Market Brief: Bulls on Parade Following “Phase One” US-China Trade Deal
Matt Weller, CFA, CMT October 11, 2019 4:07 PM
- Risk assets exploded higher today as the US and China signed a “Phase One” trade deal, with President Trump stating that the deal covers intellectual property, financial services, and agricultural purchases. Technology transfers are reportedly up for discussion in Phase Two when US official visit China next month. As of writing, there’s no clarity on whether scheduled tariffs on Chinese goods will be enacted as scheduled.
- FX: The British pound surged against all of its major rivals for the second straight day as the EU and UK agreed to “intensify discussions over the coming days” ahead of next week’s highly-anticipated EU Summit. The safe haven Japanese yen was the weakest major currency in generally optimistic trade, taking USD/JPY to its highest level since August 1.
- The loonie was the day’s second-strongest major currency after a much stronger-than-expected jobs report, which showed 53.7k new jobs created and the unemployment rate dropping to 5.5%, within a tick of the multi-decade low set earlier this year. Traders will no doubt pare back their expectations for a BOC interest rate cut later this month after such a strong report.
- US data: The UofM Consumer Sentiment index recovered to 96.0 (vs. 92.0 eyed), though longer-term inflation expectations nonetheless fell to a record low. Separately, the Federal Reserve announced $60B in monthly purchases of short-term Treasury bills.
- Commodities: Oil gained more than 2% on the day (see the key events and themes we’ll be watching next week), while gold shed roughly -1%.
- US indices closed sharply higher on trade deal optimism (growing odds of a Brexit deal didn’t hurt), with all major bourses rising roughly 1.5% on the day.
- All eleven sectors rose on the day led by Industrials (XLI) and Materials (XLB). Utilities (XLU) rose the least.
- Stocks on the move:
- Apple (AAPL) rose 3% on the day to hit a fresh record high as analysts at Wedbush raised their price target for the stock to $265.
- Bed Bath and Beyond (BBBY) tacked on another 8% today after appointing a former Target executive as its new CEO.
- Check out the major macroeconomic events and trends we’ll be watching in the week to come!
*No major economic data is scheduled for release during Monday’s Asian session (though traders should keep an eye out for Chinese trade balance figures (no set release schedule) *
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.