12.12.2019 – Daily Report. The Fed has spoken, now it’s the ECB’s turn. And the British are going to the polls. Before the big customs decision on Sunday, investors are taking a moderate turn. Will there be a Phase 1 deal by then, or will the US impose new penalties? Recently it looked a little more like an easing of the conflict.
Frankfurt slightly positive
The German stock market was cautiously optimistic on Thursday morning. The DAX gained 0.4 percent to 13,202 positions. The futures on Dow Jones and S&P 500 each gained 0.2 percent. If it is true what the news agency Reuters reports with reference to insiders, then new tariffs on December 15 appear rather unlikely.
Only one Trump consultant for new tariffs
According to Reuters, US President Donald Trump will probably meet with his closest advisors today, Thursday, to discuss the new tariffs due on Sunday – tariffs on goods worth 160 billion dollars, including smartphones and toys, are up for debate. Trump will meet US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and economic advisors Larry Kudlow and Peter Navarro. However, according to the report, Navarro is the only one who explicitly advocates a tougher stance. Kudlow and Mnuchin are strictly against it. Lighthizer hopes he has enough arguments to prevent customs tariffs. But Trump will make the final decision.
Meanwhile, the New York Times reported a detail that fits the picture. Navarro, under the alias Ron Vara, has emailed a memo around Washington advocating higher tariffs to force China to make structural changes. It goes on to say that there is a lot of discussion about the customs deal.
We think: If Trump should impose new tariffs against China, then it will rumble strongly on Wall Street and in Frankfurt. If the US collapses and softens or postpones tariffs in light of the great progress that has been made, the stock market is likely to pick up moderately. If China should either kneel before or shortly after the deadline and publicly promise mega purchases from US farmers, as demanded, which makes the new tariffs unnecessary, then prices will surge sharply.
Waiting and Seeing in Asia
The stock markets in Asia showed no clear trend in the morning. In China, the CSI-300 fell by 0.3 percent to 3,891 points. In Japan, the Nikkei gained 0.1 percent to 23,425 points. In Hong Kong, the Hang Seng rose by 1.3 percent to 26,994 points.
New York cautiously optimistic
Wall Street had closed the night before, well claimed. The Dow Jones gained 0.1 percent to 27,911 points. The market-wide S&P 500 advanced 0.3 percent to 3,141 positions. And the Nasdaq Composite even rose 0.4 percent to 8,654 positions.
The Fed holds still as expected
The brokers were satisfied with the Federal Reserve’s interest rate decision. Because of the good economic data and low unemployment, the Federal Reserve left its key interest rate unchanged in the corridor of 1.5 to 1.75 percent. At its previous three meetings since July, the Fed had lowered the key rate by 0.25 percentage points each.
Brokers waiting for the ECB
Now it’s the turn of the European Central Bank – today the first interest rate meeting is taking place in Frankfurt under the chairmanship of its new President Christine Lagarde. Hardly anyone expects a change in the key interest rate, which is at a record low of 0.0 percent.
Tension at Sterling
The British pound is going to be exciting tonight: The first exit polls for the election in the House of Commons should arrive at 22.00 hrs. The Tories were not so rosy recently, because according to the statistical error dispersion of the important opinion poll by YouGov, Prime Minister Boris Johnson could still miss the absolute majority of 320 seats. Johnson wants to free Britain from the European Union on 31 January. Labour has announced a second Brexit referendum in the event of an election victory. If the majority is unclear, EURGBP would be guaranteed to be highly volatile.
That’s what the day brings
The diary brings some interesting events today, you can find the overview as always here: Market Mover
The aforementioned ECB interest rate decision will be received at 13.45. The press conference at 2.30 p.m. could provide new impetus for EURUSD.
The US producer prices are reported at 2.30 pm.
At the same time, the first weekly applications for unemployment benefits are received in the USA.
The Bernstein Bank wishes you successful trades!
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