Traction from good news can often be difficult to maintain. The longer markets have time to react to events, the chances are that the story can be unpicked. The US/China “phase one” agreement is done but yet to be signed as translations need to be poured over. A signing of “phase one” will come in January, but this leaves traders with nagging concerns that something may lie in the translation that puts a fly in the ointment. Now, it is perfectly possible that all will be fine, but it does leave capacity for disappointment. The positive traction of the risk on move is spluttering. This is restricting yields from moving higher, pulling flow back into safety. The dollar is benefitting from this today, whilst gold continues to hover a shade under $1480. Perhaps the same could be said of the new Conservative Government in the UK. Apparently, legislation will be put forward by PM Johnson that prevents an extension to the Brexit transition period beyond December 2020. Sterling has been on a tear, until now, and a degree of profit-taking has set in today. After such a strong run higher in recent sessions, this could still be a healthy retracement, but the bulls need to move fast to protect their medium term gains. The Reserve Bank of Australia minutes show the RBA is open to potential easing of policy again early in 2020 and is weighing on the Aussie today.
Wall Street closed with decent gains with the S&P 500 +0.7% at 3191. US futures are a touch more tentative today, but Asian markets have been positive, with the Nikkei +0.5% and Shanghai Composite +1.3%. In forex, although EUR is holding up well, USD is outperforming across the major pairs. GBP is the biggest slider, down -0.6% whilst AUD is down -0.4% on those RBA minutes. In commodities, gold continues to sit at a crossroads, whilst oil is also holding on to its recent gains.
The focus for the economic calendar today comes with UK employment and US house building. At 0930GMT the UK Unemployment is expected to increase a shade to 3.9% in October (from 3.8% in September) with the claimant count for November at 24,500 (33,000 in October). There will also be a big focus on wages with UK Weekly Earnings expected to fall slightly to +3.4% (from +3.6% in September). Later in the session, US Building Permits are expected to slip to 1.41m (from 1.46m in October), whilst US Housing Starts are expected to increase to 1.3