stock market morning report

Stock Market Rise After Delayed December US Tariffs

Futures are trading up on news that the White House is delaying planned tariffs on China.  Investors continue to monitor US-Chinese trade negotiations, as the deadline for the introduction of new US tariffs on Chinese exports is approaching. Earlier, President Donald Trump announced that he would increase duties on Chinese goods in the amount of USD 156 billion on December 15 if significant progress is not achieved in the negotiations. This deadline is approaching, and there are no clear signals about the imminent conclusion of a deal, which is unnerving the market. On Wednesday, the two-day meeting of the US Federal Reserve will end and a decision will be made on the interest rate. It is expected that the regulator will not take action at the last meeting of the year and will leave it at 1.75%. Most members of the FOMC consider the reduction already undertaken sufficient to maintain the prospects for moderate economic growth, a strong labor market, and maintaining inflation near the target level of 2.0%.

Eurozone

Strengthening is facilitated by strong data on the ZEW economic sentiment index for Germany and the Eurozone in general. December data showed a significant increase in optimism in the European economy. The index for Germany rose from −2.1 to 10.7 points, and from −1.0 to 11.2 points for the Eurozone. As the head of the ZEW Institute, Achim Wambach, noted, the growth of business sentiment is associated with hopes for a further increase in German exports and consumption. Today, the euro is strengthening to the US dollar and the yen but weakens to the British pound.

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United Kingdom

The pound strengthens despite weak UK GDP data in Q3. QoQ, the British economy slowed down to 0.0%, and YoY – from 0.9% to 0.7%. This is the slowest growth rate in 7 years. Observers attribute the decline to the negative impact of the Brexit delay for January and global trade instability. The statistics on the volume of British industrial production published today turned out to be ambiguous. In October, the indicator grew by 0.1%, below market expectations (0.2%). However, production in the manufacturing industry grew by 0.2% and exceeded forecasts (0.1%). The latest negative statistics was generally ignored by the market, as investors are still following the parliamentary elections and hoping for the Conservative party to win and break out of Brexit uncertainty. GBP is strengthening today against its main competitors – EUR, USD, and JPY.

Japan

Today, the Japanese yen is strengthening against the US dollar and is weakening to the pound and the euro. In the absence of significant releases, the movement of the Japanese currency is technical. It is worth noting that the budget of Japan for the fiscal year 2020 can reach a record volume of 100 trillion yen (USD 920 billion). It includes government spending on free pre-school education, as well as on the program of discounts on purchases by bank transfer, which aims to support consumer spending after an increase in consumption tax in October. The implementation of these measures may support the Japanese economy.

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Australia

In the absence of significant releases, the movement of the Australian currency is technical. Today’s speech by the head of the RBA, Philip Lowe, did not bring new data to the market, as the official focused on a review of payment systems for the digital economy and did not discuss the monetary policy of the regulator. Generalдн, investors are waiting for new data on US-Chinese trade negotiations. Yesterday, the Chinese Ministry of Commerce said that Beijing was hoping for a speedy deal as soon as possible, but no more specific data was received. AUD today is weakening to the main competitors – the US dollar, the euro, the yen, and the pound.

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