Fundamental analytics

Global markets retain heavy tone, focus on US-China relations

The situation in global markets remains tense, market sentiment and interest in risk remains minimal. The decline in equities continued to gain momentum, on Wednesday, as US stock markets showed a second day of strong sale-off, falling by more than three percent. On Thursday, markets continued to decline, at European trading session, futures for US indices lost more than 1.5 percent, with the SP 500 index approaching the significant level of 2650-2600 points. This is a zone of two monthly lows and instead of the Christmas rally, US stock markets risk ending the year with a breakthrough of these levels. European markets are also under pressure. Any demand is observed only for defensive assets, US dollar, gold and the Japanese yen.

The main influence on global markets continues to have two strategic factors. First, this is the Fed's monetary polivy for the next 2019. New introduction from Powell, showed that the regulator is considering the possibility of reducing the pace of rate hikes. The situation in this regard is not yet clear to the end; Powell’s important speech, which could provide additional information, was postponed, and the speech of the New York Fed Chairman contained completely opposite information.

 The second factor that continued to have a negative impact market sentiment is a factor of trade and political relations between the US and China. As if two countries lack conflict issues when the news broke today that the Chief Financial Officer of the largest Chinese technology company Huawei Technologie was arrested in Canada for possible violations of US sanctions against Iran. This arrest threatens to escalate tensions between the United States and China. The representatives of China have already expressed their hard reaction to the issue. It is clear that in such conditions the chances of reaching trade agreements have dropped significantly. All these questions continued to support the US dollar. The dollar index has consolidated around the 97 points, and it is very close to the annual levels.

In addition, this is only the first half of the session. The two remaining days of the week will be very rich in terms of statistics. In particular, ADP data on employment in the USA, statistics on the volume of industrial orders, trade balance, PMI of the non-manufacturing sector and a whole range of other data will become known today. What a day!

In Europe today, no important statistics are expected any more. In the morning, data on production orders in Germany were published. The figures turned out to be better than expected, so the decline in the EUR / USD pair was stopped somewhat. According to the data, the volume of orders in October rose by 0.3%, against the expected decline of 0.4%. At the same time, data for the previous month was revised downwards from 0.3% to 0.1%. Nevertheless, the presence of economic and political problems in Europe limit the level of demand for the European currency. Not to mention that FX markets trade inactive way ahead of Friday US Non-Farm data.

US labor market data is important in the current conditions as this will shed sone additional light on FED intentions. These reports, as a rule, always have a strong influence on the markets. Besides the release of labor statistics will come out a bit earlier then the December meeting of the Federal Reserve System (FRS), at which, as expected, the US Central Bank would raise its key interest rate for the fourth time this year. Investors will be especially careful to annalisy and evaluate published figures. For us, this means that the last two days of the week will be extremely volatile.

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