FOMC Meeting Minutes, Ongoing US-China Trade Talks, Chinese CPI/PPI
The Dollar traded modestly higher against other major currencies on Tuesday, ending the series of losses. However the gains were short lived, with a further downside seen on Wednesday morning.
Oil prices were seen climbing higher with the American Petroleum Institute indicating a draw of 6.3 million barrels from stockpiles compared to the previous week. Gold prices further declined with markets mostly positive on the ongoing trade talks between the US and China.
Stock indices around the world closed overwhelmingly with gains on Tuesday, while the VIX – Volatility Index, which is sometimes seen as a measure of uncertainty in the market further declined.
On Wednesday in Germany the Trade Balance statistic for November will be released. Switzerland publishes its Consumer Price Index (CPI) for December and the European Union releases its newest Unemployment Rate data. In the US the Mortgage Bankers’ Association (MBA) publishes its weekly mortgage market indicators and in Canada data on Housing Starts as well as the interest rate decision from the Bank of Canada is expected. In the Asian-Pacific trading session on Thursday China publishes its CPI and PPI data.
With the dollar overall trading stronger, the EUR/USD traded lower on Tuesday. However the losses were quickly recovered on Wednesday morning with the German Trade Balance for November surprisingly reported with a surplus of 19 bn. €, up from 17.9 bn. € in the previous month.
EU economic data from Tuesday was overall disappointing with the German Industrial Production down by -1.9% (expected +0.3%) m/m and the French Trade Balance at a deficit of -5.1 bn. € up from -4.05 bn. € in the previous month, while the Economic Sentiment index published by the European Commission was at only 107.3 (expected 108.3).
On Wednesday in Germany the Trade Balance statistic for November will be released. The European Union releases its newest Unemployment Rate data. In the US the Mortgage Bankers’ Association (MBA) publishes its weekly mortgage market indicators.
Markets will be especially closely watching the release of the minutes from the last FOMC meeting in light of the recent change in the way Federal Reserve Chairman Powell speaks about the near term monetary policy of the central bank while it is more and more expected that the Fed would not stay on its course of multiple rate hikes for this year.
Hong Kong 50
Hong Kong listed shares were some of the best performing equities on Wednesday morning, with the Hang Seng Index (Hong Kong 50) reaching a new monthly high. The market received a boost by the perceived optimism surrounding the currently ongoing trade talks between the US and China. The extensions of the talks for a third day on Wednesday was seen as a possible sign that progress was made.
While most Hong Kong listed stocks climbed higher, shares of the smartphone maker Xiaomi (-6.30%) plunged to an all-time low after six-months lockup period after the successful IPO expired, allowing some early investors and employees to sell their stocks on the market.
China is scheduled to release its Consumer Price Index (CPI) and Producer Price Index (PPI) data for December on Thursday.
Oil pushed again higher, with the WTI crude oil rising above the $50, pushing further away from the low seen around Christmas. Decisive support was seen after the American Petroleum Institute (API) published weekly stockpile figures, which showed crude oil inventories down by 6.3 million barrels compared to the previous week.
Other factors said to possibly influencing the global energy markets were the reports that Saudi Arabia is planning to further curb oil exports by the end of the month and the ongoing trade talks between the US and China. The markets have so far been reacting with optimism to the currently ongoing trade negotiations between the two economic superpowers. The previously slump in equity markets, which also affected energy commodity values was in part blamed on the uncertainty regarding the developments in global trade and the corresponding economic growth.
On Wednesday the Energy Information Agency (EIA) will release its weekly report on crude oil, gasoline and distillate stockpiles.
US stock indices again overall closed higher with an especially strong performance of the real estate (US Real Estate ETF +1.82%) and industrial sector (US Industrial ETF +1.42%). On the other hand chip stocks overall declined (US Semiconductors ETF -0.56%) after a very solid performance over the preceding two trading days.
Markets seemed positive on the ongoing trade talks between the US and China, hopeful that the ongoing conflict might be resolved and thus remove this factor negatively affecting growth estimates. Among other woes Apple (+1.85%) currently has with sales of its iPhone lineup, analysts from Bank of America Merrill Lynch mentioned that it might be suffering from an “informal boycott” from Chinese consumers.
Stocks of aerospace company Boeing (+3.80%) jumped to a new one month high as the company announced positive demand and record deliveries in 2018 driven by its successful 737 and 787 jets.
The earnings season is again starting to take shape. On Wednesday Constellation Brands, known for its Corona beer, is going to publish its quarterly earnings. Then on Friday Infosys is set to release its quarterly results. The following week companies like Bank of America, Goldman Sachs and Netflix are set to publish their quarterly earnings.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results.
For the full disclaimer click here.