Risk-taking was the name of the game during the Asian session, as traders price in a “cease fire” between the U.S. and China as well as Russia and OPEC possibly extending its deal through 2019.
- U.S., China agree to hold off from further tariff increases
- NZ overseas trade index (q/q) drops by 0.3% vs. 0.1% growth expected, 0.4% previous
- Japan’s capital spending up by 4.5% vs. 8.6% expected, 12.8% in Q2 2018
- AU AIG manufacturing index slows down from 58.3 to 51.3 in November
- AU MI inflation gauge flat in November vs. 0.1% uptick in October
- AU building approvals declines by 1.5% vs. -1.4% expected, +5.5% previous
- AU company operating profits rises by 1.9% vs. 2.9% increase expected, 2.4% in Q2
- AU ANZ job ads lower by 0.3% vs. 0.3% growth in October
- China’s Caixin manufacturing PMI a bit better at 50.2 vs. 50.1 expected and previous
U.S., China agree to pause further tariff increases
After a two-and-a-half hour “high steaks” meeting in Argentina, Presidents Donald Trump and Xi Jinping have decided to hold off on further tariff increases on each others’ products.
For now, the U.S. has agreed to postpone its tariff additions on $200B worth of Chinese goods scheduled on January 1. Meanwhile, China has agreed to purchase a “very substantial” amount of agricultural, energy, industrial, and other U.S. products immediately.
The “cease fire” will last 90 days as U.S. and Chinese teams attempt to untangle thorny issues such as non-tariff barriers, cyber theft, intellectual property protection, agriculture, and forced technology transfer.
Not all are impressed, however. Some analysts think that 90 days is too soon to successfully navigate through trade-related issues.
Others also point out that we’re seeing a de-escalation of hostilities rather than a cease fire as existing tariffs are still in effect and are still dragging on their economies and causing uncertainty among investors.
Improvement in risk appetite
Not surprisingly, the lack of escalation in the U.S.-China trade war brought the bulls out during the Asian session.
- Nikkei is up by 1.39% to 22,662.7
- A SX 200 is up by 1.43% to 5,767.6
- Shanghai index is up by 2.91% to 2,663.453
- Hang Seng is up by 2.68% to 27,217.3
Gold also joined the bullish party, as it took advantage of lower demand for the low-yielding dollar.
Ditto for crude oil benchmarks, which found support from President Vladimir Putin himself sharing that Russia and OPEC “have an agreement to extend our [output cut] deal” even as he cautioned that “[t]here is no final decision on volumes, not yet.”
- Gold is up by 0.29% to $1,225.70 per troy ounce
- Brent crude oil is up by 5.69% to $62.45 per barrel
- U.S. WTI is up by 6.06% to $53.70 per barrel
Major Market Mover(s):
Since Australia ships a lot of its exports to China, better economic prospects for the latter ended up boosting the Aussie.
AUD/USD is up by 62 pips (+0.85%) to .7371; AUD/JPY is up by 72 pips (+0.86%) to 83.64; AUD/CHF is up by 53 pips (+0.72%) to .7353; AUD/NZD is up by 43 pips (+0.40%) to 1.0662; EUR/AUD is down by 66 pips (-0.42%) to 1.5405, and GBP/AUD is down by 86 pips (-0.51%) to 1.7335.
The combo of higher oil prices and an improvement in global risk sentiment supported the oil-related Loonie for most of the session.
USD/CAD is down by 75 pips (-0.57%) to 1.3202; CAD/JPY is up by 52 pips (+0.61%) to 85.89; GBP/CAD is down by 58 pips (-0.34%) to 1.6878; CAD/CHF is up by 35 pips (+0.47%) to .7551, and EUR/CAD is down by 38 pips (-0.25%) to 1.5000.
USD, JPY, and CHF
Safe-haven currencies like the dollar, yen, and franc took a step back against their peers as traders took on riskier bets after last weekend’s headlines.
GBP/JPY is up by 33 pips (+0.23%) to 144.98; CHF/JPY is up by 19 pips (+0.17%) to 113.74, and NZD/JPY is up by 39 pips (+0.50%) to 78.44.
USD/CHF is down by 12 pips (-0.12%) to .9976; EUR/CHF is up by 22 pips (+0.20%) to 1.1328; GBP/CHF is up by 14 pips (+0.11%) to 1.2747, and NZD/CHF is up by 25 pips (+0.36%) to .6897.
EUR/USD is up by 37 pips (+0.33%) to 1.1355; NZD/USD is up by 34 pips (+0.49%) to .6913, and GBP/USD is up by 29 pips (+0.22%) to 1.2777.
Watch Out For:
- 8:15 am GMT: Switzerland’s retail sales (y/y) (-0.7% expected, -2.7% previous)
- 8:15 am GMT: Spain’s manufacturing PMI (51.5 expected, 51.8 previous)
- 8:30 am GMT: Switzerland’s manufacturing PMI (56.3 expected, 57.4 previous)
- 8:45 am GMT: Italy’s manufacturing PMI (48.9 expected, 49.2 previous)
- 8:50 am GMT: France’s final manufacturing PMI to remain at 50.7?
- 8:55 am GMT: No changes expected from Germany’s manufacturing PMI (51.6)
- 9:00 am GMT: Euro Zone’s final manufacturing PMI expected to maintain 51.5 reading
- 9:30 am GMT: U.K.’s manufacturing PMI (51.6 expected, 51.1 previous)