Thursday, January 16, 2020

US-China phase one trade deal signed; Morgan Stanley’s earnings report set for 8.15pm (GMT +8) today

Tags
  • China
  • Gold
  • Stocks
  • US earnings' season
  • DXY

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Market Recap: US-China phase one trade deal signed; Morgan Stanley’s earnings report set for 8.15pm (GMT +8) today

Wall Street rallied to fresh record highs after the US and China signed their phase one trade deal. Stocks in the US soared initially when the US and China signed the deal but retreated after as investors sifted through the deal. In the phase one trade deal, China pledged to purchase at least an additional US$200bn worth of US farm products and other goods and services over two years. China has also committed to be stricter on theft of American intellectual property as well as avoiding currency manipulation to gain an advantage for Chinese exports. The deal will also have a system in place to ensure that both sides keep within the terms of agreement. But as expected, the deal does not carry details of any of the structural reforms needed to solve the fundamental issues that started the trade conflict and did not fully rollback all the tariffs since the start of the trade war.

Goldman and Bank of America (BofA) both saw jumps in their trading revenue but did not come close to what JPMorgan or Citi posted. But Goldman fell 0.2% after reporting a bigger-than-expected decline in its bottom line due to litigation costs. BofA beat estimates for its quarterly profit but revised its outlook for the first half of 2020 downwards, pulling its stock down 1.8%. Morgan Stanley’s quarterly earnings report is set to be released next, at 8.15pm (GMT +8).

Indexes Change (%) Net Change Closing Price
Dow Jones 0.31% 90.55 29,030.22
S&P500 0.19% 6.14 3,289.29
Nasdaq 0.08% 7.37 9,258.70
*Source: Bloomberg

The greenback fell against most major currencies as risk of a global economic slowdown was reduced thanks to the phase one trade deal.

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Safe haven assets climbed higher as the dollar weakened. Gold gained while the yen strengthened against the greenback, likely as the value of the dollar dropped thanks to the phase one trade deal. US Treasuries gained as well, pushing benchmark 10-year yields lower for the second session in a row, to 1.78%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold 0.64% 9.86 1,556.25
Silver 1.13% 0.20 17.75
JPY 0.08% 0.09 109.90
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year -2 1.55%
10-Year -3 1.78%
30-Year -3 2.24%
*Source: Bloomberg

Oil futures fell on Wednesday after a US inventory report showed increased supply. But oil prices look set to recover on Thursday as the newly signed phase one trade agreement detailed China's commitment to purchase an additional US$52.4bn worth of US energy supplies over the next two years. As of 8.43am (GMT +8) on Thursday, WTI crude oil futures were 0.52% higher.

Oil Futures Change (%) Net Change Closing Price
Brent Crude -0.76% -0.49 64.00
WTI Crude -0.72% -0.42 57.81
*Source: Bloomberg

Meanwhile in Asia, major indices were mixed in the morning as investors digested the details of the US-China phase one trade deal. The Nikkei and KOSPI started the day 0.18% and 0.04% higher although KOSPI fell later in the morning. The ASX200 started the day flat but advanced later.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 0.13% 32.08 23,948.66 8:39:05 AM
KOSPI Index -0.14% -3.16 2,227.39 8:59:00 AM
ASX200 Index 0.47% 32.66 7,027.50 8:59:05 AM
Hang Seng Futures 0.20% 57.00 28,809.00 2:59:55 AM
*Source: Bloomberg

Economic releases for the day ahead (all timings in GMT +8):

  • Germany Dec Inflation Rate (CPI) (Final Est.) (3pm)
  • ECB Dec Monetary Policy Meeting Minutes (7.30pm)
  • US Dec Retail Sales Advance (9.30pm)
  • US Jan 11 Initial Jobless Claims (9.30pm)