Morning Commentary: Putting Lipstick on a Pig

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Putting Lipstick on a Pig Share this story: Alan Rose Foreign Exchange Head Trader

Equity and commodity markets are attempting to close out 2018 on a positive and upbeat note today after a volatile and emotionally charged last three months of the year where equity and commodity prices buckled. Markets are always looking forward, and investors and traders are fearful of a global economic slowdown and weaker earnings in 2019.   However, these past five trading sessions have seen a change in equity dynamics where buyers are returning to the market and there is an absence of selling pressure; markets appear to have priced in enough negative news for now and longer term buyers are returning again. This is despite underlying economic data in Europe and China (see below) continuing to falter and  increasing signs of a slowdown in the U.S. as numerous headwinds continue to build that are impacting confidence and our economic performance.   Equity markets seem to be reacting to a tweet from President Trump that he spoke with President Xi of China on Saturday, that “big progress” is being made on trade and that negotiations are moving forward toward a comprehensive deal. China state media reported that both sides wanted stable progress. President Trump has a tendency to overstate and over embellish, but for today and in a thin market, markets are attempting to close out the year on an upbeat note.   The U.S. dollar (DXY) is closing the year on a softer note finishing lower the past three consecutive trading days. The foreign exchange market continues to react to the dialing back of any further fed rate increases combined with a government shutdown with no end in sight. The Japanese yen (JPY) has been one of the most favored currencies over the past month appreciating by nearly 3.65%. It is the only major currency to finish 2018 in the black up by 2.50%. We anticipate more U.S. dollar weakness as 2019 unfolds. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: China heads into the New Year (coincidentally it is the year of the pig!) with its factories moving into contractionary territory as the impact of the trade war and a slowing global economy take their toll. The Chinese manufacturing PMI dropped to 49.4 in December which is the weakest since early 2016. Consensus expectations were for a print of 49.9; November’s reading was at 50.0. Export orders fell for the seventh straight month. Non-manufacturing data (services) did expand from 53.4 to 53.8 as services are becoming a larger part of the Chinese economy.

If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. 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:

Investment and Insurance Products: • Are Not insured by the FDIC or any other federal government agency • Are Not deposits of or guaranteed by a Bank or any Bank Affiliate • May Lose Value 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. The 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.

Unsubscribe from this list  |  Update email preferences This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list. Copyright ©2018 City National Bank – All Rights Reserved. 350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071 City National Bank is a subsidiary of Royal Bank of Canada. TERMS & CONDITIONS  |  PRIVACY STATEMENT NMLSR ID# 536994 | City National Bank Member FDIC