• Trading in Asia was mixed as US shares stabilized overnight. In the meanwhile, the ongoing discussions between China and the US adds uncertainty. The bottom performer among major Asian indices was the Nikkei, which fell 0.45%.
• Oil climbed higher amidst resuming hopes following the 1.2 million barrels per day production cut agreed by OPEC+. However, concerns that the US could much further increase its shale production and the slowing global economy could make the output cut less effective.
• Gold ticked higher in Asian trading as its biggest nemesis – the US dollar – lost ground. Disappointing data about the US construction sector and concerns about a possible global economy slowdown could further have the USD slump, and hence increase bullish bids on the yellow metal.
• The Indian Rupee slumped 1.6% overnight following the resignation of its central bank governor.
• The Pound kept steady after the initial slump that followed May’s delay of the vote on Brexit.
• The yield on US 10-year Treasuries fell one basis point to 2.85% on concerns about trade talks with China and the lack of clarity concerning the faith of the jailed Huawei CFO.

Asian overnight: An 18-month low for Japanese stocks set the seal on a difficult session in Asia, but another strong rebound for Wall Street provided some hope that the selling in equities has abated for now. While the agreed March 1 deadline for further agreement on trade differences with the US looms, China over the weekend had contributed to increasing alarm in financial markets by summoning US and Canada’s ambassadors to answer about the Chinese businesswoman arrest. Stocks in China climbed following news that a timetable for trade talks was discussed. 

UK, US and Europe: News that the Chinese Vice Premier Liu He discussed the timetable for trade talks with US Treasury Secretary Steven Mnuchin had shares in China rise. Furthermore, the arrest of Huawei Technologies Co’s CEO makes the diplomatic wrestling even more critical. While possible progress on tariff talks had Chinese benchmarks ticked higher overnight, is a positive outcome for US concretely foreseeable?

Macron announced yesterday evening a series of resolutions in an attempt to end to the “yellow vest” protest that is jeopardizing its presidency. While the raft of new spending could undo part of the French government’s gains from tax increases, it could also stabilize the Eurozone politics, after more uncertainty was produced by the power switch in Germany’s CDU. With the Brexit deadline on the pipeline and concerns about a possible meddling in the “yellow vest” protest from Russia, the Old Continent is finding it hard to benefit from the Holiday Season’s higher spending.

Economic calendar - key events and forecast (times in GMT)

Source: Daily FX Economic Calendar

9.30am – UK employment data: September expected to have seen employment drop by 64,000, while the claimant count rises by 7400 in November. Unemployment rate for October expected to hold at 4.1%, while average hourly earnings to rise 3% for October. Markets to watch: GBP crosses

10am – German ZEW (December): economic sentiment to rise to -12 from -24. Markets to watch: EUR crosses

1.30pm – US PPI (November): factory-gate inflation to rise 0.1% MoM, from 0.6% last month. Markets to watch: USD crosses

11.30pm – Australia Westpac consumer confidence index (December): forecast to fall to 104 from 104.3. Markets to watch: AUD crosses
 

Corporate News, Upgrades and Downgrades

• Ashtead retained its full-year outlook, saying that stronger rental revenue growth in North America boosted performance. Pre-tax profit for the first half was up 25% to £610 million, while revenue was 19% higher at £2.25 billion. 
• WPP said it would spend £300 million over the next three years as part of restructuring efforts. Organic growth in line with peers is expected to return by the end of 2021. Full-year results are expected to be in line with forecasts. 
• Serco has won two UK contract extensions worth a combined £135 million. 

Aviva upgraded to top pick at RBC
Lancashire upgraded to outperform at RBC
Sanofi upgraded to buy at Jefferies
Unicaja Banco raised to buy at Ahorro Corporacion

Derwent London cut to equal-weight at Barclays
Phoenix cut to outperform at RBC
Superdry downgraded to hold at Berenberg
Standard Life Aberdeen cut to sector perform at RB

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