March 4, 2019
Chinese markets soar amid hopes of a trade agreement with the United States
Stocks in China skyrocketed on Monday, March 4, after Beijing offered to reduce tariffs on certain U.S. products as part of a trade agreement with Washington.
Other markets in Asia were also bullish. The Japanese Nikkei 225 gained 1.11 percent. In South Korea, the Kospi rose by 0.3 percent, while Samsung Electronics rose by more than 0.4 percent. The ASX 200 in Australia rose 0.41 percent, with the materials sub-index being the best. Shares of major mining companies advanced.
After the collapse of last week's Trump-Kim summit, all eyes are on the U.S.-China trade agreement. The Trump-Xi summit is likely to be held later this month.
China's productive activity fell in February, for the third consecutive month. The world's second largest economy continued to struggle with weak export orders. Weakness is also being felt in the rest of the Asia-Pacific region. South Korean exports contracted to their slowest pace in almost three years during February as Chinese demand cooled.
The February ISM manufacturing index sank to its lowest level since November 2016 and remained below expectations. On Thursday, U.S. gross domestic product surpassed expectations. Overall, economic data appears to be quite strong in the US.
Crude oil falls more than 2% and demand concerns remain. A Reuters survey showed that analysts expect global fuel consumption to decline this year, given the global economic slowdown. Nevertheless, for the time being, fuel consumption in the developing economies of Asia, which are the main drivers of global oil demand, has remained unchanged so far.
The US dollar index and two-year Treasury yields have risen in recent days and these factors have prompted investors to close positions in gold. Gold prices fell by 1 percent on Friday to their lowest level since late January. It is its biggest weekly decline in six and a half months.
Palladium rose 0.3 percent and reached an all-time high. It ends with gains, for the fourth consecutive week. The threat of a possible strike in South African mines keeps prices high.
European markets are expected to open up Monday's session.
U.S. Indices rise
U.S. stocks rose on Friday, March 1, in what is being the strongest start to the year in nearly three decades.
Friday's moves come one day after major indices posted solid monthly gains in February. The S&P 500 is up more than 11 percent during the year, similar to the Dow. The Nasdaq, on the other hand, has risen more than 14 percent.
The S&P 500 traded around 2,800 resistance for most of the week, briefly surpassing it on Monday and Tuesday. Last summer, once the 2,800 points were surpassed, this level became support. And that support helped push the market to new highs.
European markets close tightly
European equities traded higher on Friday, March 1, starting the first day of the new month on a positive note.
The Stoxx 600 pan-European index provisionally ended with a 0.35 percent rise and almost all sectors in positive territory.
The automotive sector was the strongest performer, with Faurecia leading the way with a rise of more than 5 percent. The French auto equipment firm said it will buy Clarion and launch a Japan-based business group in April.
Oil giant Shell suffered share declines after confirmation that it faces multiple charges of corruption, emissions and the consequences of an explosion at its Moerdijk facility in 2014.
In Europe, investors are still waiting for news of the UK's imminent exit from the European Union. Operators are wondering whether the UK will leave the EU at the end of March, with or without an agreement, or whether it will look for an alternative. There seem to be two options: a new referendum, which would support the opposition of the Labour Party, or a delay in the exit date.
As for economic news, eurozone inflation figures showed an increase in February. The figure reached 1.5 percent last month, compared to the previous reading of 1.4 percent in January. It remains below the European Central Bank's target of 2 percent.
U.S. GDP rises in fourth quarter
U.S. economic growth was better than expected, with a 2.6 percent increase by the end of 2018 instead of the 2.2 percent expected. The growth took place in a context of uncertainty.
Growth was boosted by a 2.8 percent increase in consumer spending, which was worse than expected.
In addition, there was also an increase in non-residential fixed investment, exports, private investment in inventories and federal government spending.
Weak fixed residential investment and state and local government spending hampered progress.
Poor retail sales have generated concern, as consumers drive nearly 70 percent of U.S. growth.
Exports rose 1.6 percent in the quarter, while imports rose 2.7 percent. This does not contribute to reducing the U.S. trade balance.
Employment remains strong, with wage increases as well.
U.S.-China trade agreement will have big commitments
Treasury Secretary Steven Mnuchin said the United States is approaching a long-awaited trade agreement with China.
‘The deal isn't closed yet, but we've made a lot of progress’.
Mnuchin and U.S. Trade Representative Robert Lighthizer are working on a detailed agreement to reach meaningful commitments with Beijing. Real structural changes must come about that will affect, above all, the Chinese economy.
These discussions have lasted two years, since the first summit between President Donald Trump and Chinese President Xi Jinping.
North Korea accuses U.S. of failing summit
North Korea is questioning President Donald Trump's speech about the cause of the hasty end of the summit between Trump and North Korean leader Kim Jong Un.
North Korea's foreign minister says his country asked for only partial relief from sanctions in exchange for shutting down its main nuclear complex. However, the United States demanded more disarmament measures.
Trump told reporters that North Korea had demanded the total elimination of sanctions in exchange for closing the Yongbyon nuclear facility.
Ri also says his country was willing to offer in writing a permanent halt to nuclear and intercontinental ballistic missile tests. Washington missed an opportunity that may not come back.
Eurozone inflation rallies in February and unemployment falls
The annual inflation rate in the euro area was 1.5% in February. After a rise in the price of energy and fresh food.
In particular, energy became more expensive in the euro area by 3.5% year-on-year in February, compared with a rise of 2.7% in January. Fresh food rose by 2.9%, compared to 1.8% in the previous month.
Services rose by 1.3% year-on-year in February, three tenths less than in January.
The underlying inflation rate in the euro area, which excludes the price of energy, food, alcohol and tobacco from the calculation, moderated to 1% in February.
Unemployment fell in January to 6.5% in the EU and remained at 7.8% in the euro area in January.
The data are the best since 2000 and 2008, respectively.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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.