CFD Markets News and Forecasts — 12-02-2019

Major US stock indexes have risen sharply, helped by news that US lawmakers made a preliminary deal to finance border security. Improving the prospects for trade between the United States and China also supported stocks.

On Monday evening, congressional negotiators struck a deal in principle, which is expected to prevent the partial closure of the federal government on Friday. However, the draft agreement does not provide the funding needed to build the wall of President Donald Trump along the border between the United States and Mexico. Thus, it is not clear whether the president will support this version of the agreement.

The focus of investors' attention is also continued to be trade negotiations between the US and China, as both countries are trying to conclude a deal before the deadline in early March. Both sides expressed the hope that a new round of negotiations, which began on Monday in Beijing, would bring them closer to a comprehensive trade agreement. Bloomberg News also reported that some US advisers admit that the most likely scenario at the moment is a deadline shift.

In addition, the vacancy and labor turnover review (JOLTS), published by the US Bureau of Labor Statistics, showed that in December, the number of vacancies increased to 7.335 million from 7.166 million in November (revised from 6.888 million). The latter value represents the new cyclical maximum. Analysts had expected the number of vacancies to fall to 6.9 million. The level of vacancies increased by 0.1 percent and amounted to 4.7 percent. The number of vacancies increased in the private sector (+198 00) and has changed little in the government sphere. In addition, hiring amounted to 5.907 million versus 5.812 million in November. The level of employment has not changed, and amounted to 3.9 percent.

Almost all the components of DOW finished trading in positive territory (28 out of 30). The growth leader was Caterpillar Inc. (CAT, + 2.83%). The Walt Disney Company (DIS, -0.21%) was an outsider.

All sectors of the S & P recorded an increase. The industrial goods sector grew the most (+ 1.6%).

At the time of closing:

Dow 25,425.15 +372.04 +1.49%

S & P 500 2,744.61 +34.81 +1.28%

Nasdaq 100 7,414.62 +106.71 +1.46%

The Job Openings and Labor Turnover Survey (JOLTS) published by the Labor Department showed the U.S. job openings edged up in December. 

According to the report, employers posted 7.335 million job openings in December, compared to the November figure of 7.166 million (revised from 6.888 million in original estimate) and economists’ expectations of 6.900 million. The job openings rate was 4.7 percent in December, up from 4.6 percent in the prior month. The report showed that the number of job openings rose for total private (+198,000) and was little changed for government. Job openings went up in a number of industries, with the largest gains in construction (+88,000), accommodation and food services (+84,000), and health care and social assistance (+79,000). The job openings level dropped in a number of industries, with the largest decreases in nondurable goods manufacturing (-37,000), federal government (-32,000), and real estate and rental and leasing (-31,000). 

Meanwhile, the number of hires edged up to 5.907 million in December from 5.812 in November. The hiring rate was 3.9 percent, unchanged from November. The number of hires was little changed for total private and for government. Hires increased in retail trade (+126,000), educational services (+19,000), and mining and logging (+9,000) but declined in information (-22,000) and in federal government (-10,000). 

The separation rate in December was at 5.545 million or 3.7 percent, compared to 5.563 million or 3.7 percent in November. Within separations, the quits rate was 2.3 percent (flat m-o-m), and the layoffs rate was 1.1 percent (-0.1 pp m-o-m).

U.S. stock-index rose on Tuesday, amid news that U.S. lawmakers reached a tentative deal to avert another partial government shutdown as well as optimistic comments by the U.S. and China’s representatives about their ongoing trade talks.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Cisco Systems (CSCO) downgraded to Equal-Weight from Overweight at Morgan Stanley; target $49

The Bank of England (BoE) governor Mark Carney noted in his speech at Financial Times event in Frobisher Hall, the Barbican:

• It's in everyone's interest to find a Brexit solution that works for all in the weeks ahead
• Trade concern is cascading through economies via reduced investment and demand
• Trade uncertainty threatens global expansion
• Provided the expansion continues, a modest tightening of monetary policy over time will likely be sufficient to achieve inflation targets. Policy can remain limited and gradual, as well as data dependent
• Global growth more likely than not to stabilize around new, modest trend
• China is the one major economy in which all major financial imbalances have materially worsened. It may be
• the exception that proves the rule that financial imbalances cause recessions
• Decelerating global economy reflects a shift from accommodative to tighter financial conditions that occurred initially in emerging economies, then in most advanced economies, and finally and sharply in the United States.

