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  • After 35 days, the US government shutdown was temporarily ended. Speculative reasons for the termination of the shutdown include Pelosi’s threat not to allow Trump deliver his State of the Union address, poll numbers that indicated that the President and the Republicans were being held responsible for the shutdown and the negative TV footage highlighting the disruption to domestic airports. In any case, funding for the “Wall” will return as a market issue by Feb 15 (if not sooner).
  • The ECB meeting passed off with no change in interest rates (as expected) but of more importance to investors was the comments made by Draghi at the subsequent press conference. Draghi highlighted the risks to the downside associated with their economic outlook however; we expect the ECB will wait until their March meeting (where their updated economic forecasts will be published) before they decide on the timing and direction of the next interest rate move. Draghi still maintains his belief that there is a limited chance of a recession in the Eurozone.
  • Last week, manufacturing PMI’s were released for the US (54.9) and the Eurozone (50.5). Both figures were above 50 and therefore pointed to an expansion in this part of the economy in spite of trade war concerns.
  • Notwithstanding the uncertainty surrounding Brexit, the UK labour market remains relatively strong, with an unemployment rate of 4% (see graph). In a scenario of a soft Brexit, expect the Bank of England to expedite a hike in short term rates, which will have obvious consequences for the UK equity market and the exchange rate. Investors will be looking for long sought clarity this week on the UK political process associated with Brexit.