News & Analysis

Weekly Summary -Another Week of Geopolitics

February 22, 2019

By Deepta Bolaky

The week was predominantly on trade issues, Brexit, China’s coal ban, and the minutes of the Federal Reserve.

Geopolitics Remain At The Forefront

The geopolitical headlines largely drove risk sentiment in the financial markets again this week. Investors were cautiously optimistic about the dominant geopolitical headlines.

  • US -China trade talks 

At the beginning of the week, investors found relief on the fact that further talks were in the pipeline, but there was a lack of concrete information on where the negotiations were leading. Towards the end of the week, the news that both parties started to sketch outlines of a deal to end a trade dispute and that negotiators are drawing six memorandums of understanding on structural issues boosted sentiment. 

  • US-EU Auto Tariffs

 There are also mounting pressures for a deal between the US and the European Union. President Trump is not taking car tariffs off the table and is ramping threats on the 28-member bloc to grant better access for US products. The backlash between the US and the EU is adding additional pressure on the European markets which are already battling domestic political tensions and slowing growth.

  • Australia and China

 Australia was caught by surprise following China’s Coal ban. The ties with China were already showing signs of deterioration due to the clash back in 2017 over cybersecurity. However, tensions increased again last month when Australia withdrew the visa of a prominent Chinese businessman, just months after barring Huawei from supplying equipment to its 5G broadband network. 

  • Brexit

Rather than having more updates on Brexit, news of resignations was flowing across the week. There were seven resignations from the Labour Party and two resignations from Theresa May’s Party.

Overall, there was enough optimism in the markets to keep risk sentiment afloat. Major equity indices swung from gains and losses but managed to remain in positive territory for the week as of writing. In the Australian share market, it was a big week on the earnings front which helped the index to climb higher and is poised to finish the week higher.

Central Banks

On the economic calendar, the release of the minutes by the RBA and the FOMC were widely anticipated. The RBA’s minutes was mostly a non-event as it reflected what investors were expecting.

On the other side, the FOMC minutes were less-dovish, and there was a lack of clarity on the interest rate outlook for the year 2019. The Federal reserve remains on the “patience” stance but is not taking a hike off the tables yet.

“Many participants observed that if uncertainty abated, the Committee would need to reassess the characterization of monetary policy as “patient” and might then use different statement language.”

Employment Reports

We had a chance to have fresh updates on the labour market for the UK and Australia. The British Pound came under selling pressure after disappointing monthly data on the UK labour market. Claimant Count Change dropped from 20.8k to 14.2k in January, Average Earnings including bonus came below expectations at 3.4%, and Unemployment remains steady at 4%.

In Australia, after soft wages data, the employment reports surprised on the upside. However, the interest rate cut forecasts by Westpac, and China’s coal ban overshadowed the bullish report and sent its local currency on the offer.


 The Gold rallied to multi-months high this week mostly on the back of the US dollar. Despite an improvement in risk sentiment since the beginning of the year and trade optimism, investors remain on edge because of the slowing global growth and the geopolitical risks. The yellow pair dropped back to $1,326 as of writing and experienced its biggest single-day drop on Thursday since November 2018.

Monday, 25 Feb 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
5.402 6.102 0.392 0.027 0.062 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0