Tin tức thì trường

The main US stock indices fell slightly, as investors were skeptical of the report of The Wall Street Journal (WSJ) that the United States may postpone the introduction of additional tariffs on Chinese goods, scheduled for December 15.

WSJ reported that negotiators in the United States and China are discussing the option of delaying another tariff increase, as both sides are trying to agree on the so-called first phase of the trade deal. The article also notes that the American negotiators asked Chinese officials to commit themselves to the volume of purchases of agricultural products in advance before proceeding to conclude a deal. Meanwhile, China wants its purchases of agricultural products to be proportional to the amount of canceled US tariffs. However, White House adviser Larry Kudlow told Bloomberg that he could not confirm earlier reports of tariff deferrals.

The focus is also on the two-day Fed meeting on monetary policy. It is expected that following the meeting, the US central bank will decide to leave interest rates unchanged.

Market participants also analyzed data on the US labor market. According to a report by the Ministry of Labor, labor productivity outside the agricultural sector, which measures hourly productivity per employee, fell by 0.2% year on year in the 3rd quarter, which was the biggest drop since the fourth quarter of 2015. Earlier it was reported that productivity for the third quarter decreased by 0.3%. Productivity rose 2.5% in the second quarter. Economists had expected performance for the 3rd quarter to be revised to -0.1%. At the same time, labor costs per unit of output, the price of labor per unit of output increased by 2.5% in the third quarter. It was previously reported that they grew by 3.6%.

Most DOW components recorded a decrease (16 out of 30). Outsiders were shares of 3M Company (MMM; -1.29%). The biggest gainers were Chevron Corporation (CVX; + 0.63%).

Most S&P sectors completed trading in the red. The largest decline was shown by the conglomerate sector (-0.3%). The health sector grew the most (+ 0.4%).

At the time of closing:

Dow 27,882.27  -27.33 -0.10%

S&P 500 3,132.50 -3.46 -0.11%

Nasdaq 100 8,616.18 -5.64 -0.07%

Analysts at Wells Fargo note the data released today showed that the NFIB Small Business Optimism Index climbed to 104.7 in November, signaling that small business owners feel better about the overall economy and are looking to expand and hire more workers.

• “Small business optimism rose solidly in November, with the overall index rising 2.3 points to 104.7, just slightly below its cycle high. Seven of the 10 index components rose during the month, with earnings trends jumping 10 points. Business owners appear to have a clearer view of the business environment. The NFIB Uncertainty Index fell six points in November, following a four-point drop the prior month, and is now at its lowest level since May 2018. The drop in uncertainty may reflect some rising optimism that trade deals will be reached with Mexico and China.
• The improvement in small business confidence likely reflects stronger sales in recent months, as well as some drawdown in inventories. A net 12% of business owners reported higher sales in the past three months, up eight points from the prior report and the highest level since May 2018. The strength in sales has helped curb inventories.
• The employment components of the NFIB survey all came in exceptionally strong.
• The strength in the employment components is becoming increasingly evident in the compensation data. Average hourly earnings for production and nonsupervisory workers have a fairly tight correlation with the share of businesses citing the quality of labor as their number one challenge.”

Analysts at Rabobank note that, while the coincident and lagging indicators show that the U.S. economy is still going strong, the leading indicators suggest that the future looks less bright.

• "The un-inversion of the yield curve, strong employment growth, solid growth in consumer spending, the low unemployment rate and a possible US-China trade deal do not change our forecast that the US economy is heading for a recession next year.
• The arguments put forward to dispel our forecast of a recession reveal the absence of a coherent forecasting framework.
• Our forecasting framework points to a recession in the second half of 2020. This will also force the Fed to slash rates back to zero before the end of 2020."

Analysts at TD Securities note that China’s November aggregate financing and new loans came in above expectations, rising to CNY 1,750bn and CNY 1390bn, respectively, from CNY 618bn and CNY 661bn, previously.

