Asia morning update - Brexit vote watch

Asia markets look to pare back some of the declines following lingering concerns over global growth from the underwhelming Chinese trade numbers.

Source: Bloomberg

Ahead of the Brexit draft vote in the UK parliamentary, expect little to sway in the relatively quiet Asia session.

Citigroup Q4 report pleases

Wall Street’s broad descent on Monday, underscored by the poor Chinese trade showings, had been challenged by the financial sector with bank shares lifted from Citigroup’s Q4 results. An arguably mixed set of results had the market looking at it from a glass that is half full perspective. Despite the challenging environment, whereby the extreme risk-aversion that unfolded into the year-end negated the usual positive effects of volatility, the reduction in expenses managed to shore up the Q4 numbers. The impact on trading income will likely be felt across banks, boiling down to each bank’s management of the situation Earnings per share at $1.61 beat the market’s $1.55 consensus though revenue had been a slight miss.

Beyond the backward-looking components, however, Citigroup noting that trading had improved at the start of the year and the concern centring sentiment driven recession rather than China slowdown had likely been a boon for prices. As far as the KBW bank index and the XLF ETF have suggested, the market is liking this first release. J.P. Morgan will be up next, broadly regarded to be more favourable than Citigroup, ahead of Goldman Sachs which had been embroiled in matters relating to Malaysia’s state fund 1MDB. These could still see more gyrations to come for prices.

Financial Select Sector SPDR Fund

UK parliamentary vote

After having the matter kicked down the road, it is finally the day for the UK parliamentary vote on the Brexit draft. In the lead up to today’s vote, there had been little doubts that the draft would face rejection through the parliament. As such, the materialization of this outcome could be a non-event for markets. The slim chance, which had most recently been boosted by suggestions that pockets of Brexiters may vote in favour of the draft deal, would be the option not priced in and thus the wild card here. Look to the vote that is expected to take place between 3am to 5am on Wednesday here in Singapore. With a lack of an option B, the vote could narrow down the possibility to a hard-Brexit or a no-Brexit that could be the next step for the timed Brexit journey.

GBP/USD Mini

Asia markets

A quiet session is expected for Asia markets in light of the lack of economic releases. That said, early movers had mostly headed into green, paring back losses from Monday’s worry over China’s trade performance. To some extent, the market is gradually shrugging this off as a one-off incident after front loading previously. The impetus this provides for a US-China resolution had also likely inspired the gains. Gains may nevertheless be capped with uncertainties still prevailing. Focus ahead to the Brexit decision and more US earnings out this Tuesday for leads.

Yesterday: S&P 500 -0.53%; DJIA -0.36%; DAX -0.29%; FTSE -0.91%


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