Trade of the Day: Asian stocks rise, but European shares weak and US futures flat; oil firm
Quote of the Day: “The details of the reported ‘Phase One’ trade deal between the US and China are sketchy and we are not convinced that it will hold. While the deal removes a downside risk, it does not justify a change in our central forecasts for GDP growth in the US, China or the rest of the world. And importantly, it does not mark the end of tensions between the US and China, which are likely to persist in the areas of technology and investment as decoupling continues,” Capital Economics said about the trade deal.
Stock of the day: Haier Electronics rose as much as 19.9% after trading resumed on Tuesday following a suspension as the HKEX sought clarifications about a reported privatization. The company said the company’s major shareholder said it was exploring the possibility.
Number of the Day: $48 billion. Independent research firm CreditSights forecast for global bond issuance volume from China’s property sector in 2020. This is sharply lower than the $70 billion issued in the year to date.
Tip of the Day: The 2020 full-year oil oversupply is expected to narrow substantially as a result of additional curbs by OPEC, said Nomura analyst Shigeki Matsumoto. “Based on the International Energy Agency’s (IEA) forecasts for global demand and non-OPEC output (in its December Oil Market Report), and assuming OPEC production volume remains at the November 2019 level, we estimate that global crude oil supply is likely to exceed demand by 710,000 barrels/day in 2020.”
Asian extended gains after US National Economic Council Director Larry Kudlow said US exports to China would double after the phase one deal which he said was “absolutely done.” MSCI Asia Pacific ex-Japan index rose 0.8% to a level not seen since mid-2018, Japan’s Nikkei index rose 0.5% and the Hang Seng index advanced 1.2% with technology, banks and insurance sector propelling the benchmark.
“I expect net capital inflows into HK, especially the stock market, due to a ‘truce’ of the trade war. The social activities have small impacts on the asset markets and therefore haven’t seen larger scale net capital outflows. With more inflows the HKD might strengthen against the USD,” said Iris Pang, Greater China Economist at ING Bank.
International Monetary Fund’s (IMF) new Managing Director Kristalina Georgieva applauded the phase one trade deal between China and the US as a “very positive step” for both countries. In an interview she upgraded China’s GDP forecast, saying she expects the agreement between the two countries to boost China’s growth to around 6% next year, up from the IMF’s previous estimate of 5.8% made in October.
But Europe gave back some of the gains and US futures came off the highs as markets looked for new catalysts for sustaining the rally. The British pound also retreated, falling 1% after Prime Minister Boris Johnson moved to change the law to guarantee the Brexit transition phase isn’t extended beyond the end of next year, reviving the threat of a no-deal split.
“By outlawing an extension, it leaves very little time in which to agree a comprehensive free trade agreement with the EU and means the clock is now ticking down to a firm cliff-edge next December. Sterling’s impressive gains following the exit poll and election result have now been completely wiped out as markets are reminded that Boris Johnson’s promise to leave the EU is something he intends to fulfill, possibly without negotiating an amicable future relationship,” said Andy Scott, Associate Director at advisory firm JCRA. The Stoxx Europe 600 Index dropped 0.5% and futures on the S&P 500 Index were flat.