Nikkei 225 closes lower by 0.09% at 23,410.19

The Nikkei is barely changed as markets stay tepid to start the week

Nikkei 10-12

It has been a quiet session for Asian stocks as markets are staying more cautious and reserved today in anticipation of key risk events still to follow later in the week.

The Hang Seng and Shanghai Composite are also trading at flat levels currently with little change observed in US futures and bond yields as well to start the day.
The overall risk mood is more flat after some bit-part losses seen in equities overnight as traders and investors are keeping their focus on key central bank meetings, the UK election and US-China trade developments still.
As such, USD/JPY is mired in a 11 pips range holding at 108.63 currently. The rest of the major currencies bloc is also little changed as trading ranges remain narrow.

China should not attach too much significance to 6% growth rate, says government economist

The debate on China’s economic target for next year continues


In an article published in the People’s Daily, a deputy director at the DRC – an advisory body to the state council – Wang Yiming says that “6% is not a special watershed”.

Adding that “the growth rate, may it be higher or lower, is not the main problem”. But instead “the key is the quality and efficiency of growth”.
Take this with a pinch of salt for now but if we start to see more commentary such as this next year, it could be a sign that China may just finally let up on the 6% level – however the calculations to reach that figure may be.
As things stand, China has a bigger issue at hand with bond defaults starting to be on the rise. The latest news today is that a local government unit barely managed to escape that with a late payment, which otherwise would have added another scare to markets.
I alluded to another case last month here. And I would expect more such cases to crop up in 2020 and that will surely add to more worries surrounding the Chinese economy over the next few years.
An interesting stat to start the week is that the value of China dollar bonds with yields above 15% have jumped up to $25.6 billion as of today. It was only $21.5 billion last week.
That’s almost a 20% jump as the bond market starts to sense some fear – which will add to funding burden for businesses in the country, and the feedback loop continues.

Economic data coming up in the European session

A couple of light data points to move things along

Comic 10-12

Good day, everyone! Hope you’re all doing well as we look to get things going in the session ahead. Markets are still keeping steady for the most part as we continue to count down to the big risk events yet to come later on in the week.

There has been plenty of hoo-ha since overnight trading over the USMCA deal but I would expect any market reaction on an official announcement to be modest given how this has been in the works for quite some time already now.
Looking ahead, there isn’t much else to shift the dial in markets as we continue to look towards key central bank meetings, the UK election and US-China trade news.
0745 GMT – France October industrial, manufacturing production data
Prior release can be found here. General indication of French factory activity to start Q4. Not a major release by any means.
0930 GMT – UK October monthly GDP data
0930 GMT – UK October manufacturing, industrial, construction output
Prior release can be found here. All the focus remains on the UK election for the pound so the data here will have minimal impact. In any case, it should just reaffirm flat/sluggish economic conditions in the UK to start the final quarter of the year.
0930 GMT – UK October trade balance data
Prior report can be found here. A general indication of trade conditions in the UK economy. A minor data point.
1000 GMT – Germany December ZEW survey current conditions, expectations
Prior release can be found here. Economic sentiment is expected to improve – in-line with other survey data – as the outlook for the German economy is seen to be less gloomy. That said, any signs of a solid recovery is still far away and there are still plenty of challenges that remain as we look towards next year. For now, hope springs eternal.
1100 GMT – US November NFIB small business optimism index
Prior release can be found here. This is an index which measures the opinion of small businesses on the economic conditions in the country. A minor data point.

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading!

China’s Global Times warns of downtrend in US-China trade – difficult to reverse

The Global Times is forthright with its views, a good window into China sentiment

Latest piece:
  • It has been 18 months since the US began imposing 25 percent tariffs on the first tranche of Chinese goods, and bilateral trade between the world’s two largest economies is still sliding. 
  • Even with a “phase one” trade deal, the downtrend in bilateral trade will be difficult to reverse. 
  • Meanwhile, China’s total trade actually expanded 2.4 percent year-on-year in the first 11 months, indicating that trade with the US is not irreplaceable for China. 
Bolding mine.
More here, but the gist of it:

The UN Security Council will meet this week to discuss North Korea

Reuters (citing diplomats and a request from the United States) report the council will meet on Wednesday

  • it will discuss North Korea’s recent missile launches
Over the weekend NK conducted an unspecified “very important test” at its Dongchang-ri satellite launch site
I wonder if we’ll see a yen response? NK issues have, in the past, prompted yen buying (a flight to liquidity response, the USD also a beneficiary) but this has diminished.
North Korea kim yen

US Major indices close just off session lows

tocks not three-day winning streak

The US major indices are closing just off session lows and in the process have snapped the 3 day winning streak.
The final numbers are showing:
  • S&P index, -9.95 points or -0.32% at 3135.96. The high reached 3148.87. The low extended to 3135.46
  • Nasdaq index closed down -34.7 points or -0.4% at 8621.82. The high reached 8678.85. The low extended to 8619.77
  • The Dow closed down -105.39 points or -0.3% at 27909.67. The high reached 28010.42. The low extended to 27906.14
The ranges of the major stock indices
Some winners today included:
  • US steel, +10.63%
  • Bristol-Myers Squibb, +2.29%
  • Slack, +2.2%
  • Deere & Company, +1.65%
  • Qualcomm, +1.31%
  • Target, +1.13%
  • Papa John’s, +1.12%
  • Home Depot, +1.06%
  • Tesla, +1.05%
  • IBM, +0.53%
  • Visa, +0.43%

Some losers today included:

  • Micron, -3.15%
  • Beyond Meat, -2.85%
  • Rite Aid, -2.29%
  • Intuitive Surgical, -2.10%
  • AMD, -1.77%
  • Alcoa, -1.75%
  • Stryker, -1.73%
  • Netflix, -1.52%
  • AliBaba, -1.58%
  • Apple, -1.39%
  • Goldman Sachs, -1.2%
  • Walt Disney, -1.0%