Weekly Market Wrap 23-27/12/2019

Marius Paun | London, UK | Senior dealer | Friday, 27th December 2019

The US President Donald Trump has reiterated that a breakthrough on ‘trade deal will be signed very shortly’ lending support to the equity markets. Gold managed to break above the $1500 mark supported by a North Korean ‘promise’ to send the US a Christmas gift which the media speculated could be yet another missile test launch. And indeed the US Federal Aviation Administration alerted the commercial airliners of a possible missile launch prior to the end of 2019.

Meanwhile, amid low volumes due to Christmas holiday, the US stocks made new highs almost on a daily basis and are firmly on course for the best year in the last two decades (above 20% gains). Will the trend continue into 2020 given the US election?

China’s state media reported that beginning with January 1st next year it will cut import tariffs on around 850 goods. At the same time, China forex market regulator said the phase one deal should help to ‘balance’ currency market while planning to increase yuan’s convertibility next year.

In the UK, the Times newspaper said EU negotiators could use threatening tactics of restricting City of London’s access to European markets. That is meant to force London to agree to Brussels rules. Furthermore, EU leaders mentioned the possibility of putting barriers to data flows. However, the pound sterling seemed unfazed and if anything resumed its rally against the US dollar breaking back above 1.31.

Australia’s private sector credit growth surprised on the downside last week coming in at +0.1% versus expectations of +0.2%. Reserve Bank of Australia’s figures showed that while credit to business picked up recently, housing credit did most of the damage due to the ongoing real estate downturn.

We also had Bank of Japan monetary policy meeting for December where there was consensus the current direction will be maintained. If necessary BoJ is not ruling out future interventions.