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TradeFred Daily Briefing
Wed 15-01-2020 12:00

In Brief:

  • Yen holds firm while riskier Asian currencies soften
  • Oil prices slip on news that tariffs will remain despite US-China trade deal
  • Gold snaps losing streak
  • Amazon to invest $1bn to bring Indian SMEs online

The safe-haven Yen held firm and riskier Asian currencies softened a little on Wednesday, as currency investors awaited the signing of the US-China trade deal with trepidation. The formal agreement is aimed at drawing a line under 18 months of tit-for-tat tariff hikes that have hurt global growth, but it will not end the trade dispute between the world's two largest economy. The USD/CNY pair lost 0.2% to 6.8943 by 12:01 AM ET (04:01 GMT).

Citing people familiar with the matter, Bloomberg reported that existing US tariffs on Chinese goods are likely to stay in place until after the American presidential election in November. The US Dollar was flat Tuesday, as sentiment on risk was hurt slightly on a report that US tariffs on Chinese goods will remain in place through the 2020 election despite both sides expected to wrap up the phase one trade deal on Wednesday. The US Dollar index, which measures the Greenback against a trade-weighted basket of six major currencies, fell by 0.01% 97.34.

Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world's biggest oil users, may not boost demand as the US intends to keep tariffs on Chinese goods until a second phase. US Treasury Secretary Steven Mnuchin said late on Tuesday that tariffs on Chinese goods will remain in place until the completion of a second phase of a US-China trade agreement, even as both sides are expected to sign an interim deal later on Wednesday. US Crude Oil WTI Futures fell 0.3%$ to $58.08 by 11:15 PM ET (03:15 GMT), while International Brent Oil Futures dropped 0.3% to $64.33.

Gold prices rebounded on Wednesday, snapping its recent declining streak amid fresh uncertainties surrounding the US-China trade front. US Gold Futures gained 0.6% to $1,553.15 by 12:47 AM ET (04:47 GMT).

Willie Walsh, head of the British Airways parent company, has attacked a UK government-backed rescue of regional UK airline Flybe, calling it a misuse of public funds. Flybe was kept afloat on Tuesday after its shareholders agreed to invest more money while the government provided support, reported to involve the deferral of a tax bill.

JPMorgan has initiated coverage of Saudi Aramco's shares with an "overweight" rating and a price target of 37 Riyals ($9.86) per share, saying it sees scope for the company to increase its proposed $75 billion base dividend.

Malaysia Airlines said on Wednesday it has suspended deliveries of 25 Boeing Co 737 MAX jets, citing the plane's delayed return to service since it was grounded last year following two fatal crashes. The decision represents another setback for Boeing, which on Tuesday reported its worst annual net orders in decades, along with its lowest number of plane deliveries in 11 years, as the grounding of the 737 MAX saw it fall far behind main competitor Airbus SE.

Amazon.com Inc CEO Jeff Bezos said his company will invest $1 billion to bring small and medium-sized businesses online in India and expects to export $10 billion worth of India-made goods by 2025. Bezos' visit comes amid strident criticism from small business owners who accuse the company and Walmart's Flipkart of unfair business practices. The companies deny the allegations.

Sales of private apartments in Singapore fell in December as fewer new developments were launched, in a further sign the property market is cooling. Developers sold 538 units last month, down from 1,165 in November, Urban Redevelopment Authority data released Wednesday showed. The decline came as fewer projects were launched, with 370 new apartments hitting the market - the lowest for all of 2019 - versus 947 in November.

South Korea’s employment rate hit a record high in 2019, offering President Moon Jae-in evidence that he is delivering on his pledge to provide more jobs, ahead of a parliamentary election. The employment rate climbed to 60.9% last year, boosted by an increase in part-time work, statistics office data showed Wednesday. At first glance, the figure appears to contradict the view among Moon’s opponents and some economists that his policies, including a higher minimum wage strategy, have priced people out of work.

The Trump administration plans to put in place new procedures governing the release of market-sensitive economic data that would hinder news organizations from preparing stories in advance under embargo, Bloomberg News reported on Tuesday, citing unnamed people familiar with the matter. Bloomberg said the changes could extend to the removal of computers from a government "lockup" room used by media and that an announcement could come as soon as this week.