• “M2 money supply increased by a smaller than expected 8.2% y/y, from 8.4% previously. The data are encouraging and suggest some opening of the credit taps in November. Indeed following October's disappointment when loans dropped to their lowest level in almost two years, the bounce back will come as a relief. However, given weakness in the manufacturing sector and sharp decline in industrial profits, demand for loans is unlikely to pick up significantly in the months ahead despite incremental policy easing and efforts by the authorities to push lenders to increase loans.”

Analysts at TD Securities note that, while the headlines scream of rising inflation in China, the underlying inflation picture is extremely subdued.

• “China November CPI rose 4.5% y/y (mkt 4.3%, TD 4.4%), its highest reading since January 2012. The main contributor continues to be food (19.1% y/y) and in particular pork prices (110.2% y/y).
• The rise in pork also helped to push other meat prices higher, with for example beef prices up 22.2% y/y. However, stripping out food, CPI rose a benign 1.0%, with some areas in deflation including durable goods, transport, auto fuels and communication equipment. This was also reflected in PPI which fell 1.4% y/y.
• As such the CPI data will have little bearing on monetary policy, with PBoC likely to continue in its incremental easing path. There may also be some good news in terms of pork prices, with some moderation likely in the month ahead.”

U.S. stock-index futures rose slightly on Tuesday, helped by WSJ report that U.S. and China are planning delay of December 15 tariffs.

Global Stocks:

• U.S. President Trump has not made a final decision on this

(company / ticker / price / change ($/%) / volume)

McDonald's (MCD) resumed with an Outperform at RBC Capital Mkts; target $218

Netflix (NFLX) downgraded to Underperform at Needham

The revised data from the U.S. Labour Department showed on Tuesday that nonfarm business sector labor productivity in the United States decreased 0.2 percent q-o-q in the third quarter of 2019, as output advanced 2.3 percent q-o-q and hours worked rose 2.5 percent q-o-q (seasonally adjusted). That was above initial estimate of a decline of 0.3 percent q-o-q but below economists’ forecast for a drop of 0.1 percent q-o-q, and marked the first decrease in productivity since the fourth quarter of 2015. In the second quarter, labor productivity climbed 2.5 percent q-o-q.

In y-o-y terms, the labor productivity rose 1.5 percent in the third quarter, reflecting a 2.3-percent jump in output and a 0.9-percent advance in hours worked.

Meanwhile, unit labor costs in the nonfarm business sector in the third quarter rose 2.5 percent q-o-q compared to an initial estimate of a 3.6 percent q-o-q advance and a 2.4 percent q-o-q gain in the prior quarter.

Economists had forecast a 3.3 percent q-o-q boost in third-quarter unit labor costs.

Unit labor costs quarterly increase reflected a 2.3-percent q-o-q increase in compensation per hour and a 0.2-percent q-o-q fall in productivity.

Compared to the corresponding period of 2018, unit labor costs rose 2.2 percent.

• U.S. needs proper deal with China
• U.S. is in a better negotiating position as time goes by
• There have been good discussions with China on intellectual property
• "Phase One" deal will be largely about agriculture and trade

Analysts at TD Securities note that Germany's ZEW survey for December was better than expected, particularly expectations which rose from -2.1 to +10.7 (mkt +0.3).

• “The current situation rose from -24.7 to -19.9 (mkt -22.0). The ZEW said that there was a hope that German exports and private consumption will develop better than previously thought, based on a higher trade balance for October, reasonably robust EU Q3 growth, and a stable German labour market. But also added that the unfavourable IP data for October shows that the economy is still quite fragile.”

Robert Carnell, the Chief Economist and Head of Research at ING, notes that inflation in China in November rose further to 4.5% YoY, but there are clear signs that it is peaking.

