Oil Futures Pare Some Gains, But Extends Winning Streak

Trading 07 jan 2019 Commentaire »

Crude oil futures settled higher on Monday, extending gains to a sixth successive session on reports Saudi Arabia is set to significantly reduce crude exports by the end of this month.

According to reports, Saudi Arabia is likely to cut crude exports by 800,000 barrels per day from November levels, to 7.1 million barrels a day by end January, aiming to lift crude oil prices back past the $80 a barrel mark in order to help cover a surge in government spending.

Meanwhile, according to a private data, inventory estimates at the Cushing storage hub dropped by 565,225 barrels during the first four days of January.

Also, traders expect the fresh round of talks between the U.S. and China that commenced in Beijing today would help the two countries resolve their trade disputes before the expiry of the 90-day truce and help revive global economic growth. Reports that Chinese Vice Premier Liu He attended the opening of the meeting bolstered sentiment.

Crude oil futures for February ended up $0.56, or 1.2%, at $48.52 a barrel, a long way down from the day's high of $49.79 a barrel.

On Friday, crude oil futures ended up $0.87, or 1.9%, at $47.96 a barrel.

Last week, a survey from Reuters showed oil output from OPEC fell by 530,000 barrels a day to 32.6 million a day in December, marking the sharpest pullback since January 2017 as top exporter Saudi Arabia throttled back production.

Data released by the Energy Information Administration on Friday showed crude inventories in the U.S. rose by 7,000 barrels in the week to December 28, beating expectations for a drop of more than 3 million barrels.


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Treasuries Come Under Pressure After Seeing Initial Strength

Trading 07 jan 2019 Commentaire »

After failing to sustain an initial move to the upside, treasuries came under pressure over the course of the trading session on Monday.

Bond prices pulled back well off their early highs and firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 2.682 percent.

With the turnaround on the day, the ten-year yield climbed further off the more than eleven-month closing low set last Thursday.

The pullback by treasuries came as stocks on Wall Street moved notably higher amid optimism about high-level trade talks between the U.S. and China in Beijing.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the U.S. team at the two-day meeting that began today, with a spokesman for China's Foreign Ministry predicting "positive and constructive discussions."

Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing growth in U.S. service sector activity slowed by more than anticipated in the month of December.

The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.

"The non-manufacturing sector's growth rate cooled off in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China."

Amid a quiet day on the U.S. economic front on Tuesday, bond traders are likely to keep an eye on the results of the Treasury Department's auction of $38 billion worth of three-year notes.


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Dollar Mixed As Investors Turn Cautious

Trading 07 jan 2019 Commentaire »

The dollar is turning in a mixed performance against its major rivals Monday afternoon. The buck is down against its major European rivals, but has turned positive against the Japanese Yen.

On a light day for U.S. economic data, trader are keeping a close eye on the high-level trade talks between the U.S. and China in Beijing.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the U.S. team at the two-day meeting beginning today, with a spokesman for China's Foreign Ministry predicting "positive and constructive discussions."

A report released by the Institute for Supply Management on Monday showed growth in U.S. service sector activity slowed by more than anticipated in the month of December. The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November.

The dollar has dropped to around $1.1475 against the Euro Monday afternoon, from an early high of $1.1392.

Eurozone retail sales grew for a second straight month in November and at a faster-than-expected pace, supported by lower oil prices and rising wages.

Retail sales rose a seasonally adjusted 0.6 percent from October, when sales increased at the same pace, figures from Eurostat showed Monday. October sales growth was earlier reported as 0.3 percent. Economists had forecast 0.2 percent growth.

Eurozone's investor confidence deteriorated for a fifth straight month in January to its lowest level in over four years, but the easing was less severe than expected, survey data from the behavioral research institute Sentix showed on Monday.

The Sentix investor confidence index dropped to -1.5 from -0.3, marking the lowest level since December 2014. Economists had forecast a score of -2 for January.

Germany's manufacturing new orders decreased for the first time in four months in November and the fall was worse than expected, preliminary data from Destatis showed on Monday.

Factory orders decreased a calendar and seasonally adjusted 1 percent from October, when they grew 0.2 percent, revised from 0.3 percent reported earlier. Economists had forecast a modest decline of 0.1 percent.

Germany's retail sales grew at the fastest pace in seven months in November, exceeding economists' expectations, preliminary data from Destatis showed on Monday.

Retail sales rose a calendar and seasonally adjusted 1.4 percent from October, when they edged up 0.1 percent, revised from a 0.3 percent fall. Economists had expected a 0.4 percent increase.

Germany's construction sector expanded at the fastest pace in seven months in December, led by strong growth in housing activity.

The German Construction Purchasing Managers' Index, or PMI, rose to 53.3 from November's 51.3, survey data from IHS Markit showed on Monday.

The buck has slipped to around $1.2775 against the pound sterling Monday afternoon, from an early high of $1.2708.

