Tariff-war watchers were struck with optimism as the week began with China sending along its deputy prime minister to what were meant to be low-level talks. Yesterday, the nation’s central bank cut reserve requirement by another 100 points as manufacturing data continues to drop. Japan’s services PMI continues to drop, from 52.3 in November to 51 this past month, and it’s getting precariously close to contractionary territory. Chinese indexes closed slightly down this morning, the Nikkei and Hang Seng – up.
After last week’s surge, the pound continues rising at a slower rate with Brexit only 90 days away. Theresa May on Sunday promised to bring the agreement to parliament next week. Across the channel, economic sentiment is down despite a healthy increase in retail sales in Germany and throughout the zone. This morning’s industrial figures from Germany show a widening contraction – -1.9% in November, down from 1.9 the month before. As markets open this morning, the question is, will yesterday’s downtrend continue to ride Asia’s performance overnight or provide upward expectations ahead of the US.
Equities Jerome Powell seems to have caved in to White House pressure. Yesterday he said that the FED would listen to the markets before adopting any kind of policy for the coming year. Still, we’re seeing a slight tapering off of the week’s upward momentum as US indexes slide into a sideways trend. The Nasdaq added a percent and a ¼ yesterday, the Dow, .42. Bad news came from the supply management institute in the form of a non-manufacturing PMI at 57.6. Expectations had been for a point and a ½ reduction from 60.7.
After hearing of planned Saudi export cuts to the tune of 800,000 barrels per day, WTI stopped short of the $50 barrel, overnight as we await tonight’s API report. And gold continues to hold tight to the 12-80 support and a bit, as the US dollar reacts to yesterday’s ISM figures. On one hand, we have a weaker dollar, on the other hand concerns over China-US trade talks.
We’ll be getting more trade data today from France at a ¼ to 8, with confidence indicators for the EU at 10. This afternoon Greenwich time, it’ll be the US trade balance at 1:30 followed closely by the Redbook index. Oil inventories is at 9:30 with building permits from Australia at a ½ past midnight.