixed last week, with the FTSE 100 index closing firmer for the week, boosted by gains in mining and banking sector stocks. On the data front, UK’s NIESR estimated gross domestic product (GDP) advanced more-than-expected in the October-December 2017 period. Moreover, monthly industrial production climbed for the eighth straight month, at par with the market forecast in November. Adding to the positive sentiment, manufacturing production advanced to its highest level since early 2008 on a monthly basis in November. Meanwhile, the country’s trade deficit surprisingly widened in November. European markets ended mostly in the green last week, after political party leaders in Germany reached a breakthrough in talks to form a new coalition government. On the macro front, Eurozone’s unemployment rate recorded a drop in November, reaching its lowest level since January 2009. Furthermore, the region’s industrial production advanced more than market expectations on a monthly basis in November, notching its strongest level since August 2017. Additionally, the German economy expanded at a stronger pace to its highest level in six years in 2017. US markets ended the week in positive territory, amid a rally in energy sector stocks. Meanwhile, reports stated that the US President, Donald Trump, will pull out of the North American Free Trade Agreement (NAFTA). In economic news, US consumer credit surged more-than-anticipated to its highest level in 16 years in November. Moreover, the country’s monthly budget deficit narrowed more-than-expected in December. Meanwhile, JOLTS job openings surprisingly dropped in November, reaching its lowest level in six months. Further, initial jobless claims recorded an unexpected rise during the week ended 6 January 2018. Asian markets closed mixed last week. Data showed that China’s consumer price index (CPI) rose less-than-expected while producer price inflation slowed down to 13 months low on an annual basis in December.

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Currency Update

The Euro ended stronger against the greenback, after the European Central Bank’s (ECB) December policy meeting minutes stated that the senior officials may phase out the central bank’s bond-buying programme in early 2018. On the data front, Eurozone’s retail sales painted a positive picture for November. Moreover, the Sentix investor confidence index rose more-than-expected in January. Furthermore, the single currency bloc’s economic confidence surged in December, reaching its highest level since October 2000. Additionally, business climate indicator jumped to its highest level since measurements began in 1985. The GBP ended firmer against the USD, after reports emerged that Spain and the Netherlands have agreed to support a soft Brexit deal. The US Dollar ended weaker against its key peers last week, after news emerged that China might slow down its purchases of US government bonds. On the macro front, US annual CPI rose at a slower pace compared to market expectations in December. Further, advance retail sales rose less than market anticipations on a monthly basis in the same month.

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ECB might phase out its vast monetary stimulus programme, indicates minutes

The minutes of the ECB’s December policy meeting indicated that the central bank might move faster-than-expected to wind down its massive monetary stimulus programme, as members broadly shared the view that the Eurozone’s economy continued its robust and increasingly self-sustaining economic expansion, which had sent the Euro and Eurozone government bond yields higher.

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The Week Ahead

Going ahead this week, investors will keep a close watch on the US Federal Reserve’s Beige Book for further cues. On the data front, UK’s CPI and China’s GDP figures along with the US Michigan consumer sentiment index, industrial production and manufacturing production will be on investors’ radar.

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