Market Commentary 17 Dec 2019

HIGHLIGHTS

It was a very interesting week last week with the UK elections producing a landslide win for Boris Johnson’s Conservative Party showing more clarity on  Brexit which should happen by end January. The British Pound had a good run after the results of the election getting as high as the 1.3490 marks. On another note, China and the US agreed on phase-one trade deal boosting Chinese imports of US goods and preventing additional tariffs scheduled on Dec 15 deadline and President Trump stating that he wants the phase-two deal to start ASAP.

The market did whipsaw last Friday and after a 260-point swing on the DOW, the indices ended little changed from Thursday’s closing price with most of the reaction already priced in on this record run. Of course, this agreement still has a few sceptics with very few details on the deal. Some investors want to see specific items on paper with a  long term agreement covering IP protection and opening Chinese markets to more US goods etc.

Retail Sales came out soft at 0.2% which is slightly below the 0.5% expectation but at least still a positive figure.

Dow Jones Chart: ( 1 Week )

DOW -        up 20.6 %  YTD

S&P –          up 26.4 %   YTD

NASDAQ –  up  31.6 % YTD

HEADS UP

• GBP Consumer Price Index (NOV)
• JPY BOJ rate decision
• CAD Consumer Price Index (NOV)
• NZD Gross Dom Product (3Q)
• AUD Unemployment Rate (NOV)
• GBP Bank of England Bank Rate
• JPY National Consumer Price Index
• USD Gross Dom Product (3Q)
• USD PCE Core (NOV)
• USD U.of Michigan Sentiment

DAILY FEEDS

GOLD:

With the USD Index down to 97.20, on the flipside Gold rallied to $1478. The mere fact that Gold stayed above the $1470 mark shows that investors are still hedging that President Trump can still do something unpredictable on the next phase of that deal. And looks like the Chinese counterpart has a muted approach on the merits and structure of the phase-one deal.

Gold Chart

EUR:

After a significant rally last week, the Euro tried to get its head above the crucial 1.12 mark which is also a pressure point on the chart. Breaking above this point is a short-term bullish signal. With the soft Retail Sales figure out of the US, this is also positive for currencies versus USD.

YEN:

USDJPY rallied back towards the double top figure of 109.50. These 110 level is apparently a very strong resistance and this range-bound trading should provide more clarity within the next 2 weeks.

AUD:
Australian flash PMI came out weaker at 49.4 weaker than last month’s 49.7. This means activity slowed down even more than last month. Official employment data comes out this Thursday. With the slowing down, AUD dropped to 0.6860 level from 0.6930. All eyes will be on the next phase of the US and China tariff war.

BITCOIN:

Bitcoin peeled off again and back at late November’s level of $7,100. It is still maintaining a bearish trend. Failure to go above the $7,200 levels would see Bitcoin slide further down in the red.

Author:

Ricardo Garrido - Senior Account Advisor of RockGlobal