Huawei investigation puts trade truce at risk

By The London Capital Group

The pound is continuing to hold its ground comfortably above $1.285 after Theresa May survived another vote of no confidence, this time in her government. As the market was expecting Theresa May to win, the reaction was muted

Attention will now switch to Theresa May’s Plan B. She has until 21st January to put forward what the next steps are. Given the extent of the division in Parliament its difficult to see how anything other than extending Article 50 or a second referendum will help towards ending the deadlock.

Upbeat earnings lift Wall Street

US stocks rose overnight thanks to bumper earnings from the likes of Goldman Sachs and Bank of America. Blowout earnings from Goldman’s sent the stock soaring over 9%. Bank of America rose 7.1% after reporting a record quarterly profit. At last some results worth cheering. It may be early days, but the results up until now had been raising eyebrows for the wrong reasons. That said its important to stay realistic, stocks might be moving higher after a disastrous December, but EPS  growth expectations are falling.

Netflix to justify 30% rally since Christmas Eve?

US earnings will remain under the spotlight with Netflix taking centre stage. As the first FAANG report, this brings a whole host of pressures. More so following the steep sell off in the tech sector at the end of last year as high valuations and macro uncertainties weighed on sentiment for the sector.

Investors will be hoping for another strong quarter from Netflix, building on from an impressive Q3. Highlights are set to include streaming revenue increasing 36% year on year and global paid membership pushing above 130 million. The results, and particularly streaming subscriber numbers will be scrutinized. The stock has rallied over 30% since Christmas Eve, now investors want to see the numbers that support that.

Huawei targeted by US

Asia initially moved higher, taking the lead from the solid upbeat earnings-inspired close on Wall Street, although gains soon faded.  European and US futures are pointing to a negative start on reports that US Federal Prosecutors are investigating Huawei Technology for allegedly stealing trade secrets. The move comes as US – Sino relations were improving amid a 90-day truce. It goes right to the heart of the unresolved IP issues with China. China are unlikely to shrug this off which is creating a risk off environment. Signs of retaliation from China could see stocks sink further.

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