Day Ahead: Top 3 Things to Watch
1. ADP Employment, Services PMI Highlight Indicators
The economic calendar is packed tomorrow as most of the Wednesday releases were delayed for the national day of mourning for former President George H.W. Bush.
ADP’s measure of private nonfarm employment, closely watched ahead of Friday’s official labor report, will be released at 8:15 AM ET (13:15 GMT). Private payrolls are expected to have grown by 195,000 in November, according to economists.
At 8:30 AM ET the weekly measure of initial jobless claims arrives, with economists predicting a drop to 226,000 for the latest period.
October factory orders come in at 10:00 AM ET, with a 1.9% drop predicted.
At the same time, the ISM will release its measure of services activity in the economy for November will be released.
On average, economists expect that the ISM non-manufacturing PMI fell slightly to 59.2 last month.
2. OPEC Meeting Begins
The oil market will be particularly active as OPEC gets its meeting in Vienna underway.
Traders have been grappling with mixed signals from Saudi Arabia about whether there will be a production cut as the kingdom does not want to bear the brunt of any supply contraction by itself and also wants to avoid irking President Donald Trump.
Russia, which is expected to participate in any cut, has also been cagey.
In addition, traders will have the latest weekly oil inventories data – pushed forward a day – to digest at 11:00 AM ET (16:00 GMT).
The big rise in U.S. crude stockpiles is a major reason why oil prices tumbled sharply last month.
Traders are expecting a decline this time around, with inventories forecast to have dropped by more than 2 million barrels.
GBP/USD Trade Range Bound As Investors Are Cautious Ahead of Brexit Vote
GBP/USD trades range bound as investors are cautious ahead of DEC 11 Brexit vote owing to high level of uncertainty about the future of deal and PM May’s Brexit Government.
GBP/USD continues to trade sideways yesterday reaching daily peaks in the 1.2800 neighborhood before sinking back down into the 1.2700 region, though swing lows continue further into the downside. Meanwhile this week’s low of 1.2658 has tested the waters of a 19-month low for the Sterling as the run-up to December 11th’s Brexit vote continues to see the GBP/USD pair off-balance amid fear of a potentially disastrous outcome. According to the UK’s Telegraph, the current stacking of MPs in the UK’s House of Commons is currently set at 216 for and 423 against Prime Minister Theresa May’s current Brexit proposal, and despite several days of debates in the parliament ahead of December 11th’s MP vote on whether or not to accept the PM’s current deal, the odds remain stacked heavily against PM May and her shrinking constituency.
Economic data in the UK continues to disappoint as Brexit fear continues to take its toll
While yesterday’s up move was unaffected by USD’s demand from hawkish FOMC member comments and dovish UK macro data, A sudden spike in global risk-aversion, triggered by the US President Donald Trump’s latest comments on China trade, turned out to be one of the key factors that underpinned the greenback’s relative safe-haven status which dragged the pair below mid 1.27 price handle. Adding to this, growing concerns of investors over global economic slowdown and consecutive session of bearish rout in all key equity markets across the globe killed risk appetite in market considerably boosting demand for safe haven USD. The only thing keeping the Cable afloat in the broader markets is broader USD weakness owing to an inversion of the short end of the US Treasury yield curve hinting at recession in US markets. As of writing this article, GBPUSD pair is trading at 1.2712 down by 0.17% on the day.
On release front, there isn’t any major market-moving economic data due for release from the UK, while the US economic docket highlights the release of the ADP report and ISM non-manufacturing PMI. With investors focus glued to the latest developments surrounding the UK’s looming departure from the EU, today’s US macroeconomic data seems unlikely to be a major game changer, though might assist traders to grab some short-term opportunities later during the early North-American session. When looking from technical perspective, the pair’s repeated failed attempts to find acceptance above 200-hour EMA clearly points to persistent selling bias at higher levels. The downside, however, remains cushioned ahead of the next big event risk and hence, the pair seems more likely to continue with its volatile swings within a broader trading range. Expected support and resistance for the day are at 1.2695, 1.2660 and 1.2760, 1.2800 respectively.
Dollar Little Changed; Yuan Falls After Huawei CFO Arrest
The dollar was little changed on Thursday while the Chinese yuan fell after the arrest of the CFO of tech giant Huawei Technologies.
The U.S. dollar index that tracks the greenback against a basket of other currencies last traded at 96.970 by 11:40 PM ET (04:40 GMT), down 0.04%.
“The dollar could remain under pressure until this month’s Fed meeting as long-term Treasury yields may not be able to mount a rebound until the market sees the Fed’s stance on policy and the economy,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
The dollar is under pressure this week amid concerns about economic growth following an inversion of the U.S. Treasury yield curve.
The two-year/10-year spread was at its flattest this week in more than a decade amid a sharp fall in long-term rates. A flatter curve is seen as an indicator of a slowing economy.
