Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

Notes from the Trading Desk – Franklin Templeton

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what their professional traders and analysts are watching in the markets. The European desk is manned by eight professionals based in Edinburgh, Scotland, with an average of 15 years of experience whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The Digest

Global equities were resilient last week amidst a few developing themes. US and European markets hit fresh all-time highs. Defensive stocks were among the week’s outperformers, while we saw further performance divergence between momentum and value in Europe.

Phase One Deal Signed

Trade was in focus last week as the United States and China prepared to sign their “phase one” trade deal on Wednesday. The details of the deal include a commitment from China not to devalue its currency in order to keep exports at more competitive prices.

There are further commitments from China to close its trade imbalance with the United States by purchasing US$200 billion of US goods as well as a vow to do more to prevent the theft of US intellectual property. However, tariffs on around three-quarters of Chinese exports to the United States, valued at roughly US$370 billion, will remain in place. Of that though, tariffs on US$120 billion of goods will cut in half to 7.5%.

The signing itself was a bit anti-climatic, with China’s President Xi Jinping notably absent. It was reported that Xi fears political rivals will see the deal as an “unequal treaty”. Focus quickly shifted to how enforceable the deal was, and there were concerns around China’s ability to walk away from the deal whenever it sees fit.

Nonetheless, Chinese state media noted that it was a “hard-fought agreement (which) should be cherished by both sides” whilst US President Donald Trump hailed it as “one of the greatest trade deals ever made”. It’s not clear as yet when negotiations on a “phase two” deal will commence. It’s believed that this will only start once the effects of the “phase one” deal are clear.

Once again, US equity markets made new all-time highs last week. The S&P 500 Index is now up 3% year-to-date and the Nasdaq has gained 4%. Investors seem increasingly comfortable with the direction of travel in US-China relations and whilst the signing of this deal was scheduled and fully anticipated, getting the deal over the line is seen as a further indication that there are workable solutions.

Chinese data from last week showed improvements too. Chinese exports ticked up annually in 2019, an 11% decline in trade with the United States. The United States remains China’s third largest trading partner behind the European Union (EU) (which is the largest) and Southeast Asia

New EU Trade Chief Hogan in the United States

With the “phase one” deal signed with China, some are concerned the trade relationship with the EU may be the next target for the Trump administration. The new EU Trade Chief Phil Hogan was in Washington to meet US trade representatives last week. There was a raft of headlines around Hogan’s visit and focus was heightened after a Washington Post article suggested that Trump had threatened a 25% tariff on European autos if Germany, France and the United Kingdom failed to explicitly condemn Iran for their nuclear deal breach. In one report, a European official labelled “extortion” as Trump attempted to manipulate European foreign policy through tariffs. Auto stocks were weak last week as this headline weighed heavily on investor sentiment.

Whilst Hogan’s comments through the week were largely conciliatory, he did warn of Trump’s short-sightedness when it comes to trade policy. Hogan said that the only period Trump was thinking about was “between now and November elections.” He said he would like to “reset” the relationship between the EU and the United States amidst reports Trump was looking to hit France with US$2.4 billion worth of tariffs in relation to a French digital-services tax.

Nonetheless, Hogan added that both sides should be working together to bring “mutual benefits” before concluding that the week was productive: “A lot done, and more to do”.

UK: Subdued Data and Noisy Politics Threaten an Early Rate Cut

Sterling moved below $1.30 versus the US dollar for the first time this year last Monday. The decline followed a number of disappointing data releases for the United Kingdom, boosting expectations that the Bank of England (BoE) will cut rates at its meeting on the 30th January. Data last week showed the UK economy contracted in November, while inflation fell to a more than three-year low in December. Retail sales also looked dire on Friday.

Subdued economic activity, the drawn-out Brexit process and other messy political risks all play into justifying a near-term interest-rate cut. A report from the Financial Times shows there’s been a spike in expectation for an early rate cut. The market now sees a 71% chance of a cut at January’s meeting. That’s up from just 5% probability two weeks ago.

The shift in rate-cut expectations has also been reflected in yields, with the 10-year gilt yield dropping sharply last Monday following the gross domestic product (GDP) release.

Last weekend, Monetary Policy Committee member Gertjan Vlieghe told one media outlet that he needed to see an “imminent and significant improvement in the UK data to justify waiting a little bit longer” to cut rates. We also had very dovish commentary from the BoE’s Michael Saunders on Wednesday.

Saunders (along with fellow MPC member Jonathan Haskel) already voted for a 25 basis point rate cut to 0.5% in November and December last year. Any data up until the vote will be in focus, with the potential for other voters to be swayed. Forward-looking manufacturing and services reports are due out this Friday

Last Week


European equities were lifted on the tide of positive sentiment from the US/China “phase one” trade deal. Investors seem happy for now to see past risks surrounding a US/EU trade spat escalating. Looking at the country-level, stocks in Switzerland, the United Kingdom (helped by a weaker pound) and France led markets higher last week. The German market saw a more muted gain.

Looking at the sectors that did well last week, the best-performing in Europe included utilities, personal and household goods, and food and beverage. At the other end, autos and banks underperformed.

