EU FX I Currencies: Weak euro lifts dollar, pound zooms on talk of second Brexit vote.

Saheli Roy Choudhury

3 minutes

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A trader shows U.S. dollar notes at a currency exchange booth.
Akhtar Soomro | Reuters

The U.S. dollar rose on Thursday against a euro dragged lower by soft economic data, while the pound took off on hopes of a second referendum on Britain's membership in the European Union.
Against the euro, the dollar strengthened to $1.1387, its highest in nearly two weeks. Inflation data for the trade bloc showed price pressures receding further from the central bank's target, complicating the situation for the European Central Bank which currently expects to raise interest rates later this year.
The single currency has fallen 0.80 percent against the dollar since Tuesday morning, when Germany reported its economy grew by 1.5 percent in 2018, the weakest rate of expansion in five years.
"The data that has been coming out of Europe this week has certainly been on the softer side and suggests that from an economic standpoint they are technically in a recession," said Dean Popplewell, chief currency strategist at Oanda.
The euro's weakness comes at a time when the dollar itself has struggled to gain momentum. On Jan. 10, the dollar almost fell below its 200-day moving average when the index touched a three-month low of 95.029. Since then it has rebounded but is still down about 0.07 percent so far this month.
The British pound rose to a two-month high against the euro , extending recent gains on growing expectations Britain can avoid a no-deal withdrawal from the European Union. Talk of a second referendum vote in the UK sparked a rally in afternoon trade which further lifted the currency.
Prime Minister Theresa May has been meeting lawmakers from all parties in an attempt to find a way out of an impasse over how Britain should leave the EU, after May's own plan was resoundingly rejected by parliament on Tuesday. While she has repeatedly rejected a second referendum, a vocal campaign in favor of holding a new vote has the support of some lawmakers.
Official government guidance shared with lawmakers on Wednesday showed that a second referendum would take more than a year to organize.
The pound also firmed toward a two-month high against the dollar. It was trading 0.73 percent up at $1.275, its highest since Nov. 15.
Investors expected the pound to trade within a relatively tight range for the remainder of the week. However, "comments tend to come fast and furious through the London papers on the weekend which normally sets up to a surprise open in sterling," said Popplewell.

Source: CNBC

Bond Yields Closing Market Report: Treasury yields jump on report US thinking about easing tariffs on China during negotiations

Thomas Franck, Ryan Browne

2 minutes

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U.S. government debt yields rose on Thursday amid news the U.S. could lower tariffs on Chinese goods as both countries continue negotiation on the trade front.
The yield on the benchmark 10-year Treasury note broke above 2.75 percent to its high of the day on the report. The 2-year yield also hit 2.57 percent before slipping back to 2.55 percent. 

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

That idea was floated by Treasury Secretary Steven Mnuchin, according to a Wall Street Journal report, which cited people close to the matter.. The report, however, added that Mnuchin faced push-back from U.S. Trade Representative Robert Lighthizer, who thinks any concession could be seen as a sign of weakness.
However, a Treasury Department spokesperson working with the trade team told CNBC: “Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China. This an ongoing process with the Chinese that is nowhere near completion.”
Back in December, China and the U.S. agreed to stop slapping tariffs on each other’s goods for 90 days while they tried to strike a deal on trade. Recent data has shown signs of weakness in China’s economy.

Asia, Europe & US Closing Market Reports

                                      ASIA

Asia markets struggle for gains despite strong US earnings; China concerns linger

Saheli Roy Choudhury

5-7 minutes

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People are reflected in a glass while looking at electronic boards displaying stock information at the Australian Securities Exchange.
Brendon Thorne | Bloomberg | Getty Images

Asia Pacific shares traded mixed on Thursday, despite strong quarterly earnings in the U.S. and after the U.K. government won a parliamentary confidence vote. Worries over China likely weighed on market sentiment.
Japan’s Nikkei 225 erased early gains of near 0.3 percent to close down 40.48 points, or 0.2 percent, at 20,402.27 while the Topix index added 5.43 points, or 0.35 percent, to 1,543.2.
The yen, considered a safe-haven asset, strengthened against the dollar, trading at 108.85 at 3:03 p.m. HK/SIN, climbing from an earlier session low of 109.12.
In South Korea, the Kospi also gave up early advances to close near flat. Australia’s benchmark ASX 200 rose 14.9 points, or 0.26 percent, to 5,850.1.
Markets in the Greater China region were mostly down: Hong Kong’s Hang Seng Index fell about 0.5 percent in late-afternoon trade. On the Chinese mainland, the Shanghai composite index fell 0.42 percent while the Shenzhen composite and Shenzhen component indices declined around 0.9 percent each.
The on-shore yuan traded at 6.7644 to the dollar. Prior to the market open, China’s central bank set the yuan mid-point at 6.7592. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from the official mid-point rate it sets daily.

