Currencies

End of QE bullish for Euro

The European Central Bank has confirmed it is ending its huge net asset purchase programme to stimulate the eurozone economy this month. The ECB has stopped its bond-buying scheme, worth €30bn a month, despite a recent slowdown in the bloc's recovery. The move, first announced in June, is a big step towards unwinding the policies brought in to stabilise the eurozone in the wake of the financial crisis. Updated ECB projections published Thursday showed the economy continuing to expand, albeit at a slightly slower pace than previously expected. End of QE as well as economic growth, even if at lower rate should be supportive of Euro against USD.

Negative divergence on chart

After the US and China halted high-level communications for weeks, there is some progress recently: US President Donald Trump and Chinese President Xi Jinping agreed at the G -20 meeting to resume trade talks. After the talks China has placed a few big orders with US for Soybean purchase and even lifted the retaliatory additional tariffs on US cars for a period of three months, showing optimism that talks are going on in positive direction. Technically, USD/CNH faced resistance near the 2016 peak of 6.98738 and has also developed a negative divergence on the RSI (14) momentum indicator on daily chart.

Prices holding above low positive

GBP has been all over the news this week on account of the Brexit negotiations and a no – confidence vote against Prime Minister Theresa May. A lot of volatility was witnessed in the pound pairs, which got support after a comfortable win by Theresa May. At present GBP/JPY is taking support at weekly trend line constructed by joining the lows of April 2017 and August 2018. We are witnessing a spinning top candlestick pattern at this trend line which is a neutral formation. Overall prices holding above low after negative news flow is a positive sign.

Equities

Trade war concerns to ease

Too much pessimism could mark the end of this year. The S&P 500 is off 5.8% in December, its worst start to the month since 1980. Rising interest rates get some of the blame for trimming stocks’ valuation. The Fed is expected to hike rates again on Wednesday, to 2.25%- 2.50%. The market’s tumult this year has left stocks trading at about 15 times the next 12 months’ expected earnings, in line with the long-term average. That’s well below the S&P 500’s price/earnings ratio of more than 18 on Sept. 20. The strategists are that the U.S. and China will reach some sort of trade deal early in 2019. Corporations and share prices also could benefit from healthy consumer demand and decent capital investment. We believe dips on SPX 500 should be bought.

Valuations are attractive

Large-bank valuations look enticing after a sharp fourth-quarter selloff driven by concerns over the health of the economy and the financial markets. Bank of America is a standout thanks to a top U.S. consumer banking franchise, a lucrative wealth management business anchored by Merrill Lynch, and an underappreciated management team led by CEO Brian Moynihan. Its shares, at $25, are off 16% so far this quarter and trade for less than 10 times projected 2018 earnings of $2.58 a share and less than nine times next year’s expected profits of $2.87 a share. At this valuation, stock is too cheap to ignore.

Metals

Bearish harmonic pattern

Gold fell to its lowest in more than a week on last trading day of the week and was on track to mark its biggest weekly decline in more than a month, as the dollar climbed on robust U.S. economic data ahead of a U.S. Federal Reserve meeting next week. The dollar rose to a 19-month high after data showed U.S. consumer spending appeared to gather momentum while industrial production rebounded in November. Markets are awaiting the Federal Open Market Committee (FOMC) meeting on Dec. 18-19, where the U.S. central bank is widely expected to raise interest rates. The focus, however, would be on the outlook for 2019. Technically, on daily chart gold has formed a bearish AB=CD harmonic pattern, and the RSI (14) is retracing back from just below the overbought zone which is a bearish sign.

Optimism fueled by Chinese comments

Copper clocked a third consecutive weekly fall on Friday after weaker than expected Chinese industrial data dampened expectations of demand from the largest metals consumer. Official figures showed China's November industrial output rose by the least in nearly three years. Euro zone data, meanwhile, showed growth in Europe had slowed. However, Supply is lagging behind demand and the producers need higher prices to invest in new projects. In addition, There has been a consistent flow of positive comments from Chinese officials that prove they are dedicated to reaching a trade deal before Trump's deadline of March 1st and news that China might even delay its 'Made in China 2025' strategy by a decade lifted the market's spirits.

Energies

IEA sees supply tightening

The global oil market could move into deficit sooner than expected thanks to OPEC’s output agreement with Russia and to Canada’s decision to cut supply, the International Energy Agency said on Thursday. The Paris-based IEA kept its 2019 forecast for global oil demand growth at 1.4 million barrels per day, unchanged from its projection last month, and said it expected growth of 1.3 million bpd this year. The decision by the government of Canada’s Alberta province to force oil producers to curtail supply will bring the largest reduction to crude output next year, the IEA said. Alberta crude and oil sands output will drop by 325,000 bpd from January to force down vast inventories that built up because of pipeline capacity constraints. Crude oil could bounce back from current level.

 

Source: Matrix PR