· The euro was steady on Friday against the dollar, which was headed for its worst week since mid-October by concern over U.S.-China trade relations and hints of weakness in the U.S. economy.
Against a basket of six currencies, the dollar fell to a one-month low of 97.355, but was last flat at 97.424. The euro was little changed at $1.1102.
Sterling was 0.2% weaker at $1.3129 and down 0.1% against the euro at 84.49 pence <EURGBP=D3>, but close to a two-and-a-half-year high as traders grew more confident uncertainty over Brexit would end soon.
U.S. President Donald Trump said U.S.-China trade talks were “moving right along” and that “we’ll have to see” about an increase in tariffs due next week.
“The U.S. market is concerned about the Dec. 15 tariffs being enacted, but I don’t think this is going to happen before the end of the year,” said Shannon Saccocia, chief investment officer at Boston Private, adding she has not made any investment decisions that implied the tariffs will be implemented.
But markets were unconvinced, with worries stemming from a lack of similar enthusiasm from China, keeping the dollar subdued. Chinese officials reiterated that some U.S. tariffs must be rolled back for a deal to end the 17-month trade war, something Washington has given no sign of doing.
· The jobs market turned in a stellar performance in November, with nonfarm payrolls surging by 266,000 and the unemployment rate falling to 3.5% from 3.6%, back to the 2019 low and matching the lowest jobless rate since 1969, according to Labor Department numbers released Friday.
Those totals easily beat the Wall Street consensus. Economists surveyed by Dow Jones had been looking for solid job growth of 187,000 and saw the unemployment rate holding steady from October’s 3.6%. The decline in November’s jobless rate came amid a corresponding 0.1 percentage point drop in the labor force participation rate, to 63.2%.
Stocks opened sharply higher in reaction to the better-than-expected report. Bond yields also surged.
Average hourly earnings rose by 3.1% from a year ago, while the average workweek held steady at 34.4 hours.
Economists had been looking for wage gains of 3%. A separate gauge of unemployment that includes discouraged workers and the underemployed declined as well, falling to 6.9%, one-tenth of a percentage point below October.
· China and the U.S. can’t agree on soy export increases, but China’s decision to cut tariffs on soy and pork are just as good for now and signals a high probability that Washington will not raise tariffs on December 15.
After the Asian market closed on Friday, China’s Customs Tariff Commission announced it would exempt U.S. soybeans and pork from the current tariff regime.
“The olive branch gesture should help continue talks,” says Brendan Ahern, CIO of KraneShares in New York.
· President Donald Trump should go forward with the next round of tariffs set for Dec. 15, CNBC’s Jim Cramer said Friday.
That’s because the November jobs report issued Friday shows the U.S. economy is stronger than some may have believed, the “Mad Money” host said.
“If we’re experiencing this kind of growth without inflation, that means President Trump has a ton of flexibility when it comes to the trade negotiations with China,” Cramer said.
“That’s why tonight I am saying I think ... he should just walk away from the table, proceed with the planned tariff hikes in a week and a half, and wait for the Chinese government to become less intransigent or until the elections in 2020 or both,” he said.
The Trump administration is in a position to do so, Cramer argued, because the long-running U.S.-China trade war is hurting the Chinese economy more than it’s hurting the American economy.
· China’s exports in November fell 1.1 per cent from a year earlier, marking a fourth successive monthly decline as the pain of the trade war continues to hit the world’s second-largest economy.
The dip was below the expectations of a group of analysts polled by Bloomberg, who forecast 0.8 per cent growth, and worse than last month’s 0.9 per cent drop.
Imports, meanwhile, grew 0.3 per cent in November – their first monthly increase since April and only the second this year – beating the Bloomberg poll, which forecast a 1.4 per cent decline.
China’s trade balance for November stood at US$38.73 billion, down from US$42.91 billion in October and lower than analysts’ expectations of US$44.3 billion.
Exports did not get the expected jolt from seasonal factors, such as the Christmas rush to buy consumer electronics goods.