• "Newswires running headlines like "China November inflation highest since 2012" entirely miss the point. Inflation in China has been driven higher by rising pork and consequently other meat prices. This is fallout from the African Swine Fever (AFS) epidemic that has killed half of the hog population in China. 
• In November, pork prices rose 3.8% MoM. But this was way down from the 20.1% increase in October, the 19.7% MoM increase in September, and the 23.1% increase in August. In fact, it was the lowest increase since June (3.6%MoM). 
• The reasons for this moderation are various but include: 

1. Higher pork imports, including from the US alleviating supply shortages
2. Mobilization of the strategic pork reserves (frozen pork warehoused for emergencies)
3. A decrease in new reports of African Swine Fever (AFS) and rebuild of stocks."

Analysts at Standard Chartered are expecting China to set a growth target of around 6% for 2020.

• “The recent Politburo meeting confirmed that the government is unlikely to drop the target of doubling 2010 GDP by 2020, a year before the 100th anniversary of the Communist Party. This requires a minimum growth of 6.1-6.2% in 2019-20, according to our and official calculations. While GDP growth rates up to 2018 are likely to be revised based on the latest economic census, we believe the upward data revisions will be marginal and insufficient to meaningfully lower the 2020 growth target.
• The government has pledged counter-cyclical policies to offset the headwinds. We estimate that higher US tariffs will reduce China’s 2020 growth by 0.3ppt with the achievement of a ‘phase one’ trade deal and by 0.6ppt in a ‘worse-case’ scenario.
• The broadly defined budget deficit is likely to remain at around 6.5% of GDP, with the mix of fiscal stimulus shifting from tax cuts to spending for a higher multiplier effect. The People’s Bank of China (PBoC) may keep credit growth slightly above nominal GDP growth, cutting the reserve requirement ratio (RRR) and de facto policy rates.
• The switch to re-leveraging in 2019 from deleveraging in 2018 may turn out to be a key support for 2020 growth. In addition, we expect infrastructure investment to edge higher on fiscal stimulus; the industrial inventory cycle to bottom out; car sales to be less of a drag; and last but not least, a positive leap-year effect.”

Analysts at TD Securities note that the UK GDP came in a bit weaker than expected at flat m/m in October, although it was a 'strong' zero at 0.040%.

• “The primary source of downside surprise seems to be the volatile construction sector, where activity declined -2.3% m/m (mkt -0.2%).
• On the other hand, IP was roughly in line with consensus at 0.1% m/m, and the index of services was a touch stronger at 0.2% m/m. So overall this still leaves Q4 GDP tracking pretty close to the BoE's 0.2% q/q estimate, and the less volatile sectors of the economy didn't look too bad.”

Analysts at Danske Bank note that the Chinese CPI out this morning showed a reading of 4.5% (YoY, 4.3% expected, 3.8% in October).

• “The Chinese CPI has been heavily affected by pork prices throughout 2019 due to the outbreak of swine fever and higher food prices contributed 3.72pp to the headline inflation.
• Core inflation came in at 1.4%, which was the 15th straight month below 2%. There are signs though, that the effect from higher pork prices is slowing, which could lead to the CPI topping out at the beginning of next year.”

The National Federation of Independent Business (NFIB) reported on Tuesday the Small Business Optimism Index increased by 2.3 points to 104.7 in November, following a 0.6-point advance in October. That represented the largest m-o-m gain since May 2018.

According to the report, the November climb in the headline index was buoyed by advances in seven of the 10 components, led by a 10-point increase in earnings, supported by quarter profit improvements. Meanwhile, owners reporting it is a good time to expand rose by 6 points and those expecting better business conditions increased by 3 points.

“Owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages,“ noted NFIB Chief Economist William Dunkelberg. “Owners are most closely focused on issues that directly impact their business, including the real, significant tax relief they were given two years ago, and they’re anxious to see that relief made permanent.”

China's private companies have defaulted at a record rate this year and could face similar pressures in 2020, rating agency Fitch said, highlighting significant corporate debt risks as economic growth slows to near 30-year lows.

A record high of 4.9% of China's privately-owned issuers defaulted on onshore bond payments in the first 11 months of 2019, Fitch said in a statement, up from 0.6% of private issuers in 2014.

Privately-owned enterprises (POEs) accounted for more than 80% of bond defaults, whether counting by the number of issuers or the principal amount of defaulted bonds, Fitch said.

