Morning Commentary: Are you an Optimist or a Pessimist?
A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Are you an Optimist or a Pessimist?
Share this story:
Alan Rose Foreign Exchange Senior Trader
News over the past 24 hours has largely been colored by whether you are forward looking or looking to the past for guidance as to the future state of the global economy. There is truth in both camps. Despite a regular barrage of positive headlines regarding an upcoming trade deal between the U.S. and China, they have not even agreed on a site or a date yet for the two respective leaders to meet. Yesterday, news broke that the proposed November signing of a Phase 1 document will most likely be pushed back into December.
For now, optimists are holding the winning hand as markets have returned very quickly to a “risk-on” environment after a brief period of consolidation yesterday. Overnight headlines from China that both parties have agreed to roll back tariffs on each other’s goods in phases as they work toward a de-escalation of the trade war have spurred on another strong global stock market rally accompanied by higher G7 interest rates and stronger energy and commodity prices. The U.S. dollar is mixed with safe haven currencies slightly weaker while the Chinese yuan continues to appreciate on its multi-day run.
For those that lean toward the notion that the global economy remains in trouble and will potentially need more stimulation, we have news and data that support that camp. German industrial production for September fell below market expectations at -0.6%. This is the 11th month in a row of declines and brings the YoY decline to -4.3%. The Bank of England (BoE) met and kept rates unchanged at 0.75%, but there were two dissenting votes for rate cuts and the outlook was skewed to the downside. The BoE downgraded growth for 2020 to 1.2% and also downgraded GDP for 2021 on continuing Brexit concerns; the 1.2% GDP for next year would be the worst since the Great Recession.
Since markets are almost always forward looking, there continues to be reasons to be optimistic about the U.S. – China trade talks and Brexit progress. But, both of these macro issues remain very fluid and could change rapidly between now and early December when the rubber meets the road. In between now and then, economic data, the impeachment inquiry/hearings and other political developments will keep the markets volatile.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
Europe continues to see ongoing concerns about future growth. Both the IMF and the EU warned of weaker growth ahead. The IMF said that Europe should make contingency plans for fiscal stimulus as downside risks build. The EU cut both growth and inflation forecasts for 2020 and 2021 and said that risks remain “decidedly to the downside”.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Tune in for a guide to ETFs and investing strategies for potential long-term success. View in a browser Fidelity Fidelity Log in Creating a portfolio with ETFs: Why and how Creating a portfolio with ETFs: Why and how
Post a Comment