Daily reviews

16.09.2019

Global stocks rise on renewed trade hopes, dollar on the defensive

news

US stock markets finished on a mixed note on Friday as Treasury yields rose to six-week highs and the dollar declined.

  • Global stocks regained positive momentum
  • Trump is potentially open to an interim trade deal with China
  • Dollar mixed on a positive lean in US economic updates
  • Major long-term bond yields reached six-week highs
  • The pound rose on a possible progress in Brexit negotiations
  • Oil posted the biggest weekly loss since July


Asian equities

Equity indexes in Asia finished the week in the positive territory amid easing trade fears and a new round of stimulus by the central bank. Optimism over a possible trade deal between the US and China is growing ahead of expected high-level talks in October. Risk appetite revived after Donald Trump said he was potentially open to an interim trade deal with China, although he stressed an easy agreement would not be possible.

U.S., Japanese and European long-term bond yields reached six-week highs. Ten-year US Treasuries reached 1.8%. MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.3%. Mainland China and South Korea were closed for public holidays. Japan's Nikkei 225 rose 1.0% to four-month highs.


US equities

US stock markets finished on a mixed note on Friday as Treasury yields rose to six-week highs and the dollar declined. The Dow Jones Industrial Average rose 0.1% to 27,218.90, reaching the highest in more than six weeks. The Nasdaq Composite Index fell 0.2% to 8,176.72, the largest drop in more than a week. In general, all three major indexes closed higher for a third consecutive week. S&P 500 finished just short of its all-time closing high. Investor sentiment has also improved on the news about a US tax overhaul plan aimed at middle-income households next year. Besides, after easing by the ECB, market participants expect stimulus measures from other major central banks. The Federal Reserve will announce its policy on Wednesday, followed by the Bank of Japan BOJ on Thursday. U.S. Fed funds rate futures imply a 0.25 percentage point interest rate cut by the U.S. central bank.

Apple weighed on the Nasdaq Friday. The giant’s shares lost nearly 2% as analysts at Goldman Sachs revised their bearish price target even further, from $187 to $165. The company’s decision to give away one year of Apple TV+ with hardware purchases could hurt average selling prices and earnings.


Currencies

The pound saw the biggest weekly gain since May after the reports about a possible progress in Brexit negotiations related to the Irish backstop. GBPUSD jumped aggressively on Friday to register fresh 1.5-month highs marginally above 1.25 and finished just below the psychological level. Prime Minister Boris Johnson will meet EU President Jean-Claude Juncker this week. EURUSD saw the second weekly gain despite the ECB delivered a fresh stimulus package in an attempt to support the fragile Eurozone economy. In particular, the central bank cut a key interest rate deeper into negative territory and announced new net purchases of government and corporate debt and support for struggling banks. The common currency, however, managed to appreciate, partly due to some profit taking and the fact that a stimulus package wasn’t as strong as expected. The pair reached late-August highs marginally above 1.11 but finished just marginally higher on Friday, around 1.1070.

On the data front, US consumer prices slowed in August, rising by a slight 0.1%, reflecting a big drop in the cost of gasoline. Core inflation, which excludes volatile food and energy costs, rose 0.3% last month and 2.4% over the past year. Meanwhile, US retail sales increased more than expected in August, pointing to solid consumer spending. Retail sales rose 0.4% last month, while data for August was revised slightly up to show sales increasing 0.8% instead of 0.7% as previously reported.


Commodities

Oil prices finished the week lower, while earlier, the appointment of the new Saudi energy minister brought some comfort to the market as he emphasized a consistent Saudi energy policy. Brent crude retreated from highs around $63.75 and registered lows below $59 though finished marginally above $60. Investors were spooked by the reports that Donald Trump was considering easing sanctions on Iran, which raised the possibility of the return of the country’s crude to the global market.

The Organization of the Petroleum Exporting Countries on Wednesday lowered its forecast for global oil-demand growth in 2019 and 2020. Meanwhile, US crude oil inventories continued to reduce as US drilling companies cut the number of operating oil rigs for a third week in a row. The Energy Information Administration reported that U.S. crude supplies fell by 6.9 million barrels for the week ended September 6. Earlier, the American Petroleum Institute reported a drop of 7.2 million barrels.