US
US bill supporting pro-democratic movements in Hong Kong has caused a negative reaction of China, however, China avoided any direct measures related to trade. Sanctions are going to be introduced on US human-rights organizations and US Navy ships port visits would be halted. The tension between two nations increase: China is going to publish new sanctions list of “unreliable entities”, while US is about to raise tariffs on Chinese goods. Donald Trump suggested a delay of trade deal till 2020 elections, which lead to the fall in stock futures. House of Representatives voted for the introduction of sanctions over China for the human rights abuse over Muslim minorities. However, last days of the week have shown some progress in elaboration of the agreement between two countries and phase one of the deal is expected to be done by 15 Dec. China’s announcement to waive some tariffs on agricultural imports from US has been perceived positively by the market.
Trump’s impeachment hearing on Wednesday in the House Judiciary Committee has been held without the presence of US president, who meanwhile was in London on a NATO Summit. These hearings can be seen as a platform for Democrats to win voters for the future elections. The process of impeachment has been moved to the stage of drawing up articles, which will most probable will be then presented for the full vote.
Cyber Monday has been very successful for Amazon.com, showing jump in sales of 17%, continuing the trend for consumers to shift from retail stores to online shopping.
On Friday, the payrolls number has been published, indicating 183,000 positions added in November, with unemployment rate of 3,6% and annual wage growth remaining 3,0%. These numbers indicated good health of US Labor market, which affected stocks value positively. It also favored Donald Trump’s policy towards delay of a trade deal with China, making its implementation less urgent.
S&P 500 pointed to a gain at the beginning of the week, however, after Donald Trump’s announcement of the trade deal delay the index showed a downward trend. Nevertheless, as far as US and China started moving towards consensus, S&P 500 rose in value again. The optimism regarding payrolls number added to the stocks performance, reflected in a firm positive tendency in S&P 500 closing at 3,145.91 with a 0.16% gain, compared to the last week.
Dow Jones Industrial Average has reduced slightly (by 0.13%) compared to the last week, reaching 28,015.06, with dynamics similar to S&P 500. Russel 2000 Index gained value increasing by 0.56% to 1633,84. VIX showed a peak on Tuesday, reaching the level of almost 18, but then reduced and ended at 13.62.
UK
British Pound strengthened against dollar rising from 1.29 level to 1.31. The FTSE 100 decreased by 1,45% compared to the week before, reaching 7,239.66. This is in accordance with so called “historical negative correlation” between currency and stock market (when currency value rises, stock market usually falls). In contrast, the FTSE 250 rose 0.58% over the week to 20,933.03, showing a positive effect on small companies. According to the YouGov poll results regarding the upcoming general elections on Dec. 12 has not changed much, indicating majority support for the Conservative party of 42%, with Labour party receiving 33% votes. However, YouGov survey also indicated that Mr Corbin gained trustworthiness and support of ordinary people and has stronger position regarding National Health Service. Mr Johnson, on the other hand, has political experience as a prime minister and possesses stronger tools regarding Brexit deal.
Europe
The EUR/USD reached 1.106, gaining value slowly from 1.102 last week, with the maximum of around 1.111 during the week.
German economy has shown a warning 0.4% decrease in factory orderings, instead of the forecasted increase of 0.4%. Retail sales presented an unfortunate dynamic as well, dropping by 0.6%. However, the final statement of 3Q GDP has shown some positive trends, while taking into account the regional vulnerability due to Brexit, trade and automobile industry situation.
There was a threat that SPD will quit Merkel’s coalition. Bond market responded with the rates on government bonds rising all around the world. Social Democrats have introduced new party leaders, Norbert Walter-Borjans and Saskia Esken, who have brought political uncertainity, threatening to lead the party out of coalition with conservative bloc. Mr Esken called for increase in public spending, tougher climate legislation and measures to be taken to drive Germany out of its weak economy position. On Monday Merkel’s CDU party claimed that no renegotiation terms are possible, and SPD can quit the coalition in case of disagreement. Mr Walter-Borjans and Ms Esken have been stating that if Social Democrats refuse to accommodate their demands, they are ready to leave the government, however SPD leaders were forsed to partially retreat. SPD officials privately say, they believe that the coalition will most probably hold till the end of the parliamentary term in 2021.
France and US had disagreements about tariffs proposed. On Monday US has announced a possible imposition of tariffs on $2.4 billion of exports in response to a 3% “digital tax” that France introduced before. France, in its turn, said that European union will retaliate if this threat would be realized.
The Euro Stoxx 50 index closed at 3,692.34, dropping 0.30%, while the German DAX rose my 0.6% to 13,166.58. STOXX Europe 600 Index ended at 407.35 with a slight decrease of 0.02%.
RoW
OPEC and Russia agreed to deepen the production cuts by 500,000 barrel a day, to prompt up prices. Oil exports from Middle East fell to its lowest level from July, according to Bloomberg’s data. IPO of Aramco may become the world’s biggest ever listing, since the pricing is considered to be at the top of the marketed range. WTI was up by 3.50% reaching 4.45, while Brent rose by 5.83% to 64.27.
China’s output is increasing with Caixin manufacturing index rising to 51.8 on Monday. MSCI Asia Pacific Index slipped from 524.81 at the opening to 518.18 on Thursday (mostly due to the Trump’s trade deal delay announcement) and then bounced back to 522.24. Japan’s Topix index closed at 1,713.36 gaining 0.82%. Nikkei was up 0.26% and USDJPY closed at 108.61.
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