Jenny Huang, director of China corporate research at Fitch Ratings, said that she expects the POE default rate "to stay at around this record level in 2020."

China's mounting defaults reflect the struggles of private firms as a slowing economy and high refinancing pressures make it harder for companies to repay debts and take out new loans.

Weaker issuers will face difficult conditions due to Beijing's "selective" efforts to support only more-qualified small and private firms, Huang said.

James Rossiter , head of global macro strategy at TD Securities, points out that the UK's Thursday election has been called the "most important election for a generation" as it could decide the path for Brexit over 2020 and beyond.

“Our base case is for the Conservatives to retain power with an enhanced majority of at least 36 votes, enabling them to pass legislation by a comfortable margin – including the Brexit Withdrawal Agreement – without having to depend on support from other parties or rebellious factions within the Conservatives. 

FX: With GBP up sharply in recent weeks, we think our base case is fully priced - or very close to it. Confirmation of a solid Tory majority may see a knee-jerk move higher in cable, but is vulnerable to "sell the fact" profit taking and a shakeout of stale positions once the elections result is known. As such, we would not chase cable higher in the immediate aftermath even if sterling may be a buy on dips further out.”

According to the report from Leibniz Centre for European Economic Research (ZEW), indicator of economic sentiment for Germany has again risen sharply in December 2019, now being valued at 10.7 points. This corresponds to a 12.8-point increase compared to the previous month and a 33.5-point increase compared to the October reading. This is the indicator’s highest value since February 2018. The assessment of the economic situation in Germany has also improved in the current December survey, with the  corresponding indicator climbing to a level of -19.9 points, 4.8 points higher than in November.

“At first glance, the renewed substantial increase of the ZEW Indicator of Economic Sentiment may seem surprising. It rests on the hope that German exports and private consumption will develop better than previously thought. This hope results from a higher than expected German foreign trade surplus in October, alongside relatively robust economic growth in the EU in the third quarter and a stable German labour market. The rather unfavourable figures for industrial production and incoming orders for October, however, show that the economy is still quite fragile,” comments ZEW President Professor Achim Wambach.

Financial market experts’ sentiment concerning the economic development of the eurozone has also considerably improved once again, bringing the indicator to a current level of 11.2 points for December, 12.2 points higher than in the previous month. The indicator for the current economic situation in the eurozone also rose significantly again by 4.9 points, climbing to a current reading of -14.7 points.

According to the report from Office for National Statistics, monthly gross domestic product (GDP) growth was 0.0% in October 2019, with growth in services and production offset by a notable fall in construction, which had its lowest level of output since January 2018. Economists had expected a 0.1% increase.

Rolling three-month GDP showed no growth in October 2019 after growth of 0.3% in Quarter 3 2019. The services sector was the only positive contributor to gross domestic product (GDP) growth in the three months to October 2019, growing by 0.2%. Output in both the production and construction sectors contracted, by 0.7% and 0.3%, respectively. The weakness seen in construction was predominantly driven by a fall of 2.3% in October.

Commenting on today’s GDP figures for the 3 months to October, an ONS Spokesperson said: “The UK economy saw no growth in the latest three months. There were increases across the services sector, offset by falls in manufacturing with factories continuing the weak performance seen since April. Construction also declined across the last three months with a notable drop in house building and infrastructure in October.”

China shouldn’t attach too much significance to the 6% growth rate, a government economist said, as debate heats up over economic targets for next year.

“6% is not a special watershed,” said Wang Yiming, a deputy director at the Development Research Center of the State Council. 

“The growth rate, may it be higher or lower, is not the main problem. The key is the quality and efficiency of growth,” Wang said.

At the same time, he argued that it is still important to maintain a mid to high growth rate. Low gross domestic product expansion will pose challenges to employment and controlling the overall leverage ratio, and will leave little room for structural adjustments, he warned.