• OPEC sees demand for its crude at 30.6 mbpd 
• Production dropped 797K bpd in January to 30.8 mbpd
• Increases estimate for non-OPEC supply growth in 2018-19
• Reduces demand growth projection by 50kbpd to 1.24 mbpd
• Saudi output in January at 10.2 mbpd vs 10.3 mbpd target
• OPEC pointed to the growth in shale as taking market share. It continues to point to oversupply but the problem is that as cartel cuts and props up prices, it brings more money into shale, creating a new rival.

UK's Prime Minister Theresa May said her ministers on Tuesday that the parliament would not be asked to vote on a revised Brexit deal this week as more time is needed to negotiate with the European Union (EU). 

“She said it is clear that these discussions with the EU will need a little more time to conclude and so we will not be bringing forward a meaningful vote this week,” a spokeswoman for May’s office said in a statement following May’s weekly meeting with her cabinet of ministers.

The monthly survey of the U.S. small businesses by the National Federation of Independent Business (NFIB) revealed that concerns about the U.S. economy after the partial federal government shutdown and volatility in financial markets drove a reading of small business owners' confidence lower for the fifth consecutive month. 

The conservative-leaning small-business group reported its optimism index fell to 101.2 in January from 104.4 a month earlier. Economists had expected a reading of 102, according to the WSJ's poll. 

The NFIB noted the January reading remained higher than the historical average, but hit its lowest level since the weeks prior to the 2016 elections.

"Business operations are still very strong, but small business owners' expectations about the future are shaky," said NFIB Chief Executive Juanita Duggan in prepared remarks. "One thing small businesses make clear to us is their dislike for uncertainty, and while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future."

According to the latest survey, hiring and hiring plans remained strong though some respondents were concerned about a deterioration in conditions that would support expansion.

The U.S Treasury Secretary Steven Mnuchin has arrived in Beijing ahead of scheduled negotiations, Reuters reported.

The plan is meant to avoid a situation under which, after Britain leaves the bloc, national regulators can offer sweeteners to London-based financial firms.

Smaller EU states had tried to completely block the reform, fearing it would reduce their power to attract foreign financial firms. But after pressure from larger states led by France and Spain, a compromise was reached by EU finance ministers meeting in Brussels.

• US shale is very responsive to rising oil prices

• expansion of pipeline capacity will unleash more shale

• Europe must use lng to diversify its gas supplies

Xinhua, citing senior official Han Zheng, say China will push forward reforms of state-owned enterprises, finance, electricity, oil and tech sectors. They will also ensure stable employment conditions.

• Exports would also fall to near 6.9m b/d, down from 8.2m b/d three months ago.

• Sees good reason to stick to medium-term inflation outlook

• Exchange of crude and products is a way of handling trade.

• Seeking cooperation from friendly nations to fight the US sanctions.

• We redirect oil flows to other markets.

• Current oil exports 1.2-1.3 mln bpd.

• Constantly monitoring oil prices.

• The world is not only dollar and the US.

• The euro zone has not yet been made crisis proof, so the ECB is still at risk of having to function as a crisis-response unit, a risk to its independence

• Certain issues like the lack of credibility of fiscal rules or the harmful sovereign-bank nexus still have to be adequately addressed

• fighting crises forces unelected central bankers to take political decision, which are difficult to square with democratic principles and may go beyond banks' narrowly defined mandate.

• Acting beyond the mandate would also undermine people’s trust in the central bank

• At the end of the day, it could become more and more difficult for the ECB to focus on its promise of a stable currency

• critical to move on eurozone budget

• will develop proposals with germany on industry

The U.S. Dollar Index - a measure of the U.S. currency against a basket of six major rivals - was up 0.08% at 97.14

• UK cannot be held in backstop permanently

• meaningful vote will come back as soon as it can

• vote on UK PM May’s deal will come back when issue of backstop sorted out

• Leadsom also concedes that backstop changes may not include re-opening the Withdrawal Agreement.

A flurry of intensifying risks could trigger an energy market "crunch" over the coming months, according to the chief executive of BP.

When asked whether production cuts from the so-called OPEC+ coalition were likely to help stabilize oil prices, Dudley replied: "Well, there's a lot of variables here and there's a lot of things that could lead to a real crunch."

Dudley cited "tragic circumstances" in Venezuela, uncertainty in Libya, rising production levels from the Permian Basin and the impact of U.S. sanctions on Iran.

"So, the OPEC+ countries agreed to reduce production in the first quarter, we don't even really have data from it. We will have to see what the data looks like but the markets feel tight to me."

