Weekly Market Wrap 02-06/12/2019

Marius Paun | London, UK | Senior dealer | Friday, 06th December 2019

China Caixin November PMI came in at 51.8 versus consensus for 51.5 showing that despite 18 months of the trade dispute with the US, their manufacturing base is still expanding. Speaking of trade disputes…. Global times reported that Beijing still insists that tariffs should be rolled back as part of the so-called Phase One deal.

The US economy surprised the markets by adding 266,000 jobs in November. It was far better than polls had predicted, a gain of 186,000 jobs, according to numbers released by the Labor Department. At the same time, the unemployment rate declined to 3.5% from 3.6% previously with average hourly earnings risings 0.2%, less than 0.3% anticipated.

On Thursday the US President, Donald Trump, said the world’s two largest economies were getting closer to sign the phase one of a trade deal. That came after his comments made on Tuesday, where he expressed views that ‘it may be better to wait until after next year election before making a trade deal with China’. So shares started the week on the back foot but finished strongly. However, the reality is that tariffs an another $156 billion worth of Chinese goods are due to come into effect on December 15th. But the markets appear to view that as a problem for next week!

In the UK the latest poll indicated the Conservatives hold a comfortable lead of 10% against the opposition Labour Party, 42% vs 32%. With the country due to vote in the Parliamentary election in the coming week, it was good enough to push the pound sterling above the recent resistance of 1.3 to the US dollar. GBPUSD was trading around 1.3150 late on Friday.

European Commission promised to act like one after the US planned tariffs on French goods, some of which could reach 100%. The move came in retaliation after France introduced a 3% digital service tax which Washington sees detrimental, especially for American companies.

The Reserve Bank of Australia held its key rate unchanged at 0.75% as was widely expected. It added the global outlook is ‘reasonable but with risk tilted to the downside’. By and large, the statement was more of the same old rhetoric of; rates to say low for an extended period; inflation close to 2% for the next two year; and it stands ready to intervene if needed. Nonetheless, as the saying goes ‘no bad news is good news’, hence the Australian dollar moved higher, crossing above 0.68 to the greenback.

Bank of Canada also kept interest rates on hold at 1.75%, acknowledging that ongoing trade conflicts remain the biggest risk to the global outlook. However, it sees commodities prices and the Canadian dollar remaining relatively stable.

Meanwhile, OPEC members and their non-OPEC allies agreed to another set of production cuts by an additional 500,000 barrels per day through to March 2020. In effect that will reduce the group’s total output by 1.7 million barrels per day. Oil prices were slightly lower on Friday afternoon when the announcement was made.