Stock indices pull back; Pound edges higher as UK PM unveils plan B

Summary:

• US stock futures pull back as NYSE closed for MLK day

• Slowing Chinese growth weighs on equities

• DE30: Henkel sinks after slashing earnings forecast

• Pound edges to daily highs as UK PM unveils plan B

• Ethereum developers postpone hard fork

Friday’s session saw a strong rally for the S&P500 (US500 on xStation) which built on the gains seen at the end of the previous day with some positive news hitting the wires late on during Thursday’s session which caused the market to break above the 2626 level. In doing so price also ended above the 50 day SMA for the first time in over 6 weeks, and you have to go all the way back to early October to find consecutive closes above this indicator - a feat that was achieved on Friday’s close. Today the market has pulled back a little in light trade due to the US bank holiday to remember Martin Luther King.

The broader declines in equities can be attributed to some data out overnight from the Far East which confirmed, what many have believed for some time, in that the Chinese economy is slowing. The trade war with the US and policy decisions in Beijing have dampened both consumer and business sentiment which has in turn caused growth for 2018 to fall to 6.6% - down from 6.8% in the previous year. It is worth pointing out that this pace of growth still represents a fair clip and while the pace in the 4th quarter did drop to its lowest level since the global financial crisis (6.4%) it is still comfortably above many of its Western peers - if the official data is taken to be accurate, something which is far from a given.

Henkel (HEN3.DE) is the worst performing DAX component on Monday. The company announced that its 2019 earnings will likely be smaller than previously expected. Henkel said that EPS will slide by a “mid-single digit percentage” at constant FX basis. Apart from that, the organic sales growth should be somewhere between 2% and 4% while Ebit margin should reach 16-17%.

This afternoon’s update on the Brexit process from the UK PM Theresa May has provided no real surprises, and little by the of any real new points, but has provided some small upside in the pound nonetheless. The gains are perhaps a little surprising given that May once more refused to take no deal off the table (the outcome that would be most negative for the GBP), but it seems on the whole that market still feels this outcome is the least likely going forward. Longer term GBPUSD remains between the 1.2830 and 1.3000 levels of support and resistance. A break outside of this narrow range could well open up the next sustained move.

Sunday’s trading in the cryptocurrency market ended on a weak footing as major cryptocurrencies experienced significant drops. Top cryptocurrencies have begun the new week with some slight losses, but their scale have been moderate so far. According to CoinMarketCap, the capitalization of the whole cryptocurrency market stands around the $120 billion handle whereas the capitalization of altcoins sits a little above the $55 billion mark. Ethereum developers have suggested the cryptocurrency hard fork called Constantinople would be activated in late February. Ethereum developers made such a suggestion during a phone call on Friday. Vitalik Buterin, the founder of Ethereum, took part in this call as well. Now, the Constantinople hard fork is planned with a 7.28M block (scheduled on February 27), according to a Péter Szilágyi’s tweet (the Ethereum developer). Let us remind that the Ethereum hard fork had been planned to be activated on January 16. However, ChainSecurity (a blockchain audit company) discovered a critical vulnerability, and Ethereum developers made a postponement of the Ethereum hard fork just hours before the planned upgrade Constantinople.