Morning Commentary: Let’s Have Some Christmas Cheer!
A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Let’s Have Some Christmas Cheer!
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Alan Rose Foreign Exchange Head Trader
It’s a new week and we are almost exactly one month away from Christmas; the markets are attempting to look ahead to more upbeat and optimistic times and put all the negativity in the rear view mirror. Global equities (U.S. included) are on the upswing today along with higher commodity prices and this is a welcome change from all the pessimism over the past weeks. The background for this rally is based on the Italian government being open to adjusting its budget, and the U.K. and EU have agreed on a transition plan which is all welcome news.
Whether this is a correction in a bear trend or there is more to this rally than meets the eye remains to be seen as this week will be a pivotal week for the markets. Fed Vice Chairman Clarida speaks on Tuesday and Chairman Powell on Wednesday. Markets have priced out a number of future Fed rate hikes and the markets will be looking for validation on that point. At the end of the week, the G20 meeting takes place in Argentina with the focal point on U.S. and China trade relations going forward.
Over the past number of weeks and months, a rare phenomenon has taken place in the markets. Stocks, bonds, and commodity prices are staging a rare simultaneous retreat. Global markets are on track for one of their worst years on record creating a background of angst, anxiety and uncertainty for investors and traders.
Global stocks and bonds could both finish the year in the red for the first time in at least a quarter century. Crude oil is already in bear market territory. 90% of the 70 asset classes tracked by Deutsche Bank are posting negative total returns in dollar terms for the year through mid-November. Markets will need a catalyst to change the negative market psychology that is causing investors to all exit at the same time – Hope springs eternal!
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
The German IFO business survey disappointed once again. The November reading came in at 102.0 against expectations of 102.3. October’s reading was 102.9 and this is the third straight month of declines. Cooling foreign demand and rising trade tensions are at the root of the persistent weakness.
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