Here are the top things you need to be aware of, prior to your trading in the US markets on Thursday, December 13:
- US equities firmed on trade progress, data mixed
US Equities are consolidating but remain below earlier highs after the US data mix and ECB’s Draghi acknowledgement of downside risks. Trade prices were very soft, while jobless claims plunged. The improved tone on the trade war with China is positive this week, but Trump’s legal jeopardy has risen with the conviction of his former lawyer Cohen and the National Enquirer deal. Meanwhile, Apple confirmed plans for a $1 bln investment in an Austin campus. GE surged 12% after JP Morgan flipped from “sell” to a “neutral” weighting on the company.
2. ECB left policy rates unchanged, ended net asset purchases – as expected
ECB downgraded growth estimates going forward, acknowledging that the balance of risks has moved toward the downside. ECB confirmed also that QE now part of regular toolkit.Comments from Draghi during the press conference saw the central bank head acknowledging recent weakness in growth numbers, but at the same time, ECB still sees a gradual rise in inflation and remains confident that headline rates will rise towards the central bank’s inflation target. Clearly this was necessary to justify the end of net asset purchases, but while Draghi highlighted the positive aspects and repeated that higher wage growth and the ongoing economic expansion are underpinning inflation. He also confirmed that growth forecasts for this year and next have been revised down as has the inflation projection for next year. So a dovish leaning statement, as the growth forecast for 2018 was cut to 1.9% from 2.0% previously and the forecast for 2019 to 1.7% from 1.8%.
3. US November Import prices, weekly Jobless Claims.
The 27k initial claims plunge to 206k in the second week of December extended the 2k drop to 233k from a lofty 235k in the week of Thanksgiving, hence reversing nearly all of the climb from the 49-year low of 202k in mid-September. Meanwhile, the US November trade price report was weak, with a 1.6% decline for import prices and a 0.9% drop for export prices. Import prices were restrained by a 12.1% drop in petroleum prices, though prices ex-petroleum were also weak, falling 0.3%. The export price decline reflected a 1.0% drop in non-agricultural prices, while agricultural export prices rose 1.8%.
Market Reaction: The Dollar ticked slightly higher following the lower jobless claims outcome,and despite the steep drop in import prices. USDJPY printed eight-session highs of 113.58 from 113.40, while EURUSD dipped under 1.1350 from 1.1380. Equity futures indicate a modestly higher Wall Street open, while yields are little changed above lows.
3. Oil prices traded below $51.0 on fears of ongoing oversupply
The International Energy Agency suggested its too early to say whether the output cuts proposed by OPEC and its allies will be sufficient to stem the supply glut, which chimes in with similar concerns among oil producers themselves. The IEA warned that there is still potential for “significant oversupply”, after analysis from OPEC published yesterday said output cuts may have to be deepened in the second half.
Market Reaction: WTI oil price slipped below $51 per barrel, after already falling 1% yesterday. Currently is trading around $50.75, with strong Support holding at $50.00.
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Andria Pichidi
Market Analyst
HotForex
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