Archives of “January 2, 2020” day

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European shares end the 1st day of the year with solid gains

  
Analysis, Global Indices

German DAX rises by 1.11%. UK FTSE up 0.87%

the major stock indices in Europe are ending the 1st day of the year was solid gains. Spain’s Ibex and Italy’s FTSE MIB led the way with 1.4% gains.
A look at the provisional closes are showing:
  • German DAX, +1.11%
  • France’s CAC, +1.14%
  • UK’s FTSE, +0.87%
  • Spain’s Ibex, +1.4%
  • Italy’s FTSE MIB, up 1.4%
  • Portugal PSI 20, up 1.0%

In the debt market, the benchmark 10 year yields so yields move lower. The German and French 10 year oat fell -3.8 basis points on the day. Italy’s 10 year note rose by 0.3 basis points.

European 10 year yields are lower
In other markets as European traders look to exit:
  • Spot gold is up $10.77 or 0.71% at $1528.06. The price is off its high at $1531.40
  • WTI crude oil futures are now trading lower by $0.27 or -0.44% at $60.78. That is near the low price for the day at $60.70. The high price extended to $61.60
In the US stock market the major indices are off their highs for the day (all-time intraday highs were reached in the S&P and NASDAQ).

US December final Markit manufacturing PMI 52.4 vs 52.5 expected

  
  Analysis

Revisions to the December Markit US PMI

Markit US PMI
  • Prelim reading was 52.5
  • Nov final reading was 52.6
  • New orders 53.1 vs 53.2 prelim (53.6 prior)
  • Nine-month high in input price inflation
  • Output price inflation rose to highest since Feb
  • Full release
Chris Williamson, Chief Business Economist at IHS Markit said:
“The US manufacturing sector continued to recover from the soft-patch seen in the summer, ending 2019 with its best quarter since the early months of 2019.
“The overall rate of expansion nevertheless faltered somewhat in December and remains well below that seen this time last year, suggesting producers are starting 2020 on a softer footing than they had enjoyed heading into 2019.
“Business sentiment about the outlook remains especially subdued compared to a year ago, reflecting ongoing worries about geopolitics and trade wars, especially the impact of tariffs, as well as fears that political and economic uncertainty surrounding the 2020 elections could dampen demand.
“The impact of tariffs was clearly evident via higher prices, while the relatively subdued level of business confidence manifested itself in a pull-back in hiring, hinting at risk aversion and cost-cutting.”

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Eurozone December final manufacturing PMI 46.3 vs 45.9 prelim

  
  Analysis
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Latest data released by Markit – 2 January 2020

The preliminary release can be found here. The mildly higher revision was predicated by the French and German readings earlier but it is still weaker than the November print.

All this does is just reaffirm more sluggish factory conditions in the euro area economy towards the end of last year and that any signs of a recovery still needs more consistency despite a better outlook to US-China trade and Brexit developments.

Markit notes that:

“Eurozone manufacturers reported a dire end to 2019, with output falling at a rate not exceeded since 2012. The survey is indicative of production falling by 1.5% in the fourth quarter, acting as a severe drag on the wider economy.

Although firms grew somewhat more optimistic about the year ahead, a return to growth remains a long way off given that new order inflows continued to fall at one of the fastest rates seen over the past seven years. Firms sought to reduce inventory levels and cut headcounts as a result, focusing on slashing capacity and lowering costs. Such cost cutting was again also evident in further steep falls in demand for machinery, equipment and production-line inputs.”

China temporarily suspends Shanghai-London Stock Connect scheme – report

  
  Analysis

Reuters reports

UK China

The report cites five sources familiar with the matter in saying that China has temporarily blocked cross-border listings between the Shanghai and London stock exchanges because of political tensions with Britain.

All of the sources in question said that politics was behind the suspension, leaving a bit of a question mark over China-UK ties in the bigger picture.
Of note, two of the sources noted that the UK’s stance over the Hong Kong protests was part of the reason, with China being unhappy about interference by foreign governments.
I think this is a bit of a lose-lose for both sides as it reduces foreign investment in UK markets, which already is hurting badly, and at the same time it also prevents Chinese investors from expanding their investment opportunities into UK-listed firms.
I reckon we can just take note of this for now and see how this affects tensions between the two countries in the coming months i.e. if it gets better or worse.

It’s PMI day in Europe to kick start the new year

  
  Analysis
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But markets are still plagued by poor liquidity conditions for the most part

2020

Happy New Year, everyone! Hope that all of you had a great celebration or time off and that you’re refreshed for another new trading year ahead.
Markets are still largely affected by thin conditions with liquidity still rather lacking and I would expect things to stay that way until tomorrow or next week at least.
In the major currencies space, things are a little mixed with the pound finding itself on the back foot while the aussie and franc are also mildly weaker on the day so far.
Looking ahead, we’ll have manufacturing PMI releases in the European morning but these will be final readings for December, so they won’t really matter all too much.
0815 GMT – Spain December manufacturing PMI
0845 GMT – Italy December manufacturing PMI
0850 GMT – France December final manufacturing PMI
0855 GMT – Germany December final manufacturing PMI
0900 GMT – Eurozone December final manufacturing PMI

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Singapore economic growth in Q4 2019 +0.1% q/q (vs +0.4% expected)

  
Analysis, Economy

Q/q GDP +0.1% against the expected +0.4% and prior quarter’s 2.4%

For the y/y, comes in at 0.7%
  • expected 0.6%
  • prior 3.1%
SG is an export reliant economy, so its nor surprise its been impacted by the trade war. The MAS eased policy in October 2019 (first easing since 2016) citing the external risks facing the country.
The phase 1 US-China deal, expected to be singed in the next couple of weeks, might ease the tensions a little.

UN sec-gen ‘deeply concerned’ North Korea said it could resume weapons tests

  
  Analysis
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Celebrated trolls of the year (2019 version) North Korea / Kim Jong Un are off to a lead position for 2020.

Kim Jong Un said earlier in the week that there are no longer grounds for him to be limited by his self-declared moratorium on intercontinental ballistic missile and nuclear weapon testing & a “new strategic weapon” will be unveiled in the near future
Prompting United Nations Secretary-General Antonio Guterres to say (through a spokesperson) that he hopes there will no new tests.
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The 2020 US election year will be, I suspect, very interesting indeed. In Chinese curse terms that is.

People’s Bank of China to cut RRR by 50 basis points from January 6

  
  Analysis

Announcement from the PBOC on Wednesday

  • to cut the reserve requirement ratio (RRR) for financial institutions by 50 basis points from Jan 6
In effect this is a cut to the amount of reserves a lender must hold
  • It will release funds for lending
A PBOC official said the RRR cut will impact to offset cash demand ahead of the Spring Festival, banking system liquidity will remain basically stable
  • Said it does not amount to “flood-like” stimulus” – the stance of prudent monetary policy has not changed
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