"We plan BP on a sort of fairway, which I think is good for the world, between $50 a barrel and $65. That's good for producers and consumers," Dudley said.

The agreement contains only a fraction of the money President Donald Trump wants for his promised border wall and does not mention a concrete barrier. The deal still needs to be approved by Congress and signed by the president.

European Central Bank officials shouldn’t overreact to individual points of incoming data when setting monetary policy as the current environment is highly uncertain, incoming Executive Board member Philip Lane said.

While the ECB has acknowledged a shift to the downside in recent weeks, the domestic euro-area economy remains “pretty strong,” Lane said.

“So we will have new comprehensive forecasts in March and at that point I think the ECB can decide where next,” he said. He later added that remark was “no signal whatsoever about decision making.”

“It is even more important during these periods to make a close study of the data because what we have is I think different signals,” Lane said. "It is early days in 2019, we have to not over react to any particular announcement or new data release and really take a measured approach to all of the data."

“The medium- to long-term accumulated contradictions and risks throughout economic development are going to become more prominent in 2019. The pressure facing the consumer market will increase and consumption growth is very likely to slow further.” Wang Bin, a commerce ministry official told.

Wang said softness in retail sales last year, which saw growth averaging 9% for the slowest in 15 years, was due to “periodic” weakness in car sales and housing-related spending, though other categories continue to post “relatively normal” growth.

Retail sales growth during the just concluded Lunar New Year holidays slipped to its lowest since at least 2011, further evidence consumers remain cautious as the economy hits the brakes.

However, Wang cautioned against becoming overly gloomy on the retail sector, saying government policy support measures should cushion the downside.

Herman Van Rompuy, the former president of the European Council, has been called upon by Theresa May as a potential "influencer" to break the Brexit deadlock, sources have told Sky News.

Mr Van Rompuy, who was European Council president between 2009 and 2014, was spotted arriving at the British ambassador's residence just after 7pm.

Mr Van Rompuy was at the helm in the European Council throughout the Greek financial crisis, which threatened the stability of the euro. Greece was finally bailed out in a compromise deal overseen by Mr Van Rompuy.

Survey respondents reported:

• Inflation expectations for one year ahead have decreased since last quarter from 2.09% to 1.82%. Expectations for two years ahead remain steady.

• GDP is expected to grow at 2.38% and 2.36% for one and two years ahead respectively.

• The expected one year ahead unemployment rate decreased from 4.40% to 4.17%. This follows a decrease in the official unemployment rate from 4.4% to 3.9% (revised to 4.0%) for Q3 2018 as reported by Statistics New Zealand in November 2018.

• House price inflation expectations decreased from 2.86% to 1.91% for one year ahead, and from 2.31% to 2.14% for two years ahead.

• A net 68.3% of respondents believe current monetary conditions are easier than neutral. This is up from a net 63.8% in the previous quarter’s survey. A net 75.6% of respondents believe monetary conditions in one year’s time will be easier than neutral.

• The NZ/US dollar exchange rate is expected to be 0.67 at the end of June 2019, and 0.66 at the end of December 2019. It was at 0.677 when the survey was conducted (23 January 2019).

• Don't Know What They Mean' By Deal Progress Made

• `Hopefully' Will Do As Well On Second Kim Meet As First

• `We're Going To Make Great Deals On Trade'

• `We Don't Want China To Have A Hard Time'

• Staff Will Work On Details; Gives No Outline Of Deal

• Agreement In Principle Reached In U.S. Shutdown Talks

EUR/USD

Resistance levels (open interest**, contracts)

$1.1437 (3650)

$1.1406 (641)

$1.1380 (472)

Price at time of writing this review: $1.1282

Support levels (open interest**, contracts):

$1.1253 (3105)

$1.1228 (5387)

$1.1198 (4088)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date March, 8 is 92013 contracts (according to data from February, 11) with the maximum number of contracts with strike price $1,1700 (6197);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3084 (3941)

$1.3029 (679)

$1.2970 (398)

Price at time of writing this review: $1.2863

Support levels (open interest**, contracts):

$1.2817 (1084)

$1.2778 (940)

$1.2754 (1209)

Comments:

- Overall open interest on the CALL options with the expiration date March, 8 is 42260 contracts, with the maximum number of contracts with strike price $1,3200 (4743);

- Overall open interest on the PUT options with the expiration date March, 8 is 28968 contracts, with the maximum number of contracts with strike price $1,2400 (1903);

- The ratio of PUT/CALL was 0.69 versus 0.67 from the previous trading day according to data from February, 11

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.