Market Roundup
• China made more than $1.2 trillion trade commitments –Mnuchin.
• White House Economic Adviser Kudlow expects China's tariffs on U.S. autos to fall to zero.
• White House Economic Adviser Kudlow says he expects china to quickly roll back retaliatory tariffs on U.S. commodities.
• Fed's Quarles: Fed watching data but will not react to "every wavering".
• Fed’s Quarles says neutral rate "not a terribly precise" concept, most useful when clear in which direction monetary policy should move.
• Fed’s Kaplan says he is paying attention to slowdown in global growth, and expects U.S. growth to slow next year.
• Fed's Kaplan says 'we are in a more challenging period' in our efforts to normalize monetary policy.
• U.S. credit demand declines, rejection rates rise - NY Fed survey.
• US Nov Markit Mfg PMI Final, 55.3, 55.4 previous.
• US Oct Construction Spending MM, -0.1%, 0.4% forecast, 0.0% previous, -0.1% revised.
• US Nov ISM Manufacturing PMI, 59.3, 57.6 forecast, 57.7 previous.
• US Nov ISM Mfg Prices Paid, 60.7, 70.0 forecast, 71.6 previous.
• US Nov ISM Manuf Employment Index, 58.4, 56.5 forecast, 56.8 previous.
• US Nov ISM Manuf New Orders Index, 62.1, 57.4 previous.
• Canada says it takes Trump's talk of NAFTA withdrawal seriously.
• CA Nov Markit Mfg PMI SA, 54.9, 53.9 previous.
• Mexico offers to buy back some airport bonds; bonds and peso rally.
• Oil surges 3% on trade truce, expected supply cuts.
Looking Ahead - Economic Data (GMT)
• Dec 4 00:30 Australia Q3 Current Account Balance SA AUD, -10.2 bln forecast, -13.5 bln previous
• Dec 4 00:30 Australia Q3 Net Exports Contribution, 0.2% forecast, 0.1% previous
• Dec 4 03:30 Australia Dec RBA Cash Rate, 1.50% forecast, 1.50% previous
Looking Ahead - Events, Other Releases (GMT)
• Dec 4 N/A ECB Vice President Luis de Guindos participates in ECOFIN meeting in Brussels
• Dec 4 N/A BoE Governor Mark Carney speaks to lawmakers about the potential impact of the UK-EU Brexit deal in London.
• Dec 4 08:00 European Union Finance Ministers' meeting in Brussels
• Dec 4 08:00 Riksbank Deputy Governor Per Jansson to comment on Insurance Sweden's report in Stockholm
• Dec 4 15:00 Fed New York President John Williams participates in a panel discussion in New York
• Dec 4 15:30 Riksbank Deputy Governor Cecilia Skingsley to participate in a panel discussion on cryptocurrencies in London
• Dec 4 15:35 BoE Insurance Supervision Executive Director David Rule to participate at a conference in London
• Dec 4 18:00 BoE Monetary Policy Committee Member Gertjan Vlieghe speaks in Plymouth
Currency Summaries
EUR/USD is likely to find support at 1.1318 levels and currently trading at 1.1348 levels. The pair has made session high at 1.1351 and hit lows at 1.1337 levels. The euro was little changed against the U.S. dollar on Monday as trade tensions between the United States and China staged a comeback after leaders from the two countries declared a truce on tariffs. China's yuan and several trade-dependent currencies made strong advances against the greenback as investors sold the safe-haven U.S. currency and bought up riskier assets. China and the United States agreed to a ceasefire in their bitter trade war on Saturday after high-stakes talks in Argentina between U.S. President Donald Trump and Chinese President Xi Jinping. U.S. Treasury Secretary Steve Mnuchin said on Monday there was a clear shift in tone at Buenos Aires from past discussions with Chinese officials, as Xi offered a clear commitment to open China's markets to U.S. companies. With trade tensions taking a back seat for the moment, investors' attention is likely to turn to U.S. monetary policy. The Federal Reserve is expected to raise interest rates again later in December but recent comments from central bank officials about how many more hikes are needed in the current cycle have hurt the dollar in recent sessions.
