Equity traders are in risk-on mode today as the US-China trade story is still fuelling the upbeat sentiment. 

Europe

Phase one of the trade deal will be singed in the middle of this month, and the feel-good factor is still circulating. Overnight, the Peoples Bank of China (PBoC) announced plans to cut the reserve requirement ratio (RRR) by 50 basis points. The news has been welcomed by buyers as the message from Beijing is that they are happy to assist the economy. The Chinese manufacturing sector is still growing albeit at a slightly slower pace as the Caixin survey cooled to 51.5 from 51.8. In London, mining stocks are showing decent gains thanks to the broadly positive news from China.   

M&G shares are in demand this afternoon even though the company has extended the ban on investors withdrawing funds from the main property fund. Last month, the company announced it was preventing investors from withdrawing funds from £2.5 billion fund on account of ‘unusually high and sustained outflows’, which were caused by Brexit uncertainty.  

Tullow Oil shares are in the red on the back of an underwhelming drilling report. The London-listed company revealed that one of its operations off the coast of Guyana has discovered oil, but the report suggests the oil findings will be below forecasts. The stock price suffered a brutal blow last month when in one update the firm cut its output forecast, suspended its dividend and announced the departure of senior executives. Should the group suffer any more setbacks, the stock could be in for another major knock.   

US

The bullish mood on Wall Street continues as the Dow Jones has set another record-high. Phase one of the US-China trade deal is set to be signed on 15 January, and the feel-good factor is still doing the rounds. Once the first phase has been signed, President Trump has said he will raise the issue of the second phase, which is likely to be to be more complicated as it will deal will topics such as intellectual property rights, so we could be in for some turbulence in the months to come.

The final reading of the manufacturing PMI update was 52.4, which was down slightly from the initial reading of 52.5. The sector is growing at a moderate rate, but the China story is driving overall sentiment.  

Advanced Micro Devices was given a lift by Nomura as the bank raised their price target for the stock from $68 to $75. The finance house predicts there will be a rebound in wafer-processing equipment sales in the next 12 months.

Boeing has lost its crown as the largest jet-manufacturer in the world as Airbus has eclipsed the troubled company. In 2019, Boeing’s total production fell short of the 863 aircrafts delivered by Airbus. In light of the decision to suspend production of the 737 Max plane, Boeing is unlikely to regain the top spot anytime soon.   

FX

The US dollar index is enjoying a broad push higher this afternoon and it has hurt EUR/USD as well as GBP/USD. The manufacturing reports from the eurozone were nothing special. The reading from Spain, France and Germany all exceeded forecasts, but it is worth noting that only the French manufacturing sector is enjoying positive growth. Germany is the powerhouse of the currency area, and it very concerning the nation’s manufacturing sector is still in a deep contraction. The final reading of the UK manufacturing PMI report came in at 47.5, up marginally from the initial reading of 47.4. The pound witnessed a respectable rally in late December so some profit taking isn’t a big surprise.     

Commodities

Gold has hit level last seen in late September as its bullish move continues. The rally began to break higher late last month and today’s upward move is made all the more impressive by the fact the US dollar is stronger as are global stocks. Should the bullish move continue it might retest the $1,555 area.

Oil has had a lacklustre session despite the optimism still doing the round in relation to the US-China trade situation, and the announcement from the PBoC. It is possible the slightly softer-than-expected Caixin manufacturing reading caused the mood to be downbeat in the oil market.    

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