2 min Market Summary: 6 Dec 2018

As of Wed, Dec 06, 08:00 GMT (UTC +08:00)

USDJPY, +0.20%, 113.01
EURUSD, +0.04%, 1.1349
GBPUSD, +0.04%,1.2725
USDCAD, +0.77%, 1.3363
NZDUSD, -0.53%, 0.6892

S&P500 CLOSED
Nasdaq CLOSED
Nikkei Futures, -0.53%, 21,919.33

CURRENCY MARKET WRAP 

• US business optimism has fallen in recent weeks amid uncertainty over tariff disputes, rising interest rates and continued labor shortages, the Federal Reserve said Wednesday. The Federal Reserve’s latest Beige Book showed most districts’ economies expanded, though at least four signalled growth cooled. The impact of President Donald Trump’s punitive import tariffs has become more widespread, with cost increases felt by manufacturers, retailers and restaurants, restraining demand. Even so, most regions of the US showed modest or moderate growth, and there were continued reports of companies increasing wages and benefits to attract and retain qualified workers, the report said.
• The US 10-year bond yield fell to its lowest point since mid-September. A string of comments from the Chinese authorities, however, lifted market sentiment in the early morning Asian trading session. The comments indicated that the trade meeting at the G20 meeting was ‘very successful’, that China will implement specific items agreed upon as soon as possible and that the US and China will proactively push forward negotiations within the 90-day time frame. The Chinese currency strengthened the most since 2005 after the weekend’s trade discussion, but weakened somewhat overnight.
• GBP Markit/CIPS UK Services PMI NOV AT 50.4 vs expected 52.2. This was the worst reading in 15 months with business optimism weakest since June 2016. “A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified… suggest that the pace of economic growth has stalled…November saw the worst performance since February 2013… The surveys are so far consistent with 0.1% GDP growth in the fourth quarter, thanks to the expansion seen back in October, but growth momentum has since been lost and risks are clearly tilted to the downside”, noted by economist at IHS Markit, which compiles the survey.
• Early yesterday, the European Court of Justice ruled that the UK can unilaterally revoke the Article 50 notification (which started the Brexit clock), as long as it has parliamentary backing (given the notification itself required approval in the House of Commons). In the House of Commons, PM Theresa May lost three votes. With more power given to the House of Commons, it will be closely watched if May’s deal falls through on Tuesday, which seems very likely at this point. Theresa May is planning a final attempt to win over Tory opponents of her Brexit deal by raising the prospect of Parliament being able to veto her controversial Irish backstop plan before it comes into operation.
• The Bank of Canada (BoC) held its benchmark interest rate steady at +1.75% as it warned that low prices for oil from the western province of Alberta could affect the pace of future rate increases. Though it was expected for the central bank to leave interest rates unchanged, what caught everyone off guard was their comment that there may be more room for non-inflationary growth. Back in October when they raised interest rates, the monetary policy statement was adjusted to suggest more aggressive tightening in 2019 but they took on a more cautious tone today in recognition of slower growth momentum in Q4. The decline in oil prices is becoming a bigger problem for the central bank because it not only impacts trade but also inflation and overall growth. The BoC admitted today that the energy sector may be materially weaker than they had previously thought. Governor Stephen Poloz will deliver a speech in Toronto Thursday (08:35 EST), which will likely provide more clues on the central bank’s outlook.

STOCK MARKET WRAP 

• US markets were closed to mark former President George H.W. Bush’s death, but the effect of Wall Street’s turmoil in the previous session, when New York-listed shares tumbled more than 3 per cent, was felt in Asia and Europe.