December 13, 2019
Japan leads Asian stock market as investors await first phase of trade agreement
The Asian markets rose on Friday, December 13, after the results of the elections in Britain where Boris Johnson has won with a large majority.
It also helped that Washington and Beijing appear to have reached a phase one trade agreement, pending President Trump’s approval. In addition, the White House has offered to eliminate the next round of tariffs that would take effect Sunday.
Mainland China’s shares rose at the end of the session. Hong Kong’s Hang Seng index rose by 2.06% with Tencent and HSBC shares rising by more than 2% each.
South Korean Kospi also experienced strong gains and traded 1.32% higher. Shares of chipmaker SK Hynix shot up more than 5%. Stocks in Australia also advanced, with the S&P/ASX 200 up 0.53%. The major mining company BHP exceeded 2%.
The Japanese Nikkei 225 appreciated by 2.35% as Fast Retailing shares soared above 3.5%. The Bank of Japan released on Friday a tankan survey showing that business confidence among the country’s major manufacturers is falling to its lowest level in more than six years.
The yen was very weak (CurrencyIndex 0%) early Friday morning.
Shares rise to a new record after a Trump tweet saying the U.S. is very close to a trade deal with China
Thursday 12 December was the first time since 27 November that major indices reached all-time highs.
They did so after the U.S. president said that China and the U.S. are very focused on getting their trade agreement before Sunday’s tariff hikes. Trump said 'they want it and so do we’.
Several different sources reliably say that U.S. negotiators have offered to cancel China’s new tariffs and reduce existing ones by up to 50 percent to $360 billion. However, it is also said that the original tariffs would be reimposed if China does not deliver on its side of the bargain.
The US dollar was very weak (CurrencyIndex 12.5%) early on Friday.
European shares close tightly after Trump’s tweet
European equities recovered on Thursday, December 12, after President Donald Trump said the United States is very close to a trade agreement with China.
Stocks registered minimal losses when the European Central Bank announced that it kept its interest rates unchanged, following the first monetary policy meeting of new President Christine Lagarde.
Finally, at the close of the session, the pan-European Stoxx 600 ended up approximately 0.5% higher. Banks, basic resources and automobiles were at the forefront.
In Britain, voters are holding general elections this Thursday. They are the second in the UK since the historic vote to leave the European Union in 2016. The elections promise to be fundamental to the fate of Brexit and the country’s economic policy.
On Thursday, the Ifo Institute confirmed its 1.1% growth forecast for the German economy. It also revised its projection for 2021 upwards to 1.5%. In addition, industrial production in the euro zone fell by 0.5% m-o-m in October and fell by 2.2% over the same period last year.
The euro was mixed (CurrencyIndex 50%) early Friday morning.
Oil prices reached their highest level in three months as the trade agreement is reached and Gold prices fall as risk appetite increases
Oil prices rose in the Asian session on Friday, December 13, reaching three-month highs after the United States and China came close to resolving a trade war that has raised big questions about global demand for crude oil.
While a trade agreement could boost oil demand in the short term, persistent doubts about future demand limit price increases.
Meanwhile, the White House has agreed to suspend some tariffs on Chinese products, and reduce others, in exchange for Beijing’s promise to increase purchases of U.S. agricultural products by 2020. But the White House has made no official statement, raising doubts about whether there is an agreement at all.
Brent futures were up (MarketEvolution) early Friday.
At the Asian session on Friday, December 13, gold fell after Washington and Beijing reached a trade agreement and avoided a new round of tariff measures. This boosted appetite for riskier assets.
In the previous session, gold prices reached their highest level in more than a month, driven by trade uncertainties, ahead of the December 15 deadline when U.S. tariffs on Chinese products were expected to begin to apply immediately.
Gold futures were down (MarketEvolution) early on Friday.
Nothing new at the ECB and markets do not move
At its meeting on Thursday, the Governing Council of the European Central Bank decided that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility would remain at 0%, 0.25% and -0.50% respectively.
The Governing Council expects the key ECB interest rates to remain at their current levels until the inflation outlook converges to a level sufficiently close to 2%.
On 1 November net purchases resumed as part of the asset purchase programme at a monthly rate of EUR 20 billion. The Governing Council expects them to last as long as necessary to reinforce the accommodative impact of its official interest rates.
It also intends to continue to reinvest in full the main payments on maturing securities in order to maintain favourable liquidity conditions and a large degree of monetary easing.
Weekly U.S. unemployment claims reach highest level in more than two years
The number of Americans who filed for unemployment benefits rose to more than the two-year high last week.
The initial claims increased from 49,000 to 252,000 for the week ending December 7 and is the highest reading since September 2017.
On the other hand, higher food and gasoline prices were offset by lower service costs, pointing to moderate inflation.
These data were released after the consumer price rally was released on Wednesday.
The Federal Reserve, which has an annual inflation target of 2%, tracks the price index of basic personal consumer spending to establish its monetary policy.
Unchanged interest rates indicate that they will no longer be touched until at least 2020
The Federal Reserve kept interest rates stable after its two-day meeting.
The Fed said it is unlikely that action will be taken next year amid persistently low inflation.
Concluding a year in which the central bank cut its benchmark rate three times, the Federal Open Market Committee met expectations and kept the funds interest rate in a range from 1.5% to 1.75%.
The committee indicated that monetary policy is likely to remain where it is for an indeterminate period, although officials will continue to monitor the development of economic conditions.
The decision to keep rates unchanged was unanimous, after several disagreements in recent meetings.
Saudi Aramco reaches record market capitalization on its second trading day
Saudi Aramco’s shares rose on its second day of public trading, pushing the initial public offering to a huge valuation of $2 trillion and reaching the target set by the Company.
The figure, almost a trillion dollars higher than that of the next largest public companies in the world, Microsoft and Apple, was ridiculed for a long time and considered impossible by the majority of the financial community.
The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.