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30.12.2019

Weekly market overview: Global stocks continue to cheer further progress towards a trade deal, dollar mostly lower

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Global stocks mostly higher in subdued holiday trading

  • Global stocks mostly higher in subdued holiday trading
  • Investors continue to express trade deal hopes
  • China’s industrial profits rebounded last month
  • US stocks at fresh record highs in a year-end rally
  • Dollar declined against major counterparts
  • Oil prices rose for a fourth week in a row

Asian equities
Asia Pacific shares finished mostly positive last week, but in general, the results were mixed due to the lack of fresh trade-related news coupled with low holiday trading volumes. Investors continued to express optimism over a phase one trade agreement between the US and China but at the same time, they continued to be somehow worried about the details in the deal. Initially, the Chinese stocks declined following the announcement that China will cut import tariffs on a wide range of goods starting January 1. But afterwards, the markets turned mostly higher as China said that it was in close contact with Washington about an initial trade agreement, while earlier, Trump confirmed that a signing ceremony would be held for the recently struck deal. At the same time, trading remained subdued on account of the year-end holidays. On the data front, profits at China’s industrial firms last month grew at the fastest pace in eight months, breaking a three-month declining streak. This was mainly due to a better performance in production and sales. As such, Japan’s Nikkei 225 Index was up 0.09% for the week. In South Korea, the KOSPI Index finished flat and in Hong Kong, the Hang Seng Index closed 1.27% higher in the weekly charts. Hong Kong stocks closed at a five-month high on Friday as investors cheered a rebound in China’s industrial profits. China’s Shanghai Index settled flat in the week and Australia’s S&P ASX 200 Index finished 0.08% higher. The MSCI Asia-Pacific Index rose 0.6 percent for the week.

US equities
In the US, stocks registered fresh record highs during a shortened trading week and finished higher on Friday as year-end optimism continued to drive the risk-on rally. The Dow Jones Industrial Average rose 23.87 points to a record close of 28,645.26. The S&P 500 finished the day 0.11 point higher at 3,240.02, a new closing high. The Nasdaq Composite slipped 0.1%, to 9,006.62 amid light trading volumes. By the way, the tech-heavy Nasdaq topped the 9,000 mark for the first time Thursday, lifted by a jump in Amazon shares on a record holiday shopping season. For the week, Nasdaq Composite rose 0.8%, while the S&P 500 climbed 0.5% to a record of 3,239.91 and the Dow Jones climbed by 0.4%, to 28,621.39. The government figures showed jobless claims in the US had fallen to 222,000 for the week ended December 21. In general, investor optimism was supported by lingering hopes of striking a trade deal between the US and China.

Currencies
The dollar index finished the week lower as traders awaited the signing of the phase one trade deal between Washington and Beijing. EUR/USD had the best week since October but at the same time, the pair remained below December intraday highs around 1.12. The euro climbed to two-week highs at 1.1188 and finished marginally below this level. The dollar had to extend its previous decline amid the headlines indicating that the US and China are preparing a signing ceremony for phase one of the trade deal. Positive risk sentiment, in turn, drove the European currencies higher on the week, with abating no-deal Brexit fears helped to lift the cable. GBPUSD registered early-December lows around 1.29 and after a rejection from these levels, jumped to local highs around 1.3170 but failed to close above the 1.31 handle. Moreover, the recovery rate was too modest in comparison with the decline during the previous week. USDJPY finished the week flat after further failed attempts to break above the 109.70 resistance area and closed around 109.40. The pair’s inability to make a strong breakthrough despite positive risk sentiment shows that dollar demand remains subdued, with year-end flows were impacting the illiquid markets in the holiday-shortened week.

Commodities
Brent crude rose on Friday and finished a holiday-shortened week near a three-month peak. Besides, the prices registered a fourth week of gains in a row, which is the longest run of weekly gains since April. Brent crude oil for February delivery was up 3.05% for the week. The market followed stock markets, positive risk sentiment, and upbeat industry news. The decline in U.S. crude inventories and falling in U.S. rig count also provided supports to oil prices. Both API and U.S. Energy Information Administration reported falls in U.S. commercial crude oil inventories. According to EIA's data, U.S. commercial crude oil inventories decreased by 5.474 million barrels in the week ending December 20, more than market estimated fall of 1.724 million barrels. Meanwhile, Baker Hughes reported that U.S. rigs drilling for oil were down eight to 677 last week. The falling U.S. dollar Index also provided floor to oil prices.