Concerns over China remain

On Wednesday, the PBOC pumped 560 billion yuan ($83 billion) into its banking system, which was a record amount of money injected in one day. In a statement on its website, the central bank said because it was the “peak of the tax period,” total liquidity of the banking system is “declining rather quickly.”
Liquidity refers to the ease with which assets can be converted into cash.
The move “alleviated concerns of a potential funding squeeze ahead of the Chinese New Year festive period,” analysts at Singapore’s OCBC Bank said in a morning note.
Market sentiment has weighed in recent months over worries that the world’s second-largest economy is slowing down while Beijing remains entangled in a trade spat with Washington. For its part, the Chinese government has introduced a spate of measures to prop up the economy.
Participants in the market want to “see the reaction from the Chinese government, kind of acknowledging that there’s a slowdown, there’s risk — not only from the trade situation that we’re dealing with, but also from the deleveraging,” Daniel Morris, a senior investment strategist at BNP Paribas Asset Management, told CNBC’s “Squawk Box ” on Thursday.
Morris pointed to Beijing’s efforts to reduce debt in the economy as well as the size of China’s shadow banking system. That, he said, inevitably had a negative impact on growth and the government is now trying to offset that.
“So, it’s a bit of a balance for them. On one hand, if you’re deleveraging, that’s negative for growth. But then we have to try to compensate for that with interest rate cuts and spending elsewhere,” he said, adding that he was reasonably confident in Beijing’s ability to manage the situation, given that some of trade concerns and drag from tariffs ultimately goes away.

Asia-Pacific Market Indexes Chart

TICKER	COMPANY	NAME	PRICE	CHANGE	%CHANGE
NIKKEI	Nikkei 225 Index	NIKKEI	20402.27	-40.48	-0.20
HSI	Hang Seng Index	HSI	26755.63	-146.47	-0.54
ASX 200	S&P/ASX 200	ASX 200	5850.10	0.00	0.00
SHANGHAI	Shanghai	SHANGHAI	2559.64	-10.79	-0.42
KOSPI	KOSPI Index	KOSPI	2107.06	0.00	0.00
CNBC 100	CNBC 100 ASIA IDX	CNBC 100	7614.09	-3.24	-0.04

May survives vote of no-confidence

The U.K. government led by Prime Minister Theresa May survived a vote of no-confidence on Wednesday. It took place one day after May’s plan on how Britain should exit the European Union was overwhelmingly voted down in the House of Commons.
The British pound traded around $1.2877 Thursday afternoon during Asian hours, reacting fractionally to the outcome of the no-confidence vote.
May faces the task of cobbling together a Brexit deal that will satisfy both lawmakers in Europe and the U.K. as well as delivering on the 2016 referendum result. But some have suggested that a second referendum vote on the decision to leave the European Union could likely happen.
“If a second referendum is called, we believe (the pound) will begin to appreciate because the YouGov polls indicate a majority of those surveyed leaning towards remaining in the EU,” Richard Grace, chief currency strategist and head of international economics at the Commonwealth Bank of Australia, wrote in a morning note. “While this was the case in mid 2016 ahead of the initial referendum, there is now a better understanding by the public of the ramifications of each of the options.”
Overnight on Wall Street, stocks rose as investors cheered strong quarterly earnings from major banks like Goldman Sachs and Bank of America. In its latest report on the economy, the U.S. Federal Reserve said on Wednesday that labor markets have tightened across the country as businesses struggled to find workers at any skill level while wages grew moderately.
The dollar index, which measures the greenback against a basket of its peers, changed hands at 96.144 at 3:06 p.m. HK/SIN. Meanwhile the Australian dollar traded at $0.7157 and the euro was at $1.1392.
— CNBC’s David Reid contributed to this report.

                                                                         
                                                                           EUROPE

European markets close flat after May survives no-confidence vote; ITV shares dive 6%

David Reid,Sam Meredith

3-4 minutes

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European stocks edged marginally higher Thursday afternoon, amid heightened political uncertainty in the U.K. and ongoing concerns over China's cooling economy.
The pan-European Stoxx 600 provisionally rose 0.06 percent by the close of trade but most major bourses struggled to leave negative territory.

European Markets: FTSE, GDAXI, FCHI, IBEX

TICKER	COMPANY	NAME	PRICE	CHANGE	%CHANGE	VOLUME
FTSE	FTSE 100	FTSE	6834.92	-27.76	-0.40	600674411
DAX	DAX	DAX	10918.62	-12.62	-0.12	81780401
CAC	CAC	CAC	4794.37	-16.37	-0.34	85231323

Europe's banking index was the worst performer Thursday, down 1.2 percent amid earnings news. French bank Societe Generale led the losses, shortly after it reported fourth-quarter results would be negatively impacted by tough market conditions. Shares of the Paris-listed stock slipped more than 6.1 percent on the news.
Looking at individual stocks, Britain's Sage surged towards the top of the European benchmark. It comes after the software company maintained its full-year guidance on Thursday, adding it had been encouraged by a strong start to 2019. Shares of the group rose over 5.1 percent.
Meanwhile, Britain's ITV slumped to the bottom of the index after Bank of America Merrill Lynch slashed its stock recommendation to "underperform" from "buy." Shares of the London-listed media company fell more than 6.1 percent on the news.
On the data front, a final reading of euro zone inflation confirmed preliminary estimates released earlier in January. The final figures showed inflation slowed in December to 1.6 percent on the year, while core indicators remained at stable low levels.
The figures published Thursday by the European Union's statistics office show inflation has fallen away from the European Central Bank target of a rate below, but close to, 2 percent. That could complicate the central bank's path for a possible interest rate hike over the coming months.

Brexit 'Plan B'

Market focus is largely attuned to the latest Brexit developments, after Prime Minister Theresa May narrowly won a no-confidence vote late Wednesday.
May defeated the parliamentary motion by a margin of 19 votes.
Shortly after securing the votes needed to avoid a general election, May urged other party leaders to hold cross-party talks in an effort to break the current deadlock on a Brexit divorce deal.
An outline for a so-called "Plan B" is due by Monday, with market participants widely expecting Westminster to push for an extension of Article 50 past March 29.
In Asia, MSCI's broadest index of Asia-Pacific shares, excluding Japan, edged 0.2 percent higher on Thursday.
By Europe's close, U.S. stocks were still open for trade and mildly higher on average.

                                           
                                                                                   US

Stocks rise after report says US considering easing China tariffs during negotiations

Fred Imbert

5-6 minutes

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Stocks rose on Thursday on the back of a report that said the U.S. could ease tariffs on Chinese goods during their trade negotiations with China.
That idea was floated by Treasury Secretary Steven Mnuchin, according to a Wall Street Journal report, which cited people close to the matter. The report, however, added that Mnuchin faced pushback from U.S. Trade Representative Robert Lighthizer, who thinks any concession could be seen as a sign of weakness.
The report sent stocks to their highs of the day, with the Dow Jones Industrial Average rising more than 250 points. The S&P 500 and Nasdaq Composite both rose about 1 percent following the report.

However, the major indexes came off their highs after a Treasury Department spokesperson working with the trade team told CNBC: “Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China. This is an ongoing process with the Chinese that is nowhere near completion.”
A senior administration official who participated in a trade meeting with the president on Wednesday later told CNBC that there is “no discussion of lifting tariffs now.” The official also said President Donald Trump “has no interest in making decisions now, it would put him in a weaker position.”
The Dow closed up 163 points, lifting itself out of correction territory. The S&P 500 ended the day up 0.76 percent while the Nasdaq climbed 0.7 percent.
“The good news is the reaction shows how much of a headwind the trade situation is on the market right now. It’s like a coiled spring ready to react to a whiff of good news. The bad news is it needs to be more official and less floated,” said Art Hogan, chief market strategist at National Securities.
Caterpillar shares spiked 2.2 percent, while Boeing jumped 2 percent. Caterpillar and Boeing shares are seen as bellwethers for global trade given their exposure to overseas markets. Apple also rose 0.6 percent.

A truck moves a shipping container at Qingdao Port on January 14, 2019 in Qingdao, Shandong Province of China.
VCG | Getty Images

Back in December, China and the U.S. agreed to stop slapping tariffs on each other’s goods for 90 days while they tried to strike a deal on trade. Recent data has shown signs of weakness in China’s economy.
Stocks had traded slightly higher earlier in the day as investors awaited Netflix’s quarterly results. Netflix is scheduled to report after the close Thursday. The stock has been on a tear so far this year, rising more than 31 percent. Netflix’s earnings will arrive after the streaming giant announced it would raise monthly subscription prices by 13 to 18 percent, a move that was cheered by Wall Street earlier this week. Dow member American Express is also set to report after the close.
“Some of the information we have gotten are surprisingly negative to me,” said Kim Forrest, senior equity analyst at Fort Pitt Capital. “It’s a mixed sort of earnings season so far.”
“Today’s information is super important, not just for Netflix, because these are our most discretionary dollars,” Forrest said. “How is that being spent? Is it being spent the same way it was last year? I think that will tell us something about how healthy the consumer is and how healthy the economy is.”
Morgan Stanley reported earnings and revenue that fell short of Wall Street estimates. The company’s results were dragged down by poor performances in its trading and wealth management businesses. Morgan Stanley shares fell 4 percent. Citigroup, J.P. Morgan Chase and Wells Fargo also reported quarterly earnings this week.
Thursday’s moves came after the major indexes posted solid gains in the previous session, lifted by the sharp gains in Goldman Sachs and Bank of America. For the week, the major indexes are all up more than 1 percent.
“Upside should now prove limited for global indices, with S&P likely to start to weaken and pullback and any strength would face strong overhead resistance between 2630-40,” said Mark Newton, managing member at Newton Advisors, in a note.
“Indices have moved between 10-15% in the last 15 trading days since Christmas Eve, and have finally reached the 50% retracement levels (or fractionally below) from the decline from September/October,” he added. “Structurally this area remains difficult as several lows were made at this area and now offer resistance on this rally.”
— CNBC’s Ryan Browne, Eamon Javers, Saheli Roy Choudhury and David Reid contributed to this report.

Source: CNBC

Politico I Breaking News: Trump strikes back at Pelosi

politico.com

By Alyssa Mt. Pleasant and David A. Chang

6-7 minutes

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So far, President Donald Trump has been uncharacteristically quiet in response to Nancy Pelosi's letter. | Mandel Ngan/AFP/Getty Images

Government Shutdown
The president is so far staying uncharacteristically silent after Pelosi's State of the Union power play.

Updated, 2:20 p.m.: President Donald Trump hit back at Speaker Nancy Pelosi a day after she asked to reschedule his State of the Union address, saying a trip she planned to make to Brussels, Egypt and Afghanistan has been postponed.
"We will reschedule this seven-day excursion when the Shutdown is over," he said in a letter to Pelosi.
Story Continued Below
Original story:
President Donald Trump and his aides like to say that when he is attacked, he punches back 10 times harder.
But more than 24 hours after House Speaker Nancy Pelosi delivered an explosive letter calling for the postponement of the State of the Union address, Trump and White House officials are staying largely silent — and that's by design.
White House officials, who were caught completely off guard by the letter, have made a strategic decision to ignore it, and neither the president nor senior officials are expected to publicly respond, at least for now, according to two people familiar with the matter. A White House spokeswoman did not respond to a request for comment.
Trump aides are still weighing next steps and trying to determine whether Pelosi is willing to force the cancellation of the speech. In the meantime, an angry outburst from the president would likely only give the matter more oxygen.
The only formal response from the administration came in a Wednesday tweet from Homeland Security Secretary Kirstjen Nielsen, who insisted that her department and the U.S. Secret Service are "fully prepared to support and secure" the annual event, which brings together the highest-ranking officials from all three branches of government.
Privately, administration officials insist that Pelosi's contention that the now-27-day-long partial government shutdown complicates efforts to secure the event is overblown. Officials noted that many Secret Service agents and senior DHS staffers are still on the job, working without pay.
They believe the House speaker overreached in calling for the speech to either be delayed or delivered in writing, and they are confident they have the support of Republicans in Congress to continue on with the State of the Union speech.
As of Thursday morning, it remained unclear how Trump and Pelosi might resolve the standoff. Although her letter technically framed the call for a delay as a request, not a demand, Pelosi has the final say on whether the speech can take place. Pelosi told reporters on Thursday that she had not heard anything from the White House, and added that Jan. 29 “is not a sacred date.”
“It’s not constitutionally required. It’s not a president’s birthday. It is a date we agreed to,” Pelosi said. “It could be a week later if government is opened. But it isn’t as if that date is sacred. It’s one that was negotiated.”
The California Democrat wouldn't comment on what she’d do if Trump rejected her request to reschedule the address. “We’ll cross that bridge when we come to it,” Pelosi said.
She then chided Trump for staying quiet on the issue, pointing out how unusual it is for a president who regularly lashes out at political opponents on Twitter.
“It’s very silent,” Pelosi said.
The State of the Union uncertainty comes amid a shutdown that shows no sign of ending. Trump has vacillated between worrying about the political fallout from the crisis, now the longest in history, and doubling down on his insistence for more than $5 billion in wall funding. Efforts to strike a bipartisan compromise have largely fizzled and there are no ongoing