Tuesday, January 14, 2020

Will the Bank of England announce a rate cut? Earnings season kicks off in the US

Tags
  • China
  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil

Wall Street rallied on Monday, as investors remain optimistic regarding this week's US-China phase one trade deal and upcoming quarterly earnings reports. The US Treasury Department revealed in its semi-annual report that the US has lifted the currency manipulator label for China, after the Asian superpower agreed to commit to not devaluing the Chinese yuan and agreed to publish exchange-rate information. Tesla spiked upwards 9.77%, closing Monday’s trading session at a record high level of US$524.86 after an analyst from Oppenheimer raised his target price for the company to US$612 per share, the highest of all Wall Street analysts.

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Sterling fell sharply against the dollar after the UK posted weaker-than-expected manufacturing data for November. Industrial production fell 1.2% month-on-month while manufacturing production fell 1.7% month-on-month in November, falling short of economists' forecasts of 0.0% and -0.2% respectively. The sharp decline in economic data sent implied probabilities for a rate cut by the Bank of England (BoE) in January surging from 23.1% on Friday to 47.7% on Monday after the data was released.

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Meanwhile, safe haven assets fell as investors started to shift back towards risky assets, signalling that traders expect the US-China phase one trade deal and earnings from major US banks to boost markets this week. US Treasury yields gained as a result, with benchmark 10-year yields rising 3bps to 1.85%.

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Oil prices declined for the fifth session in a row on Monday, as fears over escalating tensions between the US and Iran start to fade. Brent Crude futures retreated 1.20% while WTI Crude futures slipped 1.63%.

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In Asia, most major indices look set to track US gains on Tuesday. The Nikkei, KOSPI, ASX200 and Straits Times Index each advanced early into Tuesday's trading session. The Hang Seng Index started the day 0.68% higher but retreated later that morning. US equity futures were mostly flat on Tuesday morning.

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Earnings season kicks off later today starting with major banks in the US. JPMorgan will release its Q4 earnings report at 4pm (GMT +4), while Wells Fargo is scheduled to release its numbers at 5pm (GMT +4) later today. Citi is set to announce its earnings report after the US stock market closes on Tuesday.
Economic releases for the day ahead include December’s inflation rate for in the US at 5.30pm (GMT +4).