Market movers today
It is a fairly quiet day today on the data front, so focus set to remain on any news regarding the US-China trade talks, see below.
ECB’s Coeure speaks in Brussels and Fed’s Brainard is set to talk tonight but we do not expect much news from these speeches.
Of economic data we have trade balance, new home sales and consumer confidence in the US . On the latter little suggests it should fall from its high level.
In Scandinavia, the Producer Price Index is released in Sweden.
Selected market news
Despite little news from recent key catalysts in trade and economic figures, market sentiment turned positive Monday after last week where especially Hong Kong concerns wobbled trade optimism. Yesterday, all three major US equity indices closed at new record-highs especially driven by tech and M&A-related news ahead of Thanksgiving, see FT story here . The broad USD gained modestly, while core 10Y yields are little changed. This morning equities have moved higher, investment grade spreads have narrowed further, industrial metals have outperformed precious metals and Brent crude is back close to USD64/bbl.
Sentiment has been supported by news of a US-China phone call on trade between Liu He, China’s top negotiator on trade, US trade representative Lighthizer and US treasury secretary Mnuchin this morning. Information on the call is sparse but according to the Chinese side the parties ‘reached consensus on properly resolving relevant issues ‘. Admittedly, that sounds rather vague but for now it seems no news of escalation amid Hong Kong concerns is good news. As we approach 15 December when US tariffs are set to rise by 15% on USD160bn worth of Chinese goods, markets will need more concrete good news. For now that seems like the important date to keep in mind.
Overnight Fed Chair Powell held a speech that provided little news. He reiterated confidence in US policy makers’ ability to extend the expansions and while policy ‘is not on a pre-set course ‘ the Fed would still be able to respond to any ‘material ‘ change in the outlook. Short-end US rates and USD were virtually unchanged by his remarks.
Yesterday’s IFO data out of Germany supported the stabilisation signals from the new order component from German manufacturing PMIs last week. Just as in the previous month, the improvement in expectations was quite broad-based across industry, services and especially trade. In contrast to Friday’s PMIs, which indicated a further slowdown in German service sector activity, IFO signals that services firms see robust demand and expect activity still to pick up in the coming six months, see chart . The truth is probably somewhere in between, but bottom line is that Germany is edging slowly but steadily away from downswing territory. That said, there is still some distance to cover before we are back in upswing territory, especially for manufacturing, which by all indications will stay in recession territory in Q4.
