* A look at the day ahead from Deputy EMEA Markets Editor
Sujata
Rao. The views expressed are her own.
Dec 20 (Reuters) - Looks like cash sitting in defensive
assets is being deployed into equities as we reach the end of
2019. There are clouds on the horizon for sure – sluggish world
growth, Brexit, problems in several emerging market - but for
now markets are focusing on comments by U.S. Secretary of State
Mnuchin that phase one of a trade deal with China was complete
and that the two sides would sign it after the New Year.
All three major U.S. stock indexes notched up record closing
rallies on Thursday; the S&P 500 reached a sixth consecutive
record high, its longest streak since January 2018. Icing on the
cake was Congress approval for a new North American trade deal
that left in place $1.2 trillion in trade flows.
So world stocks have risen nine of the past 10 sessions and
the MSCI world index is set for its best month since March,
rising more than 7% so far in December. Markets barely batted an
eyelid when the U.S. House of Representatives voted to impeach
President Donald Trump. European shares are up around 0.3%, up
1% this week.
German and U.S. government bond markets are on course for
their fourth straight month of higher yields – Treasury yields
are up 10 basis points this week, their biggest rise since early
November.
That's despite persistent worrying signs on the growth
front. The U.S. Philly Fed and housing data were underwhelming
yesterday and Japan has just downgraded its view on the economy
for the fourth time this year. Japanese inflation did tick up
last month, data showed today, but the 2% target remains a
distant dream.
German consumer morale has worsened, a survey showed on
Friday, raising fears for consumer spending in Europe's largest
economy. As we await UK and U.S. final reports on third-quarter
gross domestic product, a Reuters poll showed analysts expect
world growth to remain subdued in 2020, with central banks’
toolkit considered to be exhausted
In Britain, parliament is set to debate PM Boris Johnson’s
Brexit bill later in the day. The majority he won in last week’s
election should allow him to get that across the line easily,
but fears are growing now that the country faces another
cliff-edge no-deal Brexit deadline at the end of 2020.
That’s taken sterling down to around $1.30, after it tested
a two-week low of $1.2990 on Thursday. So after three weeks of
gains, sterling is set for its biggest weekly decline in more
than two years, down 2.4% so far.
Also in the UK, FCA boss Andrew Bailey was chosen as the new
governor of the Bank of England. The market hasn't reacted --
Bailey spent 30 years at the BOE, but he was never a member of
the Monetary Policy Committee, so his policy stance is unknown.
In European stocks, there are some corporate updates, such
as Shell and Credit Suisse's fourth-quarter update. Traders call
Shell shares 2% lower, pointing to lower capex and
impairment charges in the quarter. Credit Suisse shares
are higher after it said it would book a pre-tax gain of at
least 450 million Swiss francs in the quarter.
Nike, which was close to record highs, fell 2%
overnight after it reported margins were hurt by higher product
costs from incremental tariffs. Nike's results could hurt Adidas
and JD Sports.
Emerging-market stocks were down 0.1% after recent gains.
China kept its lending benchmark rate unchanged on Friday.
Turkey's lira is 0.2% stronger against the dollar, a day
after sliding to its weakest level in daily trade since May.
South Africa's rand is 0.3% weaker, easing back from near a
four-and-a-half-month high. Most Asian currencies were stronger.
The Mexican central bank on Thursday cut its benchmark
interest rate to 7.25%, as expected, citing softening headline
inflation and slack in the economy. Argentina's central bank on
Thursday cut its benchmark interest rate to 58% from 63%.
Europe corp events: Carnival earnings
France Nov consumer confidence, producer prices
Italy Dec consumer, business confidence
EZ flash Dec consumer confidence, Oct current account
UK Q3 GDP, Nov public sector borrowing
Sweden Nov retail sales, producer prices
Mongolia, Jamaica central bank decisions
Bank of England policymaker Haskel speaks in London
US Q3 GDP revision, Nov personal income/consumption, Dec UMich
confidence
Canada Oct retail sales, new housing
Mexico Oct retail sales
Sovereign rating reviews – S&P Global reviews Benin
(Reporting by Sujata Rao, editing by Larry King)
