Market Overview

Traders Are Holding Their Breath On Fresh Trade Talks: 5 Things The Global Markets Are Talking About Today


European equities found some support as investors waited for developments on trade talks between the world's two largest economies. In Asia, equities traded mixed as a rebounding US dollar put some pressure on emerging markets.

The dollar has recovered a tad after losing ground Monday, rising against most G10 currency pairs, with some positive signs from the first day of Sino-US trade negotiations in Beijing.

Despite stronger job numbers stateside and news that Federal Reserve may be turning more dovish, investors still have plenty to worry about in the short-term: the outcome of trade talks remains precarious, as too does US lawmakers reaching an agreement on a budget, leaving parts of the federal government shut down for a third consecutive week.

With this in mind, here are five things the global markets were talking about on Tuesday.

1. Global Equities Post Mixed Results

Despite the Nikkei loosing nearly half of its intraday gains in the last hour of trading, it was the best performer in Asia for a second consecutive session. The benchmark finished up 0.8 percent, while nearly half of the broader Topix subsections ended lower.

Australian stocks ended higher overnight, tracking Wall Street, on hopes that Sino-US trade talks will succeed in ending a trade war. At the close, the S&P/ASX 200 index rose 0.7 percent. In Korea, stocks slumped as Samsung flagged an earnings warning that cooled investor sentiment. The Kospi fell 0.58 percent.

In China, stocks closed slightly lower overnight amid investor caution as US and Chinese officials seek to reach a trade deal in Beijing. The blue-chip CSI300 index fell 0.2 percent, while the Shanghai Composite Index lost 0.3 percent.

In Hong Kong, stocks rallied a tad. The Hang Seng index rose 0.2 percent, while the China Enterprises Index ticked up 0.1 percent.

In Europe, bourses gained ground this morning, boosted by optimism over trade talks between the US and China.

2. Oil Prices Steady On Trade Talks And OPEC Cuts

Oil prices were stable ahead of the US open, supported by hopes that talks in Beijing might defuse a trade dispute between the world's biggest economies. OPEC-led supply cuts also tightened markets.

Brent crude futures were at $57.42 per barrel, up 0.2 percent from Monday's close, while U.S West Texas Intermediate crude oil futures are at $48.56 per barrel, up 0.1 percent.

So far in 2019, crude oil prices have benefited from OPEC+ production cuts and steadying equities markets. However, capping prices for the moment is a surge in US oil supply, driven by a steep rise in onshore shale oil drilling and production.

3. Sovereign Yields Climb

Hopes of a trade deal between the US and China is boosting risk appetite and driving German Bund yields slightly higher in a sign of somewhat less demand for safe havens. The 10-year Bund yield is trading at 0.22 percent, up 0.6 percent.

Supply will be a key mover of Bunds this week with auctions in Dutch and Austrian bonds, and in German inflation-linked bonds.

Elsewhere, the yield on 10-year Treasuries fell less than 1 bps to 2.70 percent. In the UK, the 10-year Gilt yield gained 2 bps to 1.275 percent.

On Wednesday the Bank of Canada will deliver its monetary policy announcement. According to Bloomberg the chance of a cut from the BoC is up from 17 percent last week to 20.5 percent.

At the end of Nov 2018, the market saw a 66 percent chance of a BoC hike. However, consensus does not expect Governor Poloz to hike rates any time soon.

4. U.S Dollar Reprieve

The US dollar is making a recovery after losing ground on Monday, rising against most major currencies this morning, with some positive signs from day one of the .S-China trade negotiations lifting it particularly against the safe-haven yen.

The euro is weaker, trading down by 0.3 percent at $1.1447 outright. The currency also fell after German industrial production showed an unexpected fall for November, although it has pared losses since then.

Sterling continued to trade without a firm direction ahead of the US open, with GBP/USD flat at £1.2782 and EUR/GBP falling 0.1 percent to €0.8966 as the euro was pressured by weak German industrial output data. Exactly one week before the UK parliament is due to vote on the Brexit withdrawal bill, the pound remains driven by Brexit developments.

5. German industrial production

Data released Tuesday morning showed that German industrial production unexpectedly slumped in November, adding to recent evidence that a nine-year recovery in Europe's largest economy is misfiring.

Production in Germany's key industrial sector, adjusted for inflation and seasonal swings, fell 1.9 percent in November month-over-month. The market had expected a 0.3 percent gain.

It was the second consecutive monthly fall and comes after data on Monday showed an ongoing decline in new manufacturing orders.

The disappointing data would suggest that trade tensions and weaknesses in emerging markets are putting a brake on Germany's long running economic upswing, and could delay any move by the ECB to lift short-term interest rates any time soon.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsNews Bonds Eurozone Commodities Forex Markets


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