US consumer prices rose slightly in December even as households paid more for healthcare, and monthly underlying inflation slowed, supporting the Federal Reserve's desire to keep interest rates unchanged at least through this year. The weak inflation report from the Labor Department on Tuesday came on the heels of data last week showing a moderation in job growth in December. Economists said these developments were flagging a sharp slowdown in domestic demand. Though the economy appears to have maintained a steady pace of growth in the fourth quarter, it was likely supported by falling imports.

China's economic growth likely hovered at its weakest in nearly 30 years in the fourth quarter as demand at home and abroad remained sluggish, though there were some signs of improvement late in the year as trade tensions with the United States eased.

Western Asset Management Co is reducing its Indian government bond holdings as tensions around a new citizenship law and the Kashmir region cloud the economic outlook. The $453 billion investor, an affiliate of Legg Mason Inc, is diverting some of its funds into longer-dated Malaysian and Chinese debt, according to Desmond Soon, head of investment management for Asia ex-Japan. It has an overweight position in India bonds.

TradeFred Daily Briefing

In Brief:

  • Yen holds firm while riskier Asian currencies soften
  • Oil prices slip on news that tariffs will remain despite US-China trade deal
  • Gold snaps losing streak
  • Amazon to invest $1bn to bring Indian SMEs online

The safe-haven Yen held firm and riskier Asian currencies softened a little on Wednesday, as currency investors awaited the signing of the US-China trade deal with trepidation. The formal agreement is aimed at drawing a line under 18 months of tit-for-tat tariff hikes that have hurt global growth, but it will not end the trade dispute between the world's two largest economy. The USD/CNY pair lost 0.2% to 6.8943 by 12:01 AM ET (04:01 GMT).

Citing people familiar with the matter, Bloomberg reported that existing US tariffs on Chinese goods are likely to stay in place until after the American presidential election in November. The US Dollar was flat Tuesday, as sentiment on risk was hurt slightly on a report that US tariffs on Chinese goods will remain in place through the 2020 election despite both sides expected to wrap up the phase one trade deal on Wednesday. The US Dollar index, which measures the Greenback against a trade-weighted basket of six major currencies, fell by 0.01% 97.34.

Oil prices slipped on Wednesday on concerns that the pending Phase 1 trade deal between the United States and China, the world's biggest oil users, may not boost demand as the US intends to keep tariffs on Chinese goods until a second phase. US Treasury Secretary Steven Mnuchin said late on Tuesday that tariffs on Chinese goods will remain in place until the completion of a second phase of a US-China trade agreement, even as both sides are expected to sign an interim deal later on Wednesday. US Crude Oil WTI Futures fell 0.3%$ to $58.08 by 11:15 PM ET (03:15 GMT), while International Brent Oil Futures dropped 0.3% to $64.33.

Gold prices rebounded on Wednesday, snapping its recent declining streak amid fresh uncertainties surrounding the US-China trade front. US Gold Futures gained 0.6% to $1,553.15 by 12:47 AM ET (04:47 GMT).

Willie Walsh, head of the British Airways parent company, has attacked a UK government-backed rescue of regional UK airline Flybe, calling it a misuse of public funds. Flybe was kept afloat on Tuesday after its shareholders agreed to invest more money while the government provided support, reported to involve the deferral of a tax bill.

JPMorgan has initiated coverage of Saudi Aramco's shares with an "overweight" rating and a price target of 37 Riyals ($9.86) per share, saying it sees scope for the company to increase its proposed $75 billion base dividend.

Malaysia Airlines said on Wednesday it has suspended deliveries of 25 Boeing Co 737 MAX jets, citing the plane's delayed return to service since it was grounded last year following two fatal crashes. The decision represents another setback for Boeing, which on Tuesday reported its worst annual net orders in decades, along with its lowest number of plane deliveries in 11 years, as the grounding of the 737 MAX saw it fall far behind main competitor Airbus SE.

Amazon.com Inc CEO Jeff Bezos said his company will invest $1 billion to bring small and medium-sized businesses online in India and expects to export $10 billion worth of India-made goods by 2025. Bezos' visit comes amid strident criticism from small business owners who accuse the company and Walmart's Flipkart of unfair business practices. The companies deny the allegations.

Sales of private apartments in Singapore fell in December as fewer new developments were launched, in a further sign the property market is cooling. Developers sold 538 units last month, down from 1,165 in November, Urban Redevelopment Authority data released Wednesday showed. The decline came as fewer projects were launched, with 370 new apartments hitting the market - the lowest for all of 2019 - versus 947 in November.

