The US Federal Reserve building. Photo: AFP/Karen Bleier

U.S. tightens exports to China’s chipmaker SMIC, citing risk of military use

Trade of the Day: Stocks and futures hit by profit-taking; US dollar, Treasuries weaken; gold prospers

Quote of the Day: “In addition to the reported impending signing of the phase one trade deal, recent developments reaffirm stable policy support. These echo our view that reduced external uncertainty and still-accommodative policy could induce a modest mini-cycle growth recovery in China, with GDP growth likely to reach 6.0%Y in 1H20 and 6.1%Y in 2H20,” said Morgan Stanley analysts in a note after China reported its manufacturing PMI held steady in expansion territory.

Stock of the day:    Peking University Founder bonds due 2020, 2021, 2023 rose by as much as 12% after trading suspension was lifted. This follows an agreement with bondholders of the December 2019 bonds to extend the maturity date to February. Non-payment of the principal would have triggered a cross-default clause in other bonds.

Number of the Day: 73% The drop in share price of construction design company Acme International, which debuted on the Hong Kong Exchange just last month. Since its listing it has seen a high of HK$3.1 before closing at HK$0.72 following today’s collapse. The company said it does not know the reasons behind the sharp price drop.

Tip of the Day:  “With the Fed on hold and a slow and steady global growth recovery, the conditions look good for emerging market debt in 2020. The data in emerging markets, though not stellar, is showing some green shoots, indicating that central bank easing and fiscal stimulus has taken hold. As a result, emerging markets may grow faster than developed markets and the US in particular, signaling the end of the strong US dollar cycle. Hence, although the big move in rates seems largely done, the value next year should come from the long-awaited recovery in EM local currencies,” said Delphine Arrighi, emerging markets debt portfolio manager.

Asian markets were subdued, ending the year on a weak note as investors took home profits after a strong rally during 2019 riding three US Federal Reserve rate cuts and signs of a thaw in the two-year old US-China trade war. The US central bank lowered the benchmark rate thrice in 2019, the most reductions in a single year since 2008.

The MSCI Asia-Pacific ex-Japan index fell 0.46%, the Australian S&P/ASX 200 benchmark dropped 1.8% and Hong Kong benchmark Hang Seng eased 0.5% as technology and consumer stocks lead the retreat.

European stocks and US futures also retreated after recent gains but the tone remained firm after comments by White House’s trade adviser Peter Navarro told Fox News with reference to the phase one of the US-China trade deal, “That’s a done deal, put that one in the bag.”

The optimism was also supported by China’s forecast-beating official manufacturing PMI, which was steady at 50.2 in December, staying in expansionary territory for the second consecutive month. “We think the stabilization in the manufacturing PMI reflects the continued recovery of manufacturing confidence due in part to the easing of US-China trade tensions following the announcement that the countries had reached a phase one deal,” said Barclays economists in a note.

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