Friday, December 20, 2019

Mnuchin reaffirms US-China phase one trade deal; BoE keeps monetary policy unchanged

Tags
  • China
  • Dollar
  • Stocks
  • Bank of England

12202019a

US equity benchmarks reached new highs thanks to positive developments on the US-China phase one trade deal. Treasury Secretary Steven Mnuchin told the CNBC that the agreement is nearly done and is undergoing a technical and legal review, supporting Chinese commerce ministry comments that both parties are working on the agreement that is set to be signed in early January. US President Donald Trump was impeached on charged of abuse of power and obstructing Congress by the House of Representatives. But Trump's impeachment has not affected stock markets and will likely have minimal effect moving forward.

Indexes Change (%) Net Change Closing Price
Dow Jones 0.49 137.68 28,376.96
S&P500 0.45 14.23 3,205.37
Nasdaq 0.67 59.48 8,887.22
*Source: Bloomberg

Sterling led major currencies' losses against the dollar on Thursday, as investors’ expectations for a rate cut by the BoE in 2020 increases. The BoE kept rates unchanged on Thursday, as officials voted 7-2 in favour of keeping monetary policy in the UK unchanged going into 2020. But comments from the central bank did signal for possible policy easing if risks continue to put pressure on the British economy. The Financial Times reported early this morning that Andrew Bailey has been chosen to be the BoE's new governor. The UK government will announce the appointment later today.

12202019b

Meanwhile safe haven assets gained as economic data in the US missed expectations. Initial jobless claims fell less than expected, falling only to 234,000 instead of economists' forecasts of 225,000. The US housing market data also fell short of expectations, as existing home sales fell to 5.35m. Gold gained and the yen strengthened against the greenback. US treasuries remained mostly flat on Thursday.

Safe Haven Assets Change (%) Net Change Closing Price
Gold 0.23 3.40 1,478.80
JPY 0.16 0.18 109.37
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year 0 1.63
10-Year 0 1.92
30-Year 1 2.35
*Source: Bloomberg

In Asia, the Nikkei started Friday's trading session 0.30% higher but fell later in the morning as Asian equities look likely to be subdued as investors wait for the PBoC's decision on its 1-year and 5-year loan prime rates at 9.30am (GMT+8). The Straits Times Index opened the day 0.30% higher. 

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.24 -58.4 23,806.45 8:56:00 AM
Straits Times Index 0.22 7.19 3,214.61 9:01:00 AM
Hang Seng Futures 0.27 75 27,879.00 2:59:58 AM
*Source: Bloomberg

Today's focus will be on the final revision to Q3’s GDP and November’s PCE report in the US, set to release at 9.30pm (GMT +8) and 11pm (GMT +8) respectively.