South Korea’s employment rate hit a record high in 2019, offering President Moon Jae-in evidence that he is delivering on his pledge to provide more jobs, ahead of a parliamentary election. The employment rate climbed to 60.9% last year, boosted by an increase in part-time work, statistics office data showed Wednesday. At first glance, the figure appears to contradict the view among Moon’s opponents and some economists that his policies, including a higher minimum wage strategy, have priced people out of work.

The Trump administration plans to put in place new procedures governing the release of market-sensitive economic data that would hinder news organizations from preparing stories in advance under embargo, Bloomberg News reported on Tuesday, citing unnamed people familiar with the matter. Bloomberg said the changes could extend to the removal of computers from a government "lockup" room used by media and that an announcement could come as soon as this week.

US consumer prices rose slightly in December even as households paid more for healthcare, and monthly underlying inflation slowed, supporting the Federal Reserve's desire to keep interest rates unchanged at least through this year. The weak inflation report from the Labor Department on Tuesday came on the heels of data last week showing a moderation in job growth in December. Economists said these developments were flagging a sharp slowdown in domestic demand. Though the economy appears to have maintained a steady pace of growth in the fourth quarter, it was likely supported by falling imports.

China's economic growth likely hovered at its weakest in nearly 30 years in the fourth quarter as demand at home and abroad remained sluggish, though there were some signs of improvement late in the year as trade tensions with the United States eased.

Western Asset Management Co is reducing its Indian government bond holdings as tensions around a new citizenship law and the Kashmir region cloud the economic outlook. The $453 billion investor, an affiliate of Legg Mason Inc, is diverting some of its funds into longer-dated Malaysian and Chinese debt, according to Desmond Soon, head of investment management for Asia ex-Japan. It has an overweight position in India bonds.

TradeFred Daily Briefing

In Brief:

  • Sterling pares losses vs USD
  • Profit taking takes the shine off Gold
  • Asian shares & Wall Street stocks rise again
  • Good news for cryptocurrency traders as Bitcoin moves higher

The Yuan rose while the safe-haven Yen fell in Asian trading on Tuesday as trade tensions between the US and China eased. The USD/CNY pair fell 0.3% to 6.8743 by 11:45 PM ET (03:45 GMT). Just two days before the signing of the phase one trade deal, the Trump administration announced that it was removing China from its designation as a currency manipulator. However, China remained on a monitoring list for foreign-exchange practices. The administration praised China for making “enforceable commitments” not to devalue the Yuan. The Chinese currency has now recouped about a third of the losses it sustained against the US Dollar since mid-June 2018.

Elsewhere, the Pound pared some of its losses Monday against the Greenback after falling to a two-and-a-half-week lows as softer UK economic data strengthened expectations for a Bank of England rate cut. GBP/USD fell 0.50% to $1.2994 but had been as low as $1.2961 after data showed unexpected weakness in UK industrial production and GDP data in November. The data followed remarks by Bank of England monetary policy member Gertjan Vlieghe Vlieghe, who said he stood ready to back a rate cut if economic growth failed to improve.

Street protests in Iran or the anticipation of a China deal aren’t swaying oil buyers. Crude prices sunk further for the year on Monday on easing tensions in the Middle East and amid worries that oil could get into another oversupply situation from seasonal lows in consumption. West Texas Intermediate, the benchmark for US crude, settled down 96 cents, or 1.6%, at $58.05 per barrel. Brent, the global benchmark for crude, was down 77 cents, or 1.2%, at $64.21 by 3:55 PM ET (20:55 GMT). Brent hit mid-September highs of $71.75 last week, while WTI surged to an April peak of $64.72, after Iran fired missiles at US airbases in Iraq. Tehran’s action was in response to the US killing of top Iranian general Qassem Soleimani on January 3.

The profit-taking from last week that took some of the froth off Gold’s seven-year highs was back on Monday, as markets continued to operate without fear of another US-Iran blowup. Anticipation of the US-China phase one deal also allowed some risk to creep back into markets, sending stocks on Wall Street to record highs. Gold futures for February delivery on New York’s COMEX settled down $9.50, or 0.6%, at $1,550.60 per ounce. Spot Gold, which tracks live trades in bullion, was down $12.25, or 0.8%, at $1,549.78 by 2:40 PM ET (19:40 GMT). Gold’s strong hold on the $1,500 berth, however, proved its standing as a safe haven against outsized risks, analysts said.

