The upbeat mood following the conclusion of the Phase 1 deal spurred US stocks to close higher on Monday, notching fresh records in the process. US Trade Representative Robert Lighthizer said the deal went beyond agriculture and covers such issues as intellectual property with strong enforcement provisions. The NASDAQ closed 0.91% higher while the S&P gained 0.71%. The DOW also advanced 0.36% to a fresh record despite the struggles of Boeing which shed 4.29% on the day: reports surfaced that the aircraft maker was considering halting production of the 737 Max following uncertainty over when it will be certified to return to the skies. Treasury yields were higher with 2Y and 10Y USTs closing at 1.6263% and 1.8713% respectively.
Chances that the British economy may contract in Q4 upped following the worst month in more than seven years for UK manufacturing. IHS Markit’s manufacturing PMI for December came in at 47.4 against an expected 49.2 to mark a quarter where the index has been on a decline from October’s 49.6. The Composite PMI did not fare any better, notching 48.5 for the month, as the weakness also crept into services which slowed to 49.0 against expectations of 49.5. The pound closed little changed at $1.3332 while yield on 10Y and 30Y UKTs was higher at 0.822% and 1.317% respectively.
Asian stocks were higher on Tuesday as more details began to emerge on the trade deal and an outperformance by the Chinese economy in November. The CSI led gains, up 1.27% on the day, while the HANG SENG and the NIKKEI rose 1.12% and 0.47% respectively. The ASX was mildly lower however at -0.04% as the Australian Treasury cut several forecasts including budget surplus, GDP and wage growth.
Turkey’ budget swung back to surplus for November, a month for relatively higher tax income, following two months of deficits. The surplus was 7.8 billion liras, up from 2018’s 7.6 billion liras as spending and income growth was subdued on an annual basis. Revenue grew 1.7% YoY while spending rose 1.6% YoY compared with a 22.2% increase for the year to October. The lira closed weaker at 5.8496 to the dollar while TURKEY 29s were flat, trading in the low 110s.
Brazil’s economy expanded for a third straight moth in October, albeit at a modest pace according to the latest central bank economic activity index. The index, a proxy for GDP, rose 0.17% from the previous month although below a Bloomberg survey forecast of 0.2%. While this adds to other improving metrics such as growing retail sales, headwinds in the form of high unemployment and poor industrial output remain. The real closed firmer at 4.0581 to the dollar while BRAZIL 29s were higher, trading in the high 106s.
Russia’s industrial production grew at the slowest pace in almost two years in November according to the latest release by Rosstat. Industrial production slowed to 0.3% YoY in November against and expected 2.6% in a Bloomberg poll, having contracted 2.5% from October. Commenting on the release, the Economy Ministry said the year’s industrial production may be lower than the 2.3% previously forecast with “high probability” of continuing in the first months of 2020. The ruble closed firmer at 62.4460 to the dollar while RUSSIA 29s were up, trading in the high 111s.