The greenback slid to an early low of Y108.019 against the Japanese Yen Monday, but has since rebounded to around Y108.575.

The services sector in Japan continued to expand in December, albeit at a slower pace, the latest survey from Nikkei revealed on Monday with a PMI score of 51.0. That's down from 52.3 in November, although it remains above the boom-of-bust line of 50 that separates expansion from contraction.


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Gold Futures Settle Modestly Higher

Trading 07 jan 2019 Commentaire »

Gold futures ended modestly higher on Monday as the dollar weakened against most major currencies amid speculation the U.S. Federal Reserve would pause interest rate hikes sometime soon.

Data showing a slower than expected pace of growth in the U.S. services sector also contributed to the dollar's weakness.

The dollar index dropped to 95.21, losing about 0.5%, prompting traders to seek the safe haven of the yellow metal.

However, with equities trending higher amid renewed optimism about a U.S.-China long term trade deal, gold's gains were just modest.

Gold futures for February ended up $4.10, or 0.3%, at $1,289.90 an ounce.

On Friday, gold futures ended down $9.00, or 0.7%, at $1,285.80 an ounce, after having recorded their highest settlement since mid June 2018 a day earlier.

Silver futures for March settled at $15.756 an ounce, down $0.030 from previous close. Copper futures for March ended at $2.637 per pound, down $0.010 from Friday's close.

Data released by the Institute for Supply Management showed growth in U.S. service sector activity slowed by more than anticipated in the month of December. The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.

"The non-manufacturing sector's growth rate cooled off in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China."

Last week, the ISM released a separate report showing a notable slowdown in the pace of growth in U.S. manufacturing activity in December. The purchasing managers index tumbled to 54.1 in December after rising to 59.3 in November, hitting its lowest level since November of 2016. Economists had expected the index to slip to 57.9.

The Federal Reserve Chairman Jerome Power noted last week that the central bank "will be patient" with monetary policy as it watches the economy evolve. Powell stressed that monetary policy is not on a "preset path" after the Fed raised interest rates four times in 2018 and forecast two rate hikes in the new year.

"Particularly with muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves," Powell said.

The Fed chief said the central bank is always prepared to significantly shift the stance of monetary policy if incoming economic data does not meet expectations.

Markets await the minutes of the Federal Reserve's meeting held in December for clues on the central bank's future plans with regard to rate hikes. The minutes will be released this Wednesday.


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The rise of the yen: everything is just beginning

Trading 07 jan 2019 Commentaire »

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Fans of the yen waited for their high point. The Japanese currency headed for strengthening, confidently pushing the American dollar from the podium. Fed Chairman Jerome Powell said that the regulator will adhere to moderate monetary policy in 2019. The official also pointed out the lack of a predetermined rate of increase in rates and made it clear that the actions of the Central Bank will depend on current economic data and the state of the economy, which analysts predict a slowdown

The yen ended 2018 in a big plus against the dollar, and it seems to continue this dynamic, as the market will begin to put in the prices the completion of the Fed tightening cycle. In December, the national currency of Japan gained 3.5% of the cost, and by the end of the year, it could rise in price to 100-105 from the current 108.

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As a defensive asset, the yen is in demand during the deterioration of forecasts for the US economy and the fall in Treasury yields. Note that on the eve of the yield on 10-year securities passed the minimum level over the past 11 months, and greenback began to look less attractive. Most reputable banks, including Goldman Sachs, predict cooling in the US economy in 2019.

"The yen is growing primarily due to a decrease in yields in the US, the currency is very sensitive to this indicator. Recently, the yield on 10-year bonds has declined significantly, the same applies to the forecasts at the Fed rate for this year, "analysts Nomura comment.

They also added that in the case of zero dynamics of short-term profitability, "it will be difficult for investors to find a reason to buy the dollar against such currencies as the yen."

In addition, in the first three months of the beginning of the year, the greenback will be put under pressure to suspend the work of the government and reduce fiscal incentives. Do not forget that the intractable contradictions in Congress regarding the money for the construction of the wall on the border with Mexico blocked the work of the government and sowed panic in the markets. The demand for safe assets strengthened sluggish statistics on business activity in the manufacturing sectors of Europe and China, providing the incentive for the yen to achieve multi-month peaks.

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U.S. Service Sector Growth Slows More Than Expected In December

Trading 07 jan 2019 Commentaire »

A report released by the Institute for Supply Management on Monday showed growth in U.S. service sector activity slowed by more than anticipated in the month of December.

The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.

"The non-manufacturing sector's growth rate cooled off in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China."

He added, "Also, comments reflect that capacity constraints have lessened; however, employment-resource challenges remain."

The bigger than expected decrease by the headline index was partly due to notably slower growth in business activity, with the business activity index tumbling to 59.9 in December from 65.2 in November.

