Equities rally to start the week
Nikkei 2.05% Dax 0.65%
UST 10Y 0.88
Asia and the EU
CNY IP 6.9% vs. 6.5%
CNY Retail Sales 4.3% vs. 5.0%
North America Open
USD Empire Manufacturing 8:30
Equity markets were higher at the start of the week with Asia leading the way in the wake of a historic trade agreement in the region that boosted investor spirits.
China and 14 other Asian-Pacific countries signed one of the largest trade agreements ever facilitating commerce in the fastest-growing region of the world. The news was greeted warmly by capital markets with Nikkei jumping full 2% higher on investor enthusiasm.
The positive mood held despite the softer than expected data out of China with Retail Sales coming in at 4.3% vs. 5.0% eyed while Industrial Production beat at 6.9% vs. 6.5%. China continues to be the best performing G-20 economy during the COVID pandemic and the bid for equities may start to tilt towards Asia rather than the US in months ahead.
In FX the action was much more sedate with most of the pairs trading flat. The one exception was cable which broke below the 1.3200 figure as Brexit negotiations showed little progress. It’s difficult to believe that the UK may willingly opt-out of a trade union with the EU especially in light of the fact that the incoming Biden administration is far less favorable to the British point of view.
The markets continue to bet that some sort of mutually agreeable arrangement will be negotiated in the end but the longer the stalemate drags on, the more vulnerable sterling will become to downward pressure.
In North America today the calendar is quiet with only Empire Manufacturing on tap and some of the early risk-on mood from Asia may very well fade especially if the COVID case counts continue to rise above the psychologically key 200,000 mark. For now, however, the markets remain in a positive state as investors continue to look forward to the vaccine and fiscal stimulus in 2021.