China’s economy expanded at the slowest pace of 6% in decades in the third quarter quarter, and is poised to slow further as domestic demand remains weak and external uncertainties linger. Observers including Goldman Sachs Group Inc expect policy makers to set the growth target at “around 6%” for next year.

Credit Suisse discusses USD/JPY technical outlook and sees a scope for a tactical top formation on a daily close below 108.47/24. 

"Below key 55-day average and price support at 108.47/24 would mark a top USDJPY remains capped by its falling 13- and 200-day averages as well as key price and retracement resistance at 109.21/23, and the immediate spotlight remains on key flagged support, starting at the 55-day average at 108.47 and stretching down to the 108.28/24 recent lows. A close below 108.24 would suggest a more significant top has been established to mark a more meaningful turn lower with support seen next at the 107.88 November low, with the 38.2% retracement of the entire rally from August at 107.72. Whilst we would look for this to hold at first, a break can see support next at 107.10/03. Above 109.00 can ease the immediate pressure off 108.47/24, with a break above 109.21/23 still needed to suggest the worst of the sell-off is over, clearing the way for a move back to 109.39, then a retest of the recent high and downtrend from late 2019 at 109.70/80," CS adds.

Data from China Association of Automobile Manufacturers (CAAM) showed that auto sales in China fell for a 17th consecutive month in November, with the number of new energy vehicles (NEVs) sold contracting for a fifth month in a row.

Total auto sales in the world’s biggest auto market fell 3.6% from the same month a year earlier. That follows a drop of 4% in October and 5.2% in September. Car sales in the country contracted last year for the first time since the 1990s against a backdrop of slowing economic growth and a crippling Sino-U.S. trade war.

“The China 5-6 emission standard change is the biggest reason for this year’s sales plunge,” said Chen Shihua, deputy secretary general at CAAM, referring to how local governments had accelerated changes to emission standards this year.

He added that overall car production levels were now returning to normal and carmakers had boosted their product line-ups in the past few months.

In November, sales of NEVs fell 43.7%, CAAM said, following a 45.6% drop in October. NEV sales had jumped almost 62% last year even as the broader auto market contracted.

According to Karen Jones, analyst at Commerzbank, EUR/USD may have failed on its initial test of the 5 month downtrend at 1.1111, however the sell-off has so far held over the 20 day ma at 1.1046.

“It has not taken any support of note out and as a consequence attention therefore remains on the topside and the down trend guards the 1.1180 October high and the 1.1242 channel resistance and eventually the 1.1358 200 week ma. This latter level remains the critical break point on the topside from a medium term perspective. Key nearby support is the recent low at 1.0981. Failure at 1.0980 targets the 1.0943 78.6% retracement. This is seen as the last defence for the 1.0879 October low and the 1.0814 Fibo retracement, and if seen, we will look for signs of reversal from here.”

National Institute of Statistics and Economic Studies (INSEE) said that in October 2019 output increased in the manufacturing industry (+0.5%, after +0.8%), as well as in the whole industry (+0.4%, after +0.4%). Economists had expected a 0.2% increase in the whole industry.

Over the last three months, output decreased in manufacturing industry (−0.8%), and more strongly in the whole industry (−1.2%). Over the last three months, output slumped in the manufacture of coke and refined petroleum products (−10.9%). It declined markedly in mining and quarrying, energy, water supply (−3.3%) and in the manufacture of machinery and equipment goods (−1.9%) and more moderately in “other manufacturing” (−0.3%), in the manufacture of transport equipment (−0.8%) and in the manufacture of food products and beverages (−0.5%).

In the manufacturing industry, output of the last three months was lower than the same months of 2018 (−0.3%), as well as in the whole industry (−0.4%). Over a year, output slumped strongly in the manufacture of coke and refined petroleum products (−21.1%). It dipped in mining and quarrying, energy, water supply (−1.3%), in the manufacture of machinery and equipment goods (−1.1%), in the manufacture of food products and beverages (−0.6%) and it was virtually stable in the manufacture of transport equipment (−0.1%). Conversely, output increased slightly in “other manufacturing” (+0.5%).