There has been a stark outperformance of momentum over value as an investment style in 2020, with European banks weighing on value stocks given the backdrop of dovish central bank commentary. In addition, technology names have surged higher this year, driving momentum outperformance. The question is, will it last? Some observers think value can make a comeback.

Elsewhere, it was a quiet week for European macro data outside of the United Kingdom. The European Central Bank (ECB) minutes didn’t garner too much attention. ECB President Christine Lagarde’s assessment of both economic growth and inflation in December was slightly less pessimistic than her predecessor’s assessment in September. On growth, the minutes reiterated the December meeting’s conclusion that “there are some initial signs of stabilisation in the growth slowdown” and that “downside risks to growth have become less pronounced”.


With the US/China trade talk signed last week and some benign macro data, US equities made fresh all-time highs last week. The S&P 500 Index is now close to recording its biggest-ever bull run. We note that CNN’s Fear and Greed Index, which looks at a variety of different market indicators, is showing current market moves are driven by “Extreme Greed”, further evidence of the rather bullish feel around markets.

In terms of other catalysts, earnings season kicked off last week in the United States. A number of investment banks reported higher fourth quarter earnings, which sent their shares higher. This coming week is huge for US corporate earnings, with 25% of companies in S&P 500 Index due to report.

Looking at sector performance, it was a bit of a mixed bag. Utilities and technology stocks lead the way higher, while the energy names lagged.

In terms of macro data, we had a couple of notable releases. The Philadelphia Federal Reserve Business survey came in much stronger than expected, while December Retail Sales (excluding autos) also topped estimates.


Asian equities were largely well-supported last week; however, Chinese stocks remained under pressure. As discussed, focus was on the signing of the “phase one” trade deal with the United States, but disappointing Chinese data kept investor expectations in check.

Elsewhere, Australia’s market hit a new all-time high, despite the bushfires that continue to rage on in the country. South Korea’s market also advanced as hopes were raised that an interest-rate cut may be on its way after two Bank of Korea board members dissented to leaving rates on hold at the latest meeting.

Meanwhile, Taiwan continued to garner interest after President Tsai Ing-Wen’s landslide election victory, with her anti-China position proving popular.

Chinese macro data was mixed last week. Exports and imports topped forecasts, but Friday’s economic growth reading came in behind analyst expectations. Weak consumer spending and rising unemployment were cited as two factors behind the subdued growth. Nonetheless, with the “phase one” deal signed, investors seem cautiously optimistic that this could represent a turning point in improved trade relations and thus stronger economic growth.

Week Ahead


  • Regional elections in Italy next Sunday (January 26th)


  • World Economic Forum in Davos (Tuesday-Friday). US President Trump is expected to attend.
  • Tuesday: German and Eurozone ZEW Survey; UK Unemployment
  • Thursday: Eurozone Consumer Confidence US Initial Jobless Claims
  • Friday: Japanese Composite PMIs; Eurozone and UK Composite PMIs; US Composite PMIs

Monetary Policy

  • Tuesday: Monetary policy committee meeting for Bank of Japan (BOJ)
  • Thursday: Monetary policy committee meeting for ECB. ECB President Lagarde to announce new ECB strategy.


  • US markets closed on Monday 20th January for Martin Luther King Day.
  • China’s markets closed on Friday for one week for New Year.



Franklin Templeton Key risks & Disclaimers:

What Are the Risks?

All investments involve risk, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Past performance is not an indicator or guarantee of future performance.

This article reflects the analysis and opinions of Franklin Templeton’s European Trading Desk as of 20 January 2020, and may vary from the analysis and opinions of other investment teams, platforms, portfolio managers or strategies at Franklin Templeton. Because market and economic conditions are often subject to rapid change, the analysis and opinions provided may change without notice. An assessment of a particular country, market, region, security, investment or strategy is not intended as an investment recommendation, nor does it constitute investment advice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy. This article does not provide a complete analysis of every material fact regarding any country, region, market, industry or security. Nothing in this document may be relied upon as investment advice or an investment recommendation. The companies named herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. Data from third-party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered by FT affiliates and/or their distributors as local laws and regulations permit. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction. 

Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.

MeDirect Disclaimers:

This information has been accurately reproduced, as received from Franklin Templeton Investment Management Limited (FTIML). No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

BlackRock - Why we keep leaning into risk
All News

BlackRock Commentary: Why we keep leaning into risk

Investment opportunities are emerging amid a unique macroeconomic backdrop, with U.S. equities leading gains, particularly driven by AI-related companies, and expectations of continued volatility. The focus is on overweight positions in U.S., UK, and Japan stocks, while favoring quality short-term fixed income and private credit investments.

Epic Investment Partners Weekly Article
All News

Epic Investment Partners Views: The Week Ahead

This week’s key events include China’s Third Plenum, the ECB rate decision, US bank earnings, and several significant economic data releases from the US, Eurozone, and UK.. Last week, Fed Chair Powell highlighted progress on inflation but emphasised caution in rate cuts, while China’s economic recovery showed signs of weakness with lower-than-expected inflation and GDP growth.

Experience better Banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. 

Sign up and open your account for free, within minutes.



We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.