The employment index also slid to 56.3 in December from 58.4 in November, indicating a slowdown in the pace of job growth in the service sector.

However, a report released by the Labor Department last Friday showed employment in the private service-providing sector spiked by 227,000 jobs in December after climbing by 146,000 jobs in November.

The ISM said its prices index also slumped to 57.6 in December from 64.3 in November, pointing to significantly slower price growth.

Last Thursday, the ISM released a separate report showing a notable slowdown in the pace of growth in U.S. manufacturing activity in the month of December

The purchasing managers index tumbled to 54.1 in December after rising to 59.3 in November, hitting its lowest level since November of 2016. Economists had expected the index to slip to 57.9.


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U.S. Non-Manufacturing Index Drops More Than Expected In December

Trading 07 jan 2019 Commentaire »

A report released by the Institute for Supply Management on Monday showed growth in U.S. service sector activity slowed by more than anticipated in the month of December.

The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November.

While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.


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*ISM U.S. Non-Manufacturing Index Drops To 57.6 In December

Trading 07 jan 2019 Commentaire »

ISM U.S. Non-Manufacturing Index Drops To 57.6 In December


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German Factory Orders Fall, Retail Sales Rise

Trading 07 jan 2019 Commentaire »

Germany's manufacturing new orders decreased for the first time in four months in November and the fall was worst than expected, while retail sales grew at the fastest pace in seven months.

Factory orders decreased a calendar and seasonally adjusted 1 percent from October, when they grew 0.2 percent, revised from 0.3 percent reported earlier, preliminary data from Destatis showed on Monday.

Economists had forecast a modest decline of 0.1 percent. The latest fall was the most severe since a 3.6 percent slump in June.

Retail sales rose a calendar and seasonally adjusted 1.4 percent from October, when they edged up 0.1 percent, revised from a 0.3 percent fall. Economists had expected a 0.4 percent increase.

"The drop in new orders after three consecutive increases will support the pessimists' view of a longer-lasting slowdown of the German industry, while the surge in retail sales will support the optimists' view of solid domestic demand preparing the grounds for an economic rebound," ING economist Carsten Brzeski said.

Higher order backlog in the manufacturing sector suggests that the industrial economy is gathering some momentum, albeit with subdued momentum, the economy ministry said.

The automotive industry is making progress tackling the WLT emission tests problem and registered a noticeable gain of 4.5 percent in orders in November, the ministry added.

Domestic orders increased 2.4 percent and decreased 3.2 percent from the previous month.

Demand from the euro area dropped 11.6 percent, while orders from other countries grew 2.3 percent.

Orders for manufacture of intermediate goods and consumer goods decreased 4.4 percent and 3.2 percent, respectively, in November, while that for capital goods increased 1.4 percent.

On a year-on-year basis, factory orders decreased 4.3 percent in November after a 3 percent drop in October. Economists had expected a 2.7 percent decline.

Retail sales increased 1.1 percent year-on-year in November after a 5.2 percent rise in October, revised from 5 percent. Economists were looking for a 0.4 percent fall.

Elsewhere on Monday, survey data from IHS Markit showed that the German construction sector expanded at the fastest pace in seven months in December, led by strong growth in housing activity.

The German Construction Purchasing Managers' Index, or PMI, rose to 53.3 from November's 51.3. A PMI reading above suggests growth in the sector.

Activity and new orders grew at faster rates, thanks to milder-than-usual weather in some areas.


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UK New Car Sales Fall For Second Year: SMMT

Trading 07 jan 2019 Commentaire »

UK new car registrations decreased for a second year running in 2018, amid falling consumer confidence, political uncertainty and regulatory changes.

New car registrations decreased 6.8 percent to 2.37 million units, figures from the Society of Motor Manufacturers and Traders, or SMMT, showed on Monday. Sales fell 5.5 percent in December. The fleet sector logged the biggest decline and private motorists and smaller business operators also registered fewer cars.

Among the vehicle segments, only the dual purpose category witnessed increased demand. Superminis and lower medium cars remained the most popular, despite a fall in their registrations.

Diesel sector had the biggest volume decline among different fuel types, thanks to anti-diesel rhetoric and negative fiscal measures. December marked the 21st consecutive month of decrease for diesel cars.

Many diesel vehicle owners have adopted a "wait and see" approach, the SMMT said.

Registrations for petrol and alternatively fueled vehicles increased.

"A second year of substantial decline is a major concern, as falling consumer confidence, confusing fiscal and policy messages and shortages due to regulatory changes have combined to create a highly turbulent market," SMMT Chief Executive Mike Hawes said.

"The industry is facing ever-tougher environmental targets against a backdrop of political and economic uncertainty that is weakening demand so these figures should act as a wake-up call for policy makers."

That said, the demand for cars in the UK remains solid with volumes on a par with the preceding 15-year average, and the market still the second biggest in the EU, Hawes said.


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