Danske Bank analysts point out that compared to yesterday we have a busier day ahead of us with lots of interesting data releases including the UK GDP estimate for October.

“Globally, we have the monthly UK GDP estimate for October at 10:30 CET. The UK PMIs suggest that underlying growth remains weak, driven by slower global growth and high Brexit uncertainty. At 11:00 CET, German ZEW expectations are due out and they are expected to show a small rebound. At 12:00 CET, US small business optimism from NFIB is due for release. Note that YouGov is set to publish a new seat projection for the upcoming UK election tonight (23:00 CET). The last prediction released a couple of weeks ago showed a solid majority for the Conservatives and given that it was the only projection that correctly projected Theresa May would lose her absolute majority in 2017, investors and Brexit watchers will analyse the results thoroughly.”

China's consumer inflation climbed to nearly eight-year peaks in November as pork prices doubled, but factory-gate prices remained in the red, adding to uncertainty over whether the manufacturing sector is bottoming out as trade risks persist.

Consumer prices in November rose 4.5% on year, the fastest pace seen since January 2012, driven mostly by a surge in pork prices as African Swine Fever ravaged the country's hog herds, National Bureau of Statistics (NBS) data showed on Tuesday. That topped analysts' expectations of 4.2% and October's 3.8% rise.

However, core inflation - which excludes food and energy prices - stayed largely subdued.

In contrast, the producer price index (PPI), seen as a key indicator of corporate profitability, fell 1.4% on year, falling for the fifth month in a row. That compared with a 1.5% drop forecast and 1.6% fall in October.

Price declines for manufactured goods suggest demand remains weak, despite hints of improvement in recent factory surveys. Weak prices were mainly seen in oil and gas extraction and chemical fiber manufacturing sectors.

According to the report from Insee, in Q3 2019, net payroll job creation reached 42,300, that is +0.2% as in the previous quarter. Payroll employment increased by 33,700 in the private sector, an increase comparable to the previous quarter (+43,500 jobs); it increased slightly again in the public sector (+8,600 jobs after +10,600). Year on year, it rose by 258,600 (+1.0%): +231,000 jobs in the private sector and +27,700 jobs in the public service.

In Q3 2019, payroll employment remains almost stable in industry: +1,500 jobs after +1,400 the previous quarter. Over a year it increased by 17,400 jobs (that is +0.6%).

Payroll employment in construction continues to grow strongly: +9,000 jobs after +7,600 jobs (that is +0.6% after +0.5%). Year on year, employment in construction increased by 42,200 jobs (that is +3.1%).

In Q3 2019, payroll employment increased by 23,500 in market services, that is +0.2%, after +0.3% in the previous quarter. Year on year, the market services sector as a whole provided for the large majority of net job creation (+167,500 jobs).

Temporary employment decreased marginally again: –2,900 jobs in Q3 2019, i.e. –0.4% as in Q2 2019. Over a year, it declined by 8,000 jobs, that is −1.0%. 

EUR/USD

Resistance levels (open interest**, contracts)

$1.1196 (2719)

$1.1172 (3770)

$1.1157 (843)

Price at time of writing this review: $1.1066

Support levels (open interest**, contracts):

$1.1030 (5331)

$1.0989 (3185)

$1.0944 (2730)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date January, 3 is 48509 contracts (according to data from December, 9) with the maximum number of contracts with strike price $1,1200 (5360);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3307 (367)

$1.3275 (385)

$1.3251 (339)

Price at time of writing this review: $1.3155

Support levels (open interest**, contracts):

$1.3042 (498)

$1.3014 (931)

$1.2983 (84)

Comments:

- Overall open interest on the CALL options with the expiration date January, 3 is 20783 contracts, with the maximum number of contracts with strike price $1,3500 (4944);

- Overall open interest on the PUT options with the expiration date January, 3 is 17393 contracts, with the maximum number of contracts with strike price $1,2500 (2388);

- The ratio of PUT/CALL was 0.84 versus 0.80 from the previous trading day according to data from December, 9

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.