Trade of the Day: Stocks rebound, futures hold up as risk-on trades return; oil, US Treasuries retreat.
Quote of the Day: “There’s a sense that the retaliation from Iran will be in the end quite muted. Nobody wants a war and hence there’s a hope everything will calm down in the next few weeks. Meanwhile, the very recent economic data releases on industrial confidence were upbeat suggesting that the global economy may be gaining some momentum,” said Gary Dugan, CEO of Purple Asset Management.
Number of the Day: 500. The number of jobs that UBS’s wealth management unit will eliminate as Switzerland’s largest bank merges its private-bank financing and trading operations with those at the investment bank, according to a report in The Financial Times.
Tip of the Day: ”(Taiwan’s) surge in capital goods was primarily driven by semiconductor equipment imports, which accelerated by 158% y/y in December. This suggests that such a strong showing in imports likely reflects Capex expansion from domestic semiconductor manufacturers in preparation for the 5G cycle, rather than a relocation of factories from China. This, in our view, bodes well for the overall tech cycle outlook in Taiwan in 2020,” said Barclays analyst Angela Hsieh after the data was released on Tuesday.
Investors trooped back into the market as no further flare-up in the Middle East situation encouraged risk-taking. The rebound occurred even after the United States and Iran traded threats which analysts said was broadly expected.
The MSCI Asia Pacific ex-Japan index rose 0.62%, Japan’s Nikkei 225 was 1.6% higher and Australia’s S&P/ASX 200 index climbed 1.4%. Hong Kong’s Hang Seng index was up 0.34% with gains in the healthcare, technology and consumer sectors driving the advances. The MSCI Europe index was up 0.3% and US futures were flat indicating a steady start at Wall Street.
“The escalation of tensions between the US and Iran may have underpinned safe-haven gold and caused a spike in crude oil prices, but its impact on the wider markets have been minimal, even if Tehran has promised “severe revenge” for the death of Soleimani,” said Fawad Razaqzada, an analyst at FOREX.com.
Others saw economic benefit from these tensions.
“Military equipment needed to fight a war generally increase Manufacturing PMIs,” said Anita Yadav, CEO of Century Financial.
Razaqzada said the US-Iran tensions will have minimal impact on global growth and the spike in crude oil could prove to be temporary and therefore unlikely to hurt demand and the rise in oil prices could be good news for energy stocks.
“In the eyes of investors, the US-China trade deal is more important than the US-Iran conflict. This is simply because China is the world’s second-largest economy and a massive market for European and US exports. In contrast, Iran’s economy is nowhere near as large and in any case, it has minimal trade relations with the US,” Razaqzada said.
The risk-on sentiment also opened the floodgates for bond offerings from Asian issuers, dominated by Chinese developers. A swathe of bond issuers hit the market on Tuesday with China property companies Country Garden, Logan Property, Zhenro Properties, Sunac Properties and Beijing Capital Group among the first off the blocks. China SCE was also in out there with a tap of its 2024 bonds. There are issuers from non-property companies too with JD.com announcing a 10-year bond initial price guidance. Another property developer Radiance Group also issued a mandate.