December 05, 2019

 

Global Commentary

Markets were broadly lower across Asia yesterday following the overnight trade comments from President Trump, which has investors expecting that the trade deal negotiations between the U.S. and China to drag on until late 2020. In Japan, the Nikkei lost 1.05%, with a second day of substantial strength for the Yen weighing on equities. Mainland China’s Shanghai Composite lost just 0.23%, but over in Hong Kong the Hang Seng retreated 1.25%. In Australia, the S&P/ASX 200 led losses for the region as it dropped 1.58%, and South Korea’s Kospi fell 0.73% on the day.

The pendulum on trade optimism swung back to positive yesterday, giving European markets a boost after two days of selling. The optimism returned after Bloomberg reported that the U.S. and China are moving closer to a phase one deal, based on information from unnamed sources familiar with the trade talks. The pan-European Stoxx Europe 600 rose 1.18%, with Germany’s DAX adding 1.16% and the CAC 40 in France closing 1.27% higher. In London the FTSE gained a more modest 0.42% as strength in the Pound sterling kept gains muted. 

In the U.S., the renewed trade talk optimism helped major indices snap a three session losing streak to finish higher. The Dow Industrials rose 0.53%, while the Nasdaq advanced 0.54%, and the S&P 500 outperformed to a 0.63% gain.

 

Cryptocurrencies

Cryptocurrency markets edged modestly lower yesterday, remaining in a depressed state and unable to mount any strong upside. Bitcoin was down 1.3%, and both number two coin Ethereum and number three coin Ripple matched the loss from the leading cryptocurrency. In fact, losses for all the other top ten cryptocurrencies were between 1.1% and 2%. Overall it was another broadly bearish day, with 80 of the top 100 cryptocurrencies ending the day in the red.

 

FOREX

EUR/USD – The 1.1080 level held as resistance for the pair for a second consecutive day. After rising as high as 1.1116 the pair snapped back, coming to rest below the 1.1080 level as the resistance that’s been at this level throughout November continued to hold. Fundamentally, optimism for a U.S.-China trade deal resumed, helping strengthen the U.S. dollar. If the optimism persists we could see the pair sink back to the 1.1000 level by the end of the week.

GBP/USD – The Pound strengthened against the U.S. dollar for a third consecutive session, rising above the 1.3100 level by the end of the session as traders are betting on a Conservative win in the upcoming British general elections. The move took the pair to its highest close since May 2, when the pair closed at 1.3168, which is also the next resistance level for the pair.

 

Commodities

Metals – Precious metals pulled back from one-month highs yesterday as optimism over a U.S.-China trade deal returned. Gold for February delivery lost $4.20, or 0.3%, to settle at $1,480.20 an ounce. Meanwhile March silver dropped $0.332, or 1.9%, to end at $16.916 an ounce

Oil – Crude climbed higher after the U.S. reported the first inventory decline in six weeks, and hopes for deeper production cuts from OPEC remain high. West Texas Intermediate crude for January delivery rose $2.33, or 4.2%, to settle at $58.43 a barrel. February Brent crude added $2.18, or 3.6%, at $63 a barrel.

 

Indices

S&P 500 – The benchmark U.S. equity index outperformed and rose 0.63% to snap a three session losing streak as trade deal optimism returned following a report from Bloomberg which claimed the U.S. and China are near reaching a phase one deal. Gains were broad-based, with ten of the eleven S&P sub sectors finishing the day higher. Only the materials sector fell, and that was only by 0.04%. The best gain came from the energy sector, which added 1.57% as crude rallied following news of an inventory decline in the U.S.

Nikkei 225 – Japan’s benchmark equity index closed yesterday lower by 1.05% as investor sentiment was hurt by overnight trade comments from the U.S.’s President Trump, and the Yen continued firming, placing pressure on shares of Japanese multinational companies. Shares of Uniqlo parent Fast Retailing finished the day 5.21% lower to lead the market’s decline. Major exporters took a hit, with Mitsubishi Electric losing 0.8%, and Honda falling 0.5%. Despite overnight gains for crude and hopes for greater production cuts from OPEC, shares of Inpex fell 1.31%.


Stocks

McDonald’s – As the broader market hits new record highs shares of McDonald’s have pulled back and sit more than 10% below its summer highs. That could be good news as it gives investors a chance to scoop the stock up at a discount. Some analysts are suggesting the bull market in equities is coming to an end, but consumer stocks like McDonald’s are often a good place to hide. When the economy tanks and disposable income shrinks fast food chains like McDonald’s become increasingly valuable, as consumers tend to indulge themselves more at the lower priced eateries. That could give protection from a bear market, and a healthy dividend yield while waiting for the market to hit its bottom and turn higher. And if analysts are wrong and the current bull market continues higher McDonald’s is still a strong player that’s been delivering good profits.

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