Market movers today
Today, markets will look out for official confirmation of a phase one trade deal between the US and China ahead of the planned 15 December tariff rate hike (see below).
We are hosting two conference calls this morning to discuss what the UK election outcome means for Brexit, the economy and EUR/GBP. At 09:00 CET we are hosting a conference call in English (see invitation with dial-in information here ) and at 09:30 CET we are hosting a conference call in Danish.
Today’s economic highlight is the release of US retail sales for November. Private consumption has been strong in the US despite the weakness in manufacturing and there is nothing to suggest it should end now although retail sales are very volatile/noisy on a monthly basis.
Markets expect the Central Bank of Russia to cut rates from 6.50% to 6.25% today. The announcement is at 11:30 CET.
Selected market news
Stocks and other risk assets rallied this morning on news that the US and China have landed a ‘phase one’ deal. US sources close to the negotiations reported that the tariff hike planned for Sunday is off the table and that the US has offered to cut existing tariff rates by up to 50% in exchange for Chinese agricultural purchases in the order of USD50bn and increased protection of intellectual property rights. We expect some official announcements from both China and the US soon to confirm this deal. If confirmed, we believe this is good news as it means the two sides can move on to phase two. We still see a 50-50 probability a phase-two deal can be reached next year. Asian markets jumped overnight, with Japan’s Nikkei 225 gaining more than 2.5%, and US index futures suggest the equities rally will continue today. Treasuries extended a tumble, with 10Y yields down to 1.91%.
EUR/GBP cheered the Conservatives’ strong election performance and fell below 0.83. Early results showed the Tories winning around 360 seats versus the 326 needed for a majority. That means PM Boris Johnson can now get his Brexit deal through Parliament before Christmas, such that the UK formally leaves the EU by 31 January 2020. However, after that the more complicated negotiations on the future relationship will start, see UK election review – Big Conservative victory means the end of the beginning of Brexit .
In contrast to the political drama, news from the central bank front was limited. Following the Fed on Wednesday (see FOMC Review ), yesterday it was the ECB’s turn to confirm its ‘on hold’ stance to the market. At her first press conference, President Lagarde confirmed that clouds over the economic outlook have lifted and that the monetary strategy review will start in January and is intended to be concluded by end-2020 (see Flash: ECB Research – Not a dove, not a hawk – but an owl ).
