US equities slip despite China lowering auto tariffs - 12.12.2018

Dollar strengthens as wholesale prices rise

US stock market slipped on Tuesday despite China’s concession to reduce tariffs on US autos to 15%, down from 40% after the renewal of US-China trade talks. The S&P 500 slipped 0.04% to 2636.78. Dow Jones lost 0.2% to 24370.24. The Nasdaq however gained 0.2% to 7031.83. The dollar strengthening continued as wholesale cost of goods and services rose by 0.1% in November when a decline was expected: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.2% to 97.44 but is lower currently. Futures on stock indexes point to higher openings today.

Technology stocks have been under pressure on US-China trade war concerns as many US companies have supply chains established in China. Treasury yields declined with increased demand for heaven asset after stocks retreat accelerated following disappointing home builder data: the National Association of Home Builder's monthly confidence index fell 8 points to 60 in November, the lowest overall reading in more than two years.

FTSE 100 lags behind major European indices

European stocks rebounded on Tuesday. The EUR/USD and GBP/USD’s continued their slide but both are higher currently. The Stoxx Europe 600 rose 1.5%. The German DAX 30 advanced 1.5% to 10780.51 as German economic expectations rose in December according to ZEW economic research institute. France’s CAC 40 gained 1.4% after President Macron announced plans to cut taxes and lift wages for workers, and UK’s FTSE 100 added 1.3% to 6806.94.

Italy’s budget deficit concerns came to fore again. Today is the last day Italy can submit a revised budget proposal to the European Union. The first proposal with a budget deficit target of 2.4% of GDP in 2019 was rejected by the EU, but Italy’s government said it could not revise the budget deficit target. If no change is resubmitted today the EU is expected to open an excessive deficit procedure and apply sanctions against Italy.

Nikkei leads Asian indices gains

Asian stock indices are advancing today. Nikkei jumped 2.2% to 21602.75 as yen climb against the dollar continued. Chinese stocks extended gains: the Shanghai Composite Index is up 0.3% and Hong Kong’s Hang Seng index is 1.8% higher. Australia’s All Ordinaries Index added 1.4% despite Australian dollar continued climb against the greenback.

HK50 testing descending channel boundary 12/12/2018 Market Overview IFC Markets chart

Brent up on expected US inventory drop

Brent futures prices are rising today supported by expectations of an OPEC-led output cut in 2019. The American Petroleum Institute late Tuesday report indicated US crude inventories fell by 10.2 million barrels last week. Prices rose yesterday: February Brent gained 0.4% to $60.20 a barrel Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.