Sovereign bonds in India are set to decline after inflation surged sharply in December to touch a five-year high, casting doubts over any near-term monetary easing. Consumer prices rose 7.35% last month, exceeding the 6.7% median estimate of analysts surveyed by Bloomberg, official data late Monday showed. The inflation jump, largely driven by food prices, risks stalling the recent rally in the nation’s bond markets. With high consumer prices limiting the ability of the Reserve Bank of India to cut rates further to revive economic growth, the government may be forced to spend more.

Asian stocks rose in morning trade on Tuesday after the U.S. dropped China’s currency manipulator label, saying that it has made “enforceable commitments” not to devalue the Yuan. China’s Shanghai Composite inched up 0.1%, while the Shenzhen Component gained 0.3%. US stocks were higher after the close on Monday, as gains in the Basic Materials, Technology and Consumer Goods sectors led shares higher. At the close in NYSE, the Dow Jones Industrial Average rose 0.29%, while the S&P 500 index gained 0.70%, and the NASDAQ Composite index gained 1.04%. The best performers of the session on the Dow Jones Industrial Average were Apple Inc, which rose 2.14% or 6.63 points to trade at 316.96 at the close. Meanwhile, Cisco Systems Inc added 1.78% or 0.84 points to end at 47.97 and Dow Inc was up 1.65% or 0.85 points to 52.35 in late trade.

The UK economy unexpectedly shrank ahead of the general election, casting doubt over whether there was any growth at all in the fourth quarter. The figures will add to concerns at the Bank of England, where officials are debating whether further stimulus might be needed if economic weakness persists. Gross domestic product fell 0.3% in November, the Office for National Statistics said Monday. Economists had expected unchanged output. It means growth of 0.1% to 0.2% was needed in December to prevent the economy contracting in the fourth quarter.

US job growth slowed more than expected in December, but the pace of hiring likely remains sufficient to keep the longest economic expansion in history on track despite a deepening downturn in a manufacturing sector stung by trade disputes. The Labor Department's closely watched monthly employment report on Friday also showed the jobless rate holding near a 50-year low of 3.5%. A broader measure of unemployment dropped to a record low last month, but wage gains ebbed. The mixed report will probably not change the Federal Reserve's assessment that both the economy and monetary policy are in a "good place."

Canada gained a higher-than-expected 35,200 net jobs in December, entirely in full-time positions, while the unemployment rate fell to 5.6%, official data showed on Friday, figures that could ease some concerns about the strength of the Canadian economy. Analysts in a Reuters poll had forecast a gain of 25,000 jobs in December and an unemployment rate of 5.8%. Wages for permanent employees rose by 3.8%, Statistics Canada said, lower than the 4.4% gain seen in each of the previous two months. Canada shed an unexpected 71,200 net jobs in November, the biggest decline since 2009, while the national unemployment rate rose to 5.9%.

Just two years ago, Prime Minister Narendra Modi was helming an economy expanding 8%, spurring optimism India was on a path to become a major global growth driver. Now, stagflation looms as the economy grinds toward its slowest expansion in more than a decade and inflation spikes above the central bank’s target, driven by higher food prices. Social unrest against a restrictive new citizenship law is yet another challenge. There is few good options to deal with the slowdown. Dwindling government revenue and an already-stretched budget limit scope for fiscal support, while the shock 7.35% surge in inflation in December and the threat of higher oil prices mean the door for further interest rate cuts is closing.

The benchmark interest rate that the Federal Reserve focuses on controlling to implement monetary policy has moved closer to the lower bound of its target range, increasing the prospect that the central bank will adjust one of its associated tools later this month. The effective fed funds rate has been moving lower relative to the band since the Fed embarked on a series of repurchase-agreement operations and Treasury-bill buying to quell funding-market turmoil. Upheaval in September briefly saw fed funds rise above the upper bound of the range, but the measures to make more cash available over the turn of the year helped bring it down.

Bitcoin rose above the $8,543.7 threshold on Tuesday. Bitcoin was trading at 8,543.7 by 23:03 (04:03 GMT) on the Investing.com Index, up 4.94% on the day. The move upwards pushed Bitcoin's market cap up to $153.2B, or 66.64% of the total cryptocurrency market cap. At its highest, Bitcoin's market cap was $241.2B. Bitcoin had traded in a range of $8,112.1 to $8,543.7 in the previous twenty-four hours. Over the past seven days, Bitcoin has seen a rise in value, as it gained 7.27%. It has traded in a range of $7,697.6948 to $8,543.6943 over the same period.