Europe unconvinced on trade deal
SCEPTICISM REMAINS OVER LONG TERM; WALL ST PADS TO RECORDS ON SOLID RETAIL DATA
Despite some negative spindoctoring, it’s hard to argue that the deal marks a significant step in ending the frictions that have cast a dark cloud over growth Stephen Innes,
Chief Asia market strategist at AxiTrader
Given the amount of speculation and commentary by officials... it is unsurprising markets have not rallied too strongly upon final signing Hannah Anderson,
Strategist at JPMorgan Asset Management
new york/london — Wall Street stocks jumped early on Thursday, adding to records following the signing of a US-China trade accord and solid US retail sales data.
Analysts generally view the US-China deal as removing the near-term risk of an escalation between the two economic powers, even though there is scepticism it will resolve issues between the countries.
European stock markets, however, paused for breath as investor attention moved beyond the trade deal.
Shares in European carmakers hit the brakes as Germany’s defence minister confirmed that the US threatened to impose a 25 per cent tariff on European auto exports if continental heavyweights continued to back a nuclear deal with Iran.
The S&P 500 index rose 0.5 per cent as of 1015ET. The Dow Jones Industrial Average rose 0.5 per cent; it closed above 29,000 for the first time on Wednesday. The Nasdaq rose 0.7 per cent, while. the Russell 2000 index of smaller company stocks outpaced other indexes and rose 1 per cent.
In Europe, London’s FTSE 100 was down 0.6 per cent, Frankfurt’s DAX 30 slid 0.2 per cent and Paris’ CAC 40 was flat.
“Despite some negative spindoctoring, it’s hard to argue that the deal marks a significant step in ending the frictions that have cast a dark cloud over global economic growth,” Stephen Innes of AxiTrader said in a commentary.
Sensex hits milestone
Earlier in Asia, Tokyo’s Nikkei 225 closed up 0.1 per cent and Hong Kong’s Hang Seng rose 0.4 per cent, but the Shanghai Composite dropped 0.5 per cent.
In India, the Sensex closed 59.83 points higher at 41,932.56 after touching a record high of 42,059.45.
In the Middle East, Dubai and Abu Dhabi continued their winning streaks, closing 0.4 per cent and 0.1 per cent higher, respectively. Saudi Arabia also closed up 0.3 per cent.
“Given the amount of speculation by the markets and commentary by officials ahead of Wednesday’s signing, it is unsurprising markets have not rallied too strongly upon final signing,” JPMorgan Asset Management strategist Hannah Anderson said.
There was also a concern that with the deal already priced into markets, there were few catalysts to drive stocks higher, while “phase two” negotiations — expected to be the toughest — are unlikely to start in earnest until after November’s US presidential election.
Michael Hewson at CMC Markets UK added: “Given that it has taken nearly two years to pick off the low hanging fruit of a phase one deal, it does stand to reason that phase two is likely to take much longer.”
Oil rose on Thursday. Brent was up 50¢, or 0.8 per cent, to $64.50 a barrel by 1449GMT, and West Texas Intermediate rose by 38¢, or 0.7 per cent, to $58.19 a barrel.
Gold was little-changed. Spot gold was at $1,555.56 per ounce as of 1309GMT. US gold futures were up 0.1 per cent to $1,555.90.
US retail cheers Wall Street
US retail sales rose for a third straight month in December, with households buying a range of goods even as they cut back on purchases of motor vehicles, which could strengthen the view that the economy maintained a moderate growth pace at the end of 2019.
The Commerce Department said on Thursday retail sales increased 0.3 per cent last month. Data for November was revised up to show retail sales gaining 0.3 per cent instead of rising 0.2 per cent as previously reported. Economists polled by Reuters had forecast retail sales would gain 0.3 per cent in December. Compared to December last year, retail sales accelerated 5.8 per cent.
Trump, Fed spar again
Meanwhile, US central bankers expressed confidence they have borrowing costs at the right level to sustain growth and lift inflation to healthier levels, despite what businesses say is a lingering drag from uncertainty over US trade policy.
But even during the signing ceremony for a trade deal with China that promises to clear up some of that uncertainty, President Donald Trump reprised a long-running gripe against the Federal Reserve, and appeared to identify a possible new Fed chair who might fix the problem.
“I could have used you a little bit here,” Trump said to former Fed governor Kevin Warsh, who had pushed to get the Fed chair job in Trump’s first year in office. Trump picked Jerome Powell instead, a move he has since said he regretted. “Why weren’t you more forceful when you wanted that job?... I would have been very happy with you. But Kevin, thank you for being here. You understand that very well, right?”
From there, Trump launched for the first time in about a month into what has been a recurrent complaint against the Powell Fed.
“We’re the No.1 in the world by far, and we have to pay for our money,” Trump said, contrasting US borrowing costs with Europe’s negative interest rates, a function of that region’s slower growth and dimmer outlook. “Our interest rates are set high by the Fed. Our dollar’s very high.”
That is not the way Fed policymakers see it.
Rates are currently in a “good place”, unless there is a substantial change in inflation, Philadelphia Fed president Patrick Harker said in New York, adding that low rates can encourage excessive risk-taking. —