Market movers today
We have a number of important events ahead of us this week, but first, markets will heave a sigh of relief after the 90-day ceasefire was agreed between Trump and Xi (for more coverage, see our flash comment: US-China trade – Ceasefire paves the way for the real deal in 2019 , 2 December 2018).
Today, US ISM manufacturing data is being released. We think Markit PMI is a better indicator for manufacturing as ISM manufacturing has been too high compared to reality over the past couple of years. We continue to believe ISM should move lower but it has been stubbornly high for longer than expected.
Later this week, the labour market report on Friday will be even more closely monitored than normal after the latest soft indications from the Fed.
In Scandi, we are due to get PMI from both Sweden and Norway today, see page two for details on the Swedish PMI.
Selected market news
Markets in Asia were buoyed by the trade agreement between the US and China at this weekend’s G20 meeting. Stocks in Asia saw healthy gains, notably Chinese equities, and both the Chinese yuan and Australian dollar strengthened.
The agreement between the US and China provided a 90-day truce allowing for negotiations on a permanent trade deal. The truce prevented a further increase in tariffs or new tariffs imposed from the US side. However, the US threatened that if no agreement is reached after this period, the 10% tariff rate on USD200bn worth of Chinese goods will be raised to 25%.
In order to reach this agreement, China agreed to buy a not yet specified but very significant amount of US goods within agriculture, energy and industry products plus the two sides will begin to immediately negotiate ‘structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusion and cyber theft, services and agriculture’. According to a tweet from President Trump over the weekend, the Chinese side had also agreed to ‘reduce and remove’ tariffs on American cars from 40% currently. In our view, the deal is good news for financial markets and the global economy. It paves the way for a real deal in 2019 that removes all tariffs imposed and leads to more opening of the Chinese market (for more details, see our flash comment: US-China trade – Ceasefire paves the way for the real deal in 2019 , 2 December 2018).
The G20 meeting also provided relief for the oil price, as Russia and Saudi Arabia agreed to extend into 2019 their deal to manage the oil market, known as OPEC+, although Moscow and Riyadh have yet to confirm any fresh output cuts. The announcement opens the door for a deal at the OPEC meeting on Thursday, 6 December. The oil price is up 6% this morning on the news with Brent trading slightly above USD62 per barrel.
