Trade of the Day: Stocks edge up and futures gain ahead of US jobs data; Treasuries and gold fall
Quote of the Day: “China is likely to list at least 10 institutions as domestic systemically important banks (D-SIBs), out of 30 candidate banks.… This designation could influence our view over systemic importance for some banks, and may have an impact on our assessment of their support ratings,” said Fitch Ratings.
Number of the Day:. “Around 6%” – Morgan Stanley’s expectation as to China’s growth target for 2020, lower than 2019’s 6-6.5%. Chinese leaders will hold a 3-day conference during the December 9-20 period, where policymakers will set the growth targets and economic policy tone for 2020.
Tip of the Day: “We still expect some resolution of the US-China trade tensions soon enough to validate the rally in risky assets in Q1. We prefer local to external debt. We like local markets in China, Korea, Brazil, South Africa, Russia and Ukraine. We prefer to pay rates in Mexico. In External Debt, we like Ukraine and Mexico,” BofA Merrill Lynch said in a report published Friday.
Asian markets stayed optimistic after the Chinese Ministry of Finance waived tariffs on certain agricultural imports from the United States, fueling expectations Washington would reciprocate with similar waivers. Traders are eyeing the Dec 15 deadline when 15% tariffs on about $160 billion worth of Chinese exports to the US are scheduled to go into effect. The US has placed tariffs on more than $350 billion of Chinese goods amid the more than 17-month long trade war.
“Trade tensions are easing. Our base case is that a Phase 1 deal will be signed between the US and China. The deal will likely remove or delay the October and December US tariffs, and possibly roll back some of the existing US tariffs. Phase 1 deal will likely be agreed because it is in the interest of both sides,” said a research note from Deutsche Bank published on Friday.
It said China will benefit from lower US tariffs, as well as agricultural imports to combat domestic pork supply shortages while US President Donald Trump has a strong incentive to achieve a break in the trade conflict ahead of the election to mitigate its depressing effect on the US economy, especially agriculture, and claim early victory on issues such as technology transfers, IP protection, and FX interventions.
Still the uncertainty is preventing investors from extending positions ahead of the weekend and before the crucial US jobs data. MSCI Asia-Pacific ex-Japan index edged 0.4% higher while Japan’s Nikkei benchmark moved up a tad 0.2%. But Hong Kong’s Hang Seng rose 1.07% supported by gains in technology, basic materials and healthcare.
“Most investors have maintained a wait-and-see approach due to the nagging uncertainties surrounding trade negotiations between the US and China. With trading liquidity thinning as we approach the year-end, some have started to reduce their riskier positions or take profit to err on the side of caution,” said a note from independent research firm CreditSights.
Later in the day, markets will await the US jobs report, where estimates are for nonfarm payrolls to rise by 179,000, with the jobless rate steady at 3.6% and average hourly earnings seen growing 3% year-on-year, unchanged from October. The data are expected at 2130 HK time.