Market Review 18-01

Market Review 18-01

Forex News

Dollar Little Changed; China-U.S. Trade Talks in Focus

From: Investing.com

The U.S. dollar was little changed on Friday in Asia after trading slightly higher earlier in the day amid optimism of progress in Sino-U.S. trade talks.

The U.S. dollar index that tracks the greenback against a basket of other currencies last traded at 95.732 by 12:01 AM ET (05:01 GMT), up 0.02%.

Citing people with knowledge to the matter, the Wall Street Journal said U.S. Treasury Secretary Steven Mnuchin is a proponent of easing tariffs on Chinese products.

The report sent U.S. stocks higher overnight, even after the Treasury Department quickly denied the news.

Chinese Vice Premier Liu He will visit the U.S. later this month for another round of trade talks.

Separately, jobless claims data showed on Thursday that the U.S. government shutdown has yet to have an impact on jobs.

The number of people who filed for unemployment assistance in the U.S. hit its lowest level in five weeks, despite 27 days of a government shutdown which has furloughed 800,000 federal workers.

Meanwhile, the Chinese yuan was near flat against the U.S. dollar, as the USD/CNY pair traded at 6.7768, up 0.06%.

China’s statistics bureau on Friday revised down its final 2017 gross domestic product (GDP) growth to 6.8% from the previous 6.9%.

The revision came ahead of Monday’s release of preliminary GDP growth figures for the latest quarter and full-year 2018.

Sources have told Reuters earlier that Beijing is considering setting a lower economic growth target of 6-6.5% in 2019.

The People’s Bank of China (PBOC) set the yuan reference rate at 6.7665 on Friday vs the previous day’s fix of 6.7592.

Elsewhere, the USD/JPY pair was up 0.16% to 109.39.

The AUD/USD pair was unchanged at 0.7190.

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US Dollar to South African Rand Exchange Rate Edges Higher Ahead of Expected South African Reserve Bank Interest Rate Freeze

From: Futurecurrencyforecast.com

The US Dollar to South African Rand (USD/ZAR) exchange rate rebounded slightly from its worst weekly levels this morning, as investors anticipated the South African Reserve Bank’s (SARB) January policy decision.

After opening this week at the level of 13.83, USD/ZAR briefly edged higher before tumbling. On Wednesday evening, USD/ZAR touched on a 5-month-low of 13.65 before rebounding slightly this morning and trending nearer the level of 13.74.

Investors are buying the US Dollar (USD) due to lingering market demand for safe haven currencies. Uncertainties about tensions between the US and China, as well as political uncertainties in Europe, have made investors a little more eager to buy safer currencies instead.

Relatively risky emerging market currencies like the South African Rand (ZAR) have also been less appealing as a result.

The South African Rand in particular has been unable to hold its best levels this week due to some disappointing South African data, as well as market expectations that the South African Reserve Bank will not be particularly hawkish in its upcoming policy decision.

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Stock Market News

Asian Stocks Gain on U.S.-China Trade Optimism

From: Investing.com

Asian stocks traded higher in morning trade on Friday on reports that U.S. Treasury Secretary Steven Mnuchin proposed easing China tariffs.

Citing people with knowledge to the matter, the Wall Street Journal said Mnuchin is a proponent of easing tariffs, but Trade Representative Robert Lighthizer is concerned the move would be seen as a sign of weakness.

The report sent U.S. stocks higher overnight, even after the Treasury Department quickly denied the news.

Earlier today, a senior administration official told CNBC in an interview that “there’s no discussion of lifting tariffs now.”

In Asia, China’s Shanghai Composite and the Shenzhen Component were both up 0.8%. Hong Kong’s Hang Seng Index gained 1.1%.

Japan’s Nikkei 225 rose 1.3% even after data on Friday showed the country’s annual core consumer inflation slowed to a seven-month low in December.

The core consumer price index (CPI) rose 0.7% in December from a year earlier, government data showed on Friday, slowing from the previous month’s 0.9% gain.

Worsening Sino-U.S. trade disputes and slowing Chinese growth were said to be weighing on Japan’s exports and business sentiment.

Elsewhere, South Korea’s KOSPI advanced 0.5%. Australia’s ASX 200 gained 0.4%.

In other news, U.S. President Donald Trump cancelled his scheduled U.S. delegation’s trip to the global economic summit in Davos later this month, citing the ongoing partial government shutdown.

“Out of consideration for the 800,000 great American workers not receiving pay and to ensure his team can assist as needed, President Trump has cancelled his Delegation’s trip to the World Economic Forum in Davos, Switzerland,” White House Press Secretary Sarah Sanders said Thursday in a statement.

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Reality check for Europe Inc: investors brace for bumpy fourth quarter results season

From: Reuters.com

Investors are bracing for more wild swings in European stocks as the upcoming earnings season tests whether fears about slowing economic and corporate growth that punished equities in recent months have become a reality.

Global stock markets cratered in the fourth quarter amid worries about China’s slowing economy, the damage from trade tensions, Italy’s budget crisis and U.S. interest rate rises.

Investors will be scouring earnings releases for evidence that the rout which saw the pan-European STOXX 600 index notch up its worst quarterly performance in six years was justified.

Expectations are already low. According to I/B/E/S Refinitiv, fourth-quarter earnings per share (EPS) for STOXX 600 companies are expected to have grown by 6 percent, more than half the levels seen in Q3 and Q4 2017.

Excluding the energy sector, the increase would be just 3.9 percent.

Forecasts as recently as November were for 13 percent growth but a series of nasty industrial and trade data surprises from Europe and China has caused analysts to downgrade their view.

Equity strategists are braced for companies to reset expectations for the year ahead by slashing their 2019 guidance, even if some believe the market may have got ahead of itself by pricing in a slowdown or even a recession for later this year.

“It’s going to be a reality check because there’s been stress from many angles, with trade tensions, the auto sector in Germany, the political situation in Italy, the UK and the U.S.,” said Emmanuel Cau, head of European equity strategy at Barclays.

“I think there will be concerns to see whether the market was right to price lower in the last few months.”

Some reckon estimates are still too positive.

Sharon Bell, head of European equity strategy at Goldman Sachs, has pegged earnings growth as low as 4 percent.

“The big difference between us and consensus is that they are assuming margins will stay the same or grow a little bit, whereas we are assuming margins will go down a little,” she said.

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Cryptocurrency News

MIT, Stanford Researchers to Fund New ‘Globally Scalable’ Cryptocurrency, ‘Unit-e’

From: Cointelegraph.com

A group of researchers from top United States universities have announced the launch of a “globally scalable decentralized payments network,” according to a press release published today, Jan. 17.

The development of the cryptocurrency, dubbed “Unit-e,” is being funded by Distributed Technologies Research (DTR) — a non-profit organization based in Switzerland, whose official launch was also announced today in the press release.

DTR includes researchers from seven major U.S. universities, including the Massachusetts Institute of Technology (MIT), Stanford University and the University of California, Berkeley, as Bloomberg reports.

The organization reportedly received backing from blockchain investment fund Pantera Capital.

According to the press release, the core team developing Unit-e is based in Berlin and consists of “open-source and distributed systems engineers.”

Joey Krug, a member of the DTR Foundation Council and Co-Chief Investment Officer at Pantera Capital, claimed that “a lack of scalability is holding back cryptocurrency adoption.”

As Bloomberg reports, DTR is planning to launch Unit-e in the second half of this year. The organization told reporters their goal for the cryptocurrency’s processing time is 10,000 transactions per second.

On Dec. 23, the capacity of the Bitcoin (BTC) Lightning Network (LN) surpassed $2 million in transactions, with node channels that support LN able to facilitate 496.8 BTC. With that, the number of channels connecting nodes has also significantly grown for the first time for the past two months, totaling 14,352 unique channels by late 2018.

In October 2018, post-trade financial services firm Depository Trust & Clearing Corporation published a study that found that blockchain technology is scalable enough to support day to day volumes of U.S. equity markets.

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