Meanwhile, the USD/CNY pair gained 0.32% to 6.8777. Canada’s Department of Justice said on Wednesday that Meng Wanzhou, CFO of Huawei, was arrested in Vancouver due to violations of U.S. sanctions. She is facing extradition to the United States, according to various media.
The news broke after the U.S. and China agreed to halt the planned increase in tariffs to 25% from 10% on Chinese imports earlier this week.
Stock Market News
AIG hit with $750 million to $800 million in fourth-quarter catastrophe losses
American International Group (AIG.N) Inc has racked up an estimated $750 million to $800 million in catastrophe losses so far during the 2018 fourth quarter, its chief executive officer said on Wednesday.
Still, the company’s general insurance unit is on track to enter 2019 “at a slight underwriting profit,” AIG CEO Brian Duperreault said at the Goldman Sachs U.S. Financial Services Conference in New York.
The catastrophe losses do not include December, Duperreault said.
Duperreault, who took charge of AIG in 2017, has vowed to turn the company around. His most critical task is overhauling AIG’s underwriting culture after the company spent years chasing revenue growth without appropriately weighing risks.
AIG company expects an overall eight percent adjusted return on equity going into 2019, driven in part by the slight underwriting profit in its general insurance unit, Duperreault said on Wednesday.
“But let me be clear. We are not satisfied with an eight percent,” Duperreault said. The company intends to reach a double-digit adjusted return on equity, but the process could take up to three years, he added.
“The problems that AIG had when I arrived were the result of over a decade of firefighting but we are moving beyond that era,” Duperreault said.
AIG expects the unit’s 2019 net earned premium to be consistent with 2018 levels, Duperreault said.
Tesla’s China factory is set to begin production late next year, Shanghai government says
- The factory is expected to be put partially into operation in the second half of next year, according to an official WeChat post from the Shanghai government.
- Tesla did not immediately respond to an emailed request for comment.
- Elon Musk’s company has also launched an official WeChat account for hiring locals.
Tesla is on pace to begin production at its factory in China in the second half of next year, the Shanghai government said Wednesday.
Land leveling is basically complete and construction is about to begin, with the factory expected to be put partially into operation in the second half of 2019, according to an official WeChat post from the government. The article described a visit by Shanghai Mayor Ying Yong and Vice Mayor Wu Qing.
Tesla did not immediately respond to an emailed request for comment.
In mid-October, Tesla officially acquired an 864,885-square meter plot in Shanghai’s Lingang area for the electric car maker’s first factory outside the U.S.
Elon Musk’s company has also launched an official WeChat account for hiring locals.
Producing in China, the world’s largest market for electric vehicles, would allow Tesla to reduce costs significantly. The company has said it is operating at a 55 percent to 60 percent cost disadvantage with a domestic peer due to ocean transport costs and tariffs.
Bitcoin to Regain its Market Share in 2019
In 2019, Bitcoin will regain ground in terms of market share and capitalization as traders will flee risky altcoins and seek haven in a time-proven coin. That’s the year-ahead prediction published by leading consulting company A.T. Kearney.
“By the end of 2019, Bitcoin will reclaim nearly two-thirds of the crypto market capitalization, as altcoins lose their luster because of growing risk aversion among cryptocurrency investors,” the report states.
Regarding the main reasons for growing Bitcoin dominance, A.T. Kearney says that global financial regulators will adopt a more measured and less restrictive approach towards the industry. Their efforts aimed at reducing cryptocurrency price volatility and preventing criminal activities will help to reinstate confidence and foster market stability.
Some global jurisdictions have already demonstrated an interest in adopting the new reality offered by blockchain technologies and digital money concept. Thus, the British parliament’s Treasury Committee and MPs are calling for clear crypto industry regulation that will end the “wild west” environment and make the market more secure.
“At the same time, the US Securities and Exchange Commission will warm to Bitcoin exchange-traded funds and, with the US Commodities Futures Trading Commission, will continue to work to improve market transparency. Ironically, for cryptocurrencies to see a third decade, the only viable path forward involves this acceptance by the international financial system that Bitcoin once sought to defeat,” experts add.
Apart from that, A.T. Kearney explained that the complex nature of altcoins brought to the limelight by the recent “hash wars” within the Bitcoin Cash ecosystem will speed up users’ exodus from smaller coins to established assets less prone to destructive forks, 51% attacks and other vulnerabilities common to cryptocurrencies.
“Additional “hard forks” and the continued lack of consensus among developers about a path forward will further widen the chasm between Bitcoin as the most accessible and widely recognized cryptocurrency and the altcoin community,” Courtney Rickert McCaffrey from A.T. Kearney explained in the interview with Forbes.
Currently, Bitcoin market dominance is 54%, which is significantly lower from the 88% registered in January 2017. A year later, in January 2018, Bitcoin’s market share had dropped to 33%. A steady price collapse helped the coin to regain its footing.
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