US stocks brushed off the tensions in the Middle East to close higher on Monday in the process posting their biggest intraday comeback in 3 months. Stocks had opened firmly lower on the day before recovering to close in the green as no major news emerged on the US-Iran tensions. The NASDAQ led gains rising 0.56% while the S&P and the DOW closed 0.35% and 0.24% up respectively. Treasury yields were higher with 2Y and 10Y USTs closing at 1.5445% and 1.8090% respectively.
UK services picked up in December amid greater certainty on the Brexit front following a Tory majority in the December general election. IHS Markit’s services PMI for December rose to 50 from 49.3 in November. In a testament to decreasing uncertainty, the December figure was a point higher than the flash estimate of 49 collected from responses pre-election. Declining readings on the manufacturing front however kept the composite PMI unchanged at 49.3 with deteriorating construction activity also helping keep the all-sector PMI unchanged at 48.9. The pound closed higher at $1.3171 while yield on 10Y and 30Y UKTs closed higher at 0.768% and 1.242% respectively.
Euro area services ended the year on a better note than manufacturing with IHS Markit services PMI coming in at 52.8. The pickup in services helped push the composite PMI higher to 50.9 despite contraction in manufacturing with Q4 GDP growth estimated to be 0.1%. German service activity also rose to push the composite PMI for the bloc’s largest economy back into expansion territory at 50.2 after three months of contraction. The euro closed higher at $1.1197 while yield on 10Y and 30Y DBRs was lower at -0.287% and 0.249% respectively.
Asian stocks were higher on Tuesday as US-Iran tensions appeared to have shown little potential for further escalation although they remained high. US Defence Secretary Mark Esper said the US would not target Iranian cultural sites in the case of further hostilities and quashed reports that US troops were pulling out of Iraq. Stocks cemented early gains with the NIKKEI leading the charge up 1.60% on the day while the ASX and the CSI rose 1.35% and 0.69% respectively. The HANG SENG closed 0.34% higher, albeit lower than an early morning rise of 0.5%.
Brazil recorded its lowest annual trade surplus since 2015 with the 2019 figure coming at $46.7 billion. The surplus was almost 20% lower than the 2018 figure as exports fell 7.5% primarily due to declining soya beans exports and Argentina’s recession. China’s dwindling appetite for soya beans due to the outbreak of swine flu pegged sales back 21% in 2019. Argentina also played a part being one of Brazil’s top trading partners with vehicle exports down 27% while car parts were down 18%. The real closed weaker at 4.0644 to the dollar while BRAZIL 29s were slightly higher, trading in the low 106s.
Russia’s Eurobond sales in 2020 will be supported by Euroclear according to Deputy Finance Minister Sergey Storchak allaying fears that US sanctions would impede new issuances this year. Addressing an interview in Moscow, Storchak said the clearing system would be able to support non-dollar-denominated issues and said the country would be open to issuing euro-denominated debt. The ruble closed firmer at 61.8216 to the dollar while RUSSIA 29s were lower, trading in the mid 110s.
South Africa’s December business activity fell to its lowest since October 2018 as the country’s main power supplier, Eskom, rolled out its deepest power cuts yet in the month. IHS Markit’s PMI for business activity fell to 47.6 from 48.6 in November and the report cited the removal of as much as 6,000 megawatts from the grid as the primary factor. With blackouts having resumed over the weekend and warnings of further cuts in January and beyond, forecasts for business activity has remained depressed amid government growth forecast of 1.2% this year. The rand closed slightly firmer at 14.2117 to the dollar while SOAF 49s were higher, trading in the high 98s.