Stocks gained and Treasury yields jumped as investors kept a careful eye on the latest trade developments amid high-level meetings between American and Chinese officials. The pound surged on talk of a Brexit deal. Banks and automakers led the S&P 500 Index higher, though there were plenty of gyrations along the way after an overnight session that saw futures whipsawed by headlines giving conflicting signs of progress on the negotiations. The US Dollar fell, brushing off a weak inflation reading. Ten-year Treasury yields rose past 1.65% as bonds rallied globally. China’s Yuan climbed the most in a month.
Among the latest developments on trade:
- Both China and the U.S. signalled cautious optimism in securing a partial deal for a temporary truce on tariffs
- The discussions extended into the afternoon Thursday
- President Donald Trump said in a Twitter post that he plans to meet with Vice Premier Liu He on Friday, adding “They want to make a deal, but do I?”
In other news the U.K. and the European Union took a step closer to agreeing the terms of Brexit after a positive meeting between the British and Irish leaders identified a “pathway” to a potential deal. The Pound jumped by the most in seven months. U.K. Prime Minister Boris Johnson hosted Irish Premier Leo Varadkar for two and a half hours of private talks at a country house in North Western England before taking a walk around the grounds together. Varadkar said he believed a deal is possible before the end of the month, and urged negotiators to resume talks in Brussels. After the meeting, the two leaders issued a joint statement saying they had identified the potential for a route to an agreement during the course of a “detailed and constructive discussion.”
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Markets have grown jittery against a backdrop of deteriorating economic data and fresh tensions between the U.S. and China in recent days, as they prepare for the first face-to-face talks between senior officials since July. Investor nerves were on full display Thursday as a series of headlines roiled markets, with traders attempting to digest reports on everything from the duration of the talks to the potential currency pact.
The S&P 500 Index rose 0.6% to close at 2938.
The Stoxx Europe 600 Index rose 0.7%.
The MSCI Emerging Market Index increased 0.5%.
The Nikkei-225 Stock Average added 1.15%, to close at 21,800
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index sank 0.4%.
The Euro gained 0.3% to $1.1006.
The British Pound advanced 2% to $1.2447.
The offshore Yuan increased 0.4% to 7.1108 per dollar.
The Japanese Yen weakened 0.4% to 107.95 per dollar.
The yield on 10-year Treasuries rose eight basis points to 1.66%.
Germany’s 10-year yield rose eight basis points to -0.47%.
Britain’s 10-year yield jumped 13 basis points to 0.58%.
West Texas Intermediate crude gained 2.1% to $53.69 a barrel.
Gold fell 0.8% to $1,493.83 an ounce.
This morning on the Economic Front we already had the release of German CPI which came in at 0.00% as expected. At 10.30 am we have a speech by ECB President Dragi, followed by De Guindos at 11.30 am. Next we have the U.S. Import/Export Index at 1.30 pm. At the same time we have the Canadian Unemployment Rate. This is followed at 3.00 pm by the University of Michigan Consumer Sentiment Index. Finally, we have speeches from Fed Members Rosengren and Kaplan at 6.15 pm and 8.00 pm respectively.
December S&P 500
I am still flat the S&P as the market never came close to my buy level yesterday as expectations grow for a Trade deal with China. The big question is how much is now priced into the market with the S&P now trading at 2954 as I go to press. As we get closer to any announcement on the outcome of the talks the market will probably rally further and I will now raise my S&P sell level to 2965/2980 with a 2989 stop. I will also raise my buy level to 2895/2910 with a 2883 wider stop.
I am still flat the Euro as the market broke and closed over 1.10. The Euro has strong resistance from 1.1090/1.1140 and I will be a small seller on any rally to this area with a 1.1185 stop. Meanwhile as we wait for the outcome of the Trade talks I will leave my 1.0900/1.0940 buy level unchanged with the same 1.0865 stop.
December Dollar Index
I am still flat the Dollar and I will now lower my sell level to 98.75/99.25 with a lower 99.55 stop. I still do not want to be long the Dollar at this time.
Thankfully we have had no sell levels in the DAX with the market finally breaking and closing over the key 12080/12150 resistance area. The 12100 level which was previous resistance should offer strong support and today I will raise my buy level to 12060/12120 with a 11995 stop.
I am still flat the FTSE which is struggling to move higher which is no surprise given the 2% rally in the Pound yesterday. Today I will raise my buy level to 7040/7090 with a 6995 stop.
Dow Rolling Contract
The Dow has now rallied 600 points from where it was early yesterday morning as expectations grow of a trade deal with China. The Dow has strong resistance from 26840/26990 and I will be a small seller on any further rally to this area with a 27080 stop. Meanwhile I will now raise my buy level to 26150/26300 with a 26070 stop.
I am still flat the NASDAQ with the market never coming close to my buy level yesterday as we trade higher at 7810. The NASDAQ has strong resistance from 7860/7920 and I will be a seller on any further rally to this area with a 7955 stop. I still do not want to be long the NASDAQ at this time.
The BUND got hit hard yesterday falling over 200 points from Wednesday’s 174.74 rebound high. Given the extent of this sell-off I am going to stay flat the Bund until Monday’s Commentary as I want to see if there is much follow through to yesterday’s aggressive move lower.
Gold Rolling Contract
Gold traded lower to my 1492 buy level. As I want to bank some points for yesterday’s session I have now cut this position here at 1498 and I am now flat.
Silver Rolling Contract
Silver also traded lower to my 17.50 buy level. I am still long and I will now lower my T/P level on this position to 17.70 with a now higher 17.10 stop.