GBP/USD is supported in the range of 1.2650 levels and currently trading at 1.2726 levels. It reached session high at 1.2824 and dropped to session low at 1.2695 levels. Britain's pound declined against the dollar on Monday as growing concerns about British parliamentary approval for a proposed Brexit deal prompted investors to sell the currency. A broad rally across global stocks and risky currencies had lifted the pound in early trade after U.S. President Donald Trump and China's President Xi Jinping agreed to a 90-day ceasefire in their trade dispute to try to resolve their differences. British Prime Minister Theresa May said she would still be in her job in two weeks' time, playing down speculation that she might resign if the Brexit deal is not approved by parliament in a vote scheduled for Dec. 11. Opposition parties, the small Northern Irish party that props up May's government and many lawmakers in her own Conservative Party have said they will vote against the deal. Such concerns have also started bubbling up in the currency market. Against the dollar, the pound fell to its lowest since October at $1.2697, down nearly 0.7 percent from the day's highs. Against the euro, the pound weakened by 0.4 percent to 89.23 pence.
USD/CAD is supported at 1.3153 levels and is trading at 1.3205 levels. It has made session high at 1.3219 and lows at 1.3165 levels. The Canadian dollar strengthened to its highest in nearly two weeks against its U.S. counterpart on Monday, after Washington and Beijing's agreement for a ceasefire in their trade war boosted oil prices and stocks. Stocks and the price of oil, one of Canada's major exports, climbed after the United States and China agreed to a 90-day truce in a trade dispute, and ahead of a meeting this week of the Organization of the Petroleum Exporting Countries that is expected to cut supply. The lower price of oil since October has weighed on the outlook for Canada's economy, with the potential impact worsened by a historically big discount for Canadian heavy crude. Gains for the loonie came ahead of a Bank of Canada policy decision on Wednesday. Data on Friday showing Canada's economic growth slowed in the third quarter has underpinned market expectations that the central bank will not hike interest rates this week. The Bank of Canada will next raise interest rates early next year, according to a strong majority of economists polled by Reuters who still say two more rate rises will follow by end-2019.
USD/JPY is supported around 113.35 levels and currently trading at 113.66 levels. It peaked to hit session high at 113.70 and made session lows at 113.43 levels. The dollar strengthened against Japanese yen on Monday as temporary trade truce agreement between U.S. and Chinese leaders diminished demand for safe haven assets. China and the United States agreed to a ceasefire in their bitter trade war on Saturday after high-stakes talks in Argentina between U.S. President Donald Trump and Chinese President Xi Jinping, including no escalated tariffs on Jan. 1.Trump will leave tariffs on $200 billion worth of Chinese imports at 10 percent at the beginning of the new year, agreeing to not raise them to 25 percent "at this time", the White House said in a statement. The dollar index, which measures the greenback against a basket of major peers, fell 0.15 percent to a day's low of 97.06.Trade tensions have been one of the biggest drivers of dollar strength in 2018. The Federal Reserve is expected to raise interest rates by 25 basis points later in December but question marks remain about how many more hikes are due in the current cycle. The Japanese yen slipped slightly to 113.67.
Equities Recap
Miners, autos, tech, and oil stocks surged on Monday, driving Europe's main benchmarks up strongly after U.S. and Chinese leaders agreed a temporary truce in a trade war.
The UK's benchmark FTSE 100 closed up by 1.4 percent, FTSEurofirst 300 ended the day up by 1.16 percent, Germany's Dax ended up by 1.9 percent, and France’s CAC finished the up by 1.1 percent.
Wall Street's major indexes rallied on Monday following a truce between the United States and China in their trade war, which has clouded the outlook for the stock market for much of the year.
Dow Jones closed down by 1.31 percent, S&P 500 ended up 1.10 percent, Nasdaq finished the day up by 1.51 percent.
Treasuries Recap
Benchmark U.S. Treasury yields fell back below 3 percent on Monday, the yield flattened and the curve between three-year and five-year notes inverted for the first time since 2007, as risk appetite sparked by a U.S., China trade agreement faded.
Benchmark 10-year notes gained 7/32 in price to yield 2.988 percent, after getting as low as 2.986 percent, the lowest since Sept. 18.
The yield curve between two-year and 10-year notes flattened to 16 basis points, the flattest in over a decade.
Commodities Recap
Gold gained one percent on Monday, hitting its highest in more than three weeks, boosted by a sell-off in the dollar after the United States and China called a truce on fresh trade tariffs for 90 days.
Spot gold was up 0.78 percent at $1,231.35 per ounce, its highest since $1,234.87 on Nov. 7.U.S. gold futures settled up 1.1 percent at $1,239.60.
Oil prices jumped nearly four percent on Monday after the United States and China agreed to a 90-day truce in a trade dispute and Canada's Alberta province ordered a production cut, while exporter group OPEC looked set to reduce supply.
Brent crude futures rose $2.23 to settle at $61.69 a barrel, a 3.75 percent gain. U.S. West Texas Intermediate (WTI) crude futures gained $2.02 to settle at $52.95 a barrel, a 3.97 percent increase.
