Archives of “December 2019” month

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Nikkei 225 closes higher by 0.14% at 23,424.81

  
Analysis, Global Indices

Mixed mood observed among Asian equities

Nikkei 12-12

Japanese investors took heart in the Fed keeping rates on hold yesterday with Fed chair Powell reiterating a message of not hiking rates until inflation is seen rising significantly.

However, there is a bit of a mixed tone in Asia with the Hang Seng surging ahead with gains of 1.4% – largely backed by tech gains i.e. Tencent – while the Shanghai Composite is more sluggish, down by 0.3% currently.
The overall risk mood is more balanced though with US futures sitting near flat levels while Treasury yields are also little changed on the day so far.
In the broader picture, it’s still all about tariffs in trading this week and we’re yet to hear the final decision from Trump on that matter. USD/JPY is keeping more steady at 108.60, also little changed on the day.

Japan – Core Machinery Orders for October: -6.0% m/m (expected 0.5%)

  
Analysis, Economy

Machine order data is sued as a heads up to business investment (capex) in the months ahead.

-6.0% m/m

  • expected 0.5%, prior -2.9%

-6.1% y/y

  • expected -1.9%, prior 5.1%
Ugly numbers.
  • The Japanese government says it has cut its assessment of machinery orders.
  • Adds that machinery orders are showing signs of stalling
Well, d’uh.
while the BOJ is focused on its inflation goal data like this will not go unnoticed. The bank next meet on December 18 and 19.

A snapshot pic of the final UK election polls – Cons still ahead

  
  Analysis
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This is a screenshot via Reuters summary of the most recent polls.

This is a screenshot via Reuters summary of the most recent polls.
The question for GBP is will Boris Johnson’s Conservatives get a workable majority in parliament, which would give some certainty on Brexit. A hung parliament cannot be ruled out, but the suggested outcome of those polls above is aa win for BJ and some certainty on Brexit ahead.
Caveats (of course)
  1. The trend has been a narrowing in the gap between the two major parties (I’ve posted a couple of summary pieces on this yesterday and today)
  2. This is not over. Polls open in the UK Thursday moirning and by this time tomorrow we’ll be getting results trickling in.

China’s Global Times: Trump can’t force China to yield on trade like Mexico

  
Analysis, Politics
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An opinion piece in the forthright GT. Leads off with:

  • China is not Mexico. 
  • It’s impossible that the US can strike a trade deal with China by forcing Beijing to make big compromises, as the US did to Mexico when it came to the US-Mexico-Canada Agreement (USMCA).
And gets more obstreperous from there 😀
C’mon Dec 15 – more tariffs or not? Only Trump knows right now.
An opinion piece in the forthright GT. Leads off with:

The major US indices snap their two-day slide

  
Analysis, US Market
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Major indices close higher on the day

The major US indices not there today slide and are closing near the days highs in the process. Chair Powell’s view that it would take significant and persistent inflation before the next Fed hike, gave traders the green light to take stock higher.  Ahead, however, will be the US China tariffs scheduled to be hiked on December 15. That along with the UK election on the next key events for not only the US stock market but global stocks.
The final numbers are showing:
  • S&P index, +9.09 points or 0.29% at 3141.61. The high reached 3143.98. The low extended to 3133.21
  • NASDAQ index rose and 37.867 points or 0.44% at 8654.05. The high reached 8658.48. The low fell to 8622.355
  • The Dow rose 29.37 points or 0.11% to 27911.09. The hi reached 27925.50. The low extended to 27801.80

The full FOMC statement for December 2019

  
  Analysis
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The FOMC Statement for December 2019

Information received since the Federal Open Market Committee met in October indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.

Implementation Note issued December 11, 2019

  
  Analysis
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Highlights of the FOMC decision on December 11, 2019:

  • At the prior decision on October 30, the Fed cut rates 25 bps
  • The market has priced in virtually no chance of rate move through February
  • IOER 1.55% vs 1.55% prior
  • Fed drops language about ‘uncertainties about this outlook remain’
  • Vote was unanimous
  • “The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate”
  • No changes in the economic outlook paragraph
  • Says “the current stance of monetary policy is appropriate”
  • Leaves forecasts for GDP and inflation unchanged, lowers unemployment
  • Median forecast is for one rate hike in 2021 and one in 2022

Dropping the language about uncertainties is moderately hawkish. However the market is basically unmoved in the aftermath. The Fed is clearly signaling that it’s on the sidelines here.

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