November’s export decline comes despite a low comparison base. Shipments grew by just 3.9 per cent in November 2018, following gains of 14.3 per cent and 13.9 per cent in the previous two months.
Li Kuiwen, director of the statistics and analysis department at China’s customs authority, said that “the international economic and trade growth has slowed this year, but the Chinese economy maintains stable”.
· China’s trade surplus with the United States for November stood at $24.60 billion, Reuters calculation based on Chinese customs data showed on Sunday, easing from the previous month’s surplus of $26.45 billion.
China’s January-November trade surplus with the United States stood at $272.5 billion, according to Reuters calculations based on Chinese customs data.
Customs said China’s total trade with the United States fell 15.2% for the first 11 months of 2019, with exports dropping 12.5% and imports slipping 23.3%. It did not provide percentage changes in China’s bilateral trade with the United States for the month of November, however.
· China’s potential economic growth will be below 6% over the next five years, an adviser to China’s central bank said on Saturday.
The economy could grow between 5% and 6% from 2020 to 2025, Liu Shijin, a policy adviser to the People’s Bank of China, said at a conference in Beijing, according to an article he posted on social media.
· India’s central bank was wrong to keep its benchmark interest rates unchanged on Thursday, according to veteran emerging markets investor Mark Mobius.
The Reserve Bank of India surprised markets by keeping its repo rate — the rate at which it lends to other banks — unchanged at 5.15%. Prior to the decision, economists predicted a sixth rate cut from the central bank amid a notable slowdown in the Indian economy.
“I think they did the wrong thing,” Mobius, who is founding partner at Mobius Capital Partners, told CNBC’s “Street Signs” on Friday about the RBI. “I think they were reacting to the short-term situation with inflation, which is mainly caused by food prices, and, specifically, onion prices.”
In October, India’s annual retail inflation rose to 4.62% on the back of higher food prices, Reuters reported. That was a tick above the RBI’s medium-term target of 4%.
“They should have lowered rates,” Mobius said, adding it could improve business confidence in the country and may help to solve some of the debt problems in India’s financial services sector.
· North Korea’s ambassador to the United Nations said on Saturday that denuclearization is off the negotiating table with the United States and lengthy talks with Washington are not needed.
Ambassador Kim Song’s comment appeared to go further than North Korea’s earlier warning that discussions related to its nuclear weapons program, the central focus of U.S. engagement with North Korea in the past two years, might have to be taken off the table given Washington’s refusal to offer concessions.
Kim said in a statement that the “sustained and substantial dialogue” sought by the United States was a “time-saving trick” to suit its domestic political agenda, a reference to U.S. President Donald Trump’s 2020 reelection bid.
· Hong Kongers marched again on Sunday, chanting “five demands, not one less” as the city’s anti-government protests approached their six-month milestone.
· British Prime Minister Boris Johnson said he was nervous about his narrowing lead in opinion polls ahead of Thursday’s election but pledged to deliver a “transformative” Brexit that will allow lower immigration.
Opinion polls put Johnson ahead of Labour Party leader Jeremy Corbyn, though his lead has narrowed in recent weeks and such polls largely failed to predict the 2016 referendum result or May’s loss of her majority in the 2017 snap election.
· Oil prices fell on Friday, but were set for weekly gains ahead of the OPEC+ meeting which kicked off Friday in Vienna.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia - a grouping known as OPEC+ - agreed on Thursday to more output cuts to avert oversupply as economic growth stagnates amid the U.S.-China trade war.
But OPEC stopped short of pledging action beyond March and analysts have questioned the impact of the latest curbs.
Brent futures were down 18 cents at $63.21, but are set to rise 1.5% on the week.
West Texas Intermediate oil futures fell 33 cents to $58.10 a barrel. They are set to rise nearly 6% on the week.
The cuts next year will expand the existing agreement by an extra 500,000 barrels per day (bpd) reduction in the first quarter next year, through tighter compliance and some adjustments. OPEC’s current agreement is a supply cut of 1.2 million bpd and the increased amount represents about 1.7% of global oil output.
Reference: CNBC, Reuters, Forbes, South China Morning Post
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