Trade of the Day: Shares, yuan up on trade relief, British pound rallies post-UK elections; Safe havens US Treasuries, yen dumped
Quote of the Day: “If anything, the Trump administration’s attempt to check China’s rise and reset the relationship between the world’s two largest economies is having the opposite effect. US pressure is playing into the hands of Beijing’s reformers, who are accelerating plans to open China’s capital markets and introduce stronger intellectual property protections, among other initiatives,” Invesco said in its 2020 outlook released on Friday.
Stock of the day: Property and construction company Tysan Holdings surged after it announced a special dividend which gave a yield of 33% on the previous closing price. The shares rose as much as 20% before ending the day with a gain of 4.7%.
Number of the Day: 37% The year to date slide in the Argentine peso against the dollar. It is the worst-performing currency in the world as the country grapples with inflation, high debt and recession.
Tip of the Day: “If December tariff hike is postponed/canceled, and September tariffs on the $110 billion are partially rolled off, China’s growth will be close to 6% and USDCNY will trade below 7 at end 2019; and if all existing tariffs are removed by March 2020, growth could rebound to 6.3% in 2020 and USDCNY could trade between 6.5 and 6.8 next year,” said UBS economist Tao Wang. The Chinese yuan breached the 7/US dollar barrier, rising to 6.95 on Friday, its firmest since August 2.
Asian markets rallied after reports that the United States and China had agreed to scrap the proposed duties and halve some existing tariffs, with US President Donald Trump having signed off on a phase-one trade deal. Still there was edginess as neither side had officially confirmed any of the reports. The pound rose to its highest level since mid-2018 after a landside victory for Prime Minister Boris Johnson’s Conservative Party.
The MSCI Asia Pacific ex-Japan index surged 1.5% to a level not seen since late April. Japan’s Nikkei index jumped 2.5% and the Hang Seng index soared 2.6% with the insurance, technology and energy sectors rising the most.
“Christmas is approaching with less pessimism of a harsh winter. The Fed and other central banks have helped to shovel the snow. The easing of trade and Brexit worries would warm Christmas dinners, but prayers will be for the birds to return in spring. Mindful that the political gridlocks for trade and Brexit have only been loosened and not broken, speculators will be tempted to take profit near year-end,” said Philip Wee, DBS forex strategist.
Overnight, the European Central Bank tweaked its inflation and growth projections and predicted a slow but steady recovery in the coming years. Newly appointed ECB President Christine Lagarde said she was neither a policy hawk nor a dove but an owl who will use her wisdom to heal a recent rift in the Governing Council, while announcing the strategic review of the central bank’s operations would commence next month.