Treasuries Show Significant Turnaround After Seeing Initial Weakness

Trading 03 déc 2018 Commentaire »

After initially moving to the downside, treasuries showed a significant turnaround over the course of the trading day on Monday.

Bond prices climbed off their worst levels of the day and firmly into positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.1 basis points to 2.992 percent after reaching a high of 3.041 percent.

With the downturn as the day progressed, the ten-year yield closed below 3 percent for the first time since mid-September.

Treasuries initially came under pressure in reaction to the highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping over the weekend.

At the meeting, Trump and Xi agreed to a 90-day truce in the escalating trade war between the world's two largest economies as they work to reach a long-term trade deal.

A White House statement said Trump agreed not to raise the tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent on January 1st as planned.

In return, China agreed to purchase a "not yet agreed upon, but very substantial, amount" of agricultural, energy, industrial, and other product from the U.S.

The White House said the U.S. and China will use the next 90 days to attempt to reach an agreement on issues such as forced technology transfer, intellectual property protection, and non-tariff barriers.

If the two countries are not able to reach an agreement by the end of the time period, the 10 percent tariffs on Chinese goods will be raised to 25 percent.

In remarks to reporters aboard Air Force One, Trump called the agreement with Xi an "incredible deal," claiming it will have an "incredibly positive impact" on "every type of product."

Trump also said China will be "opening up" and "getting rid of tariffs," stating in a subsequent post on Twitter that China has agreed to reduce and remove tariffs on cars coming into the country from the U.S.

The subsequent rebound by treasuries may have reflected skepticism about whether the U.S. and China will be able to reach a long-term agreement.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted Trump ripped up an earlier trade deal with China negotiated by Commerce Secretary Wilbur Ross.

"We suspect that since he negotiated this deal himself, Trump will be much more reluctant to torpedo it when his own personal reputation is on the line," Ashworth said.

He added, "Nevertheless, his own administration includes plenty of China hawks who are pushing the protectionist agenda, so we suspect China will have to offer a little more than the minor concessions that South Korea, Mexico and Canada agreed to reach trade deals with the U.S."

On the U.S. economic front, the Institute for Supply Management released a report showing an unexpected acceleration in the pace of growth in manufacturing activity in the month of November.

The ISM said its purchasing managers index climbed to 59.3 in November after falling to 57.7 in October, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 57.5.

Meanwhile, a separate report from the Commerce Department showed construction spending unexpectedly edged lower in October.

Trading activity on Tuesday may be somewhat subdued, with a lack of major U.S. economic data likely to keep some traders on the sidelines.


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Oil Futures End Sharply Higher

Trading 03 déc 2018 Commentaire »

Crude oil prices rose sharply on Monday amid easing trade tensions after the U.S. and China agreed to a 90-day truce on their escalating trade war during the meeting of the presidents of the two countries in Argentina over the weekend.

While the U.S. President promised to suspend new tariffs on Chinese products after January 1, China said it will by more of agricultural products, energy and industrial goods from the U.S., in order to reduce the trade gap between the two countries.

The temporary truce has eased worries about global economic growth and concerns about demand slowdown. Meanwhile, the traders are looking ahead to the OPEC meets this week. It is expected that the oil producers will agree on a reduction in output to prevent a supply glut in the market.

Meanwhile, Saudi Arabia and Russia said they have agreed to reduce oil production, although no final decision was taken on the volume of reduction.

The Canadian province of Albert has announced that there would be an industry-wide 8.7% cut in oil production to deal with the supply gut.

In a significant move today, Qatar, the tiny Persian Gulf state, announced that it would pull out of Saudi-dominated OPEC in January and focus on its gas industry.

Crude oil futures for January ended up $2.02, or about 4%, at $52.95 a barrel.

On Friday, crude oil futures ended down $0.52, or 1%, at $50.93 a barrel, after declining to a low of $49.65 intraday.

According to data released by the U.S. Energy Information Administration, U.S. crude stockpiles increased for a tenth straight week, rising much more than expected in the week ended November 24th. In eight out of 10 weeks, the increase was much more than the expected level.


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Dollar Trading Mixed After G20 Agreement

Trading 03 déc 2018 Commentaire »

The dollar is turning in a mixed performance against its major rivals Monday afternoon. President Trump and Chinese President Xi Jinping agreed to a 90-day truce in the escalating trade war between the two countries over the weekend. The news sparked a rally in global equities, but has had less of an impact on the currency market.

A White House statement said Trump agreed not to raise the tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent on January 1st as planned.

In return, China agreed to purchase a "not yet agreed upon, but very substantial, amount" of agricultural, energy, industrial, and other product from the U.S.

The White House said the U.S. and China will use the next 90 days to attempt to reach an agreement on issues such as forced technology transfer, intellectual property protection, and non-tariff barriers.

Manufacturing activity in the U.S. unexpectedly grew at a faster rate in the month of November, according to a report released by the Institute for Supply Management on Monday.

The ISM said its purchasing managers index climbed to 59.3 in November after falling to 57.7 in October, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 57.5.

With a drop in spending on private construction more than offsetting an increase in spending on public construction, the Commerce Department released a report on Monday showing an unexpected dip in U.S. construction spending in the month of October.

The Commerce Department said construction spending edged down by 0.1 percent to an annual rate of $1.309 trillion in October after slipping by 0.1 percent to a downwardly revised rate of $1.311 trillion in September.

The modest decrease came as surprise to economists, who had expected construction spending to rise by 0.3 percent compared to the nearly unchanged reading originally reported for the previous month.

The dollar dropped to a low of $1.1379 against the Euro Monday, but has since bounced back to around $1.1345.

Eurozone's manufacturing growth slowed less-than-expected in November, amid marginal growth in output and weak business confidence, and was the lowest since August 2016, final data from IHS Markit showed on Monday.

The manufacturing purchasing managers' index fell to 51.8 from 52 in October. The flash reading was 51.5.

The buck climbed to a high of $1.2698 against the pound sterling Monday, but has since eased back to around $1.2725.

UK manufacturing growth improved in November, but activity remained subdued amid a second consecutive month of decline in export orders, though domestic demand increased as Brexit worries prompted clients to stock up on supplies.

The CIPS manufacturing purchasing managers index rose to 53.1 from October's 27-month low of 51.1, survey data from IHS Markit showed on Monday. Economists had forecast a score of 51.7.

The greenback has risen to around Y113.650 against the Japanese Yen Monday afternoon, from an early low of Y113.374.

The manufacturing sector in Japan continued to expand in November, albeit at a slower pace, the latest survey from Nikkei revealed with a manufacturing PMI score of 52.2. That's down from 52.9 in October, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

Capital spending in Japan was up 4.5 percent on quarter in the third quarter of 2018, the Ministry of Finance said on Monday - shy of expectations for an increase of 8.5 percent and down from 12.8 percent in the three months prior. Excluding software, capex added just 2.5 percent - well shy of forecasts for 10.7 percent and down from 14.0 percent in Q2.


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Gold Futures Settle At Over 1-month High

Trading 03 déc 2018 Commentaire »

Gold prices climbed to over three-week high on Monday, lifted by a weak U.S. dollar after the U.S. and China agreed to a 90-day truce on their escalating trade war during a weekend meeting between the presidents of the two countries in Argentina.

The U.S. President Donald Trump agreed to hold off on his threat to slap 25% tariffs on US$200 billion worth of Chinese goods from January 1. China, for its part, agreed to by very substantial amount of agricultural, energy, industrial and other products from the U.S. to narrow its trade gap with the U.S.

Trump said on Monday that China will be "opening up" and "getting rid of tariffs." He wrote on Twitter that China has agreed to reducer and remove tariffs on cars coming into the country from the U.S.

The dollar index was hovering around 96.90 a little while ago, losing about 0.3%.

The dollar's weakness was also due to comments from Federal Reserve Chair Jerome Powell last week that interest rates are currently just below neutral. His comments have raised expectations that there would be a pause in rate hikes sometime soon.

Gold futures for February ended up $13.60, or 1.1%, at $1,239.60 an ounce, the highest settlement in more than a month for a most active contract.

On Friday, gold futures for February settled down $4.40, or 0.36%, at $1,226.00 an ounce.

Silver futures for March settled at $14.499 an ounce, gaining about 2%.

Copper futures for March ended up by about 0.6%, at $2.8095 per pound.

In U.S. economic news today, a report from the Institute of Supply Management showed an unexpected acceleration in the pace of growth in manufacturing activity in the month of November.

The ISM said its purchasing managers index climbed to 59.3 in November after falling to 57.7 in October, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 57.5.

Meanwhile, a separate report from the Commerce Department showed construction spending unexpectedly edged lower in October.


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U.S. Construction Spending Unexpectedly Edges Lower In October

Trading 03 déc 2018 Commentaire »

With a drop in spending on private construction more than offsetting an increase in spending on public construction, the Commerce Department released a report on Monday showing an unexpected dip in U.S. construction spending in the month of October.

The Commerce Department said construction spending edged down by 0.1 percent to an annual rate of $1.309 trillion in October after slipping by 0.1 percent to a downwardly revised rate of $1.311 trillion in September.

The modest decrease came as surprise to economists, who had expected construction spending to rise by 0.3 percent compared to the nearly unchanged reading originally reported for the previous month.

The unexpected decrease in total construction spending came as spending on private construction fell by 0.4 percent to a rate of $998.7 billion in October after rising by 0.4 percent to a revised rate of $1.003 trillion in September.

Spending on residential construction slid by 0.5 percent to a rate of $539.0 billion, while spending on non-residential construction also dropped by 0.3 percent to a rate of $459.7 billion.

Meanwhile, the report said spending on public construction climbed by 0.8 percent to a rate of $310.2 billion in October after tumbling by 1.5 percent to a revised rate of $307.8 billion in September.

A 2.6 percent spike in spending on educational construction to a rate of $76.9 billion more than offset a 0.1 percent dip in spending on highway construction to a rate of $94.6 billion.

Despite the monthly decrease, the Commerce Department said total construction spending in October was up by 4.9 percent compared to the same month a year ago.


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U.S. Manufacturing Growth Unexpectedly Accelerates In November

Trading 03 déc 2018 Commentaire »

Manufacturing activity in the U.S. unexpectedly grew at a faster rate in the month of November, according to a report released by the Institute for Supply Management on Monday.

The ISM said its purchasing managers index climbed to 59.3 in November after falling to 57.7 in October, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 57.5.

The unexpected rebound by the headline index was partly due to strong demand, as the new orders index jumped to 62.1 in November from 57.4 in October.

"Customer demand expansion reversed two consecutive months of softening, with the index returning above 60 percent and recording its highest value since August," said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee.

The production index also edged up to 60.6 in November from 59.9 in October, while the employment index climbed to 58.4 from 56.8.

"Employment continued to expand, supporting production growth," Fiore said. "Respondents continued to note labor-market issues as a constraint to their suppliers' production capability."

Meanwhile, the report said the prices index tumbled to 60.7 in November from 71.6 in October, indicating a notable slowdown in the pace of price growth.

The prices index slumped to its lowest level since hitting 53.0 in June of 2017, although Fiore noted price increases continue across all industry sectors.

On Wednesday, the ISM is scheduled to release a separate report on activity in the service sector in the month of November.

The ISM's non-manufacturing index is expected to slip to 59.2 in November from 60.3 in October, indicating a slowdown in the pace of service sector growth.


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U.S. Manufacturing Index Unexpectedly Rises To 59.3 In November

Trading 03 déc 2018 Commentaire »

Manufacturing activity in the U.S. unexpectedly grew at a faster rate in the month of November, according to a report released by the Institute for Supply Management on Monday.

The ISM said its purchasing managers index climbed to 59.3 in November after falling to 57.7 in October, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to edge down to 57.5.


The material has been provided by InstaForex Company - www.instaforex.com

U.S. Construction Spending Unexpectedly Dips 0.1% In October

Trading 03 déc 2018 Commentaire »

With a drop in spending on private construction more than offsetting an increase in spending on public construction, the Commerce Department released a report on Monday showing an unexpected dip in U.S. construction spending in the month of October.

The Commerce Department said construction spending edged down by 0.1 percent to an annual rate of $1.309 trillion in October after slipping by 0.1 percent to a downwardly revised rate of $1.311 trillion in September.

The modest decrease came as surprise to economists, who had expected construction spending to rise by 0.3 percent compared to the nearly unchanged reading originally reported for the previous month.


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*U.S. Construction Spending Dips 0.1% In October

Trading 03 déc 2018 Commentaire »

U.S. Construction Spending Dips 0.1% In October


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*ISM U.S. Purchasing Managers Index Rises To 59.3 In November

Trading 03 déc 2018 Commentaire »

ISM U.S. Purchasing Managers Index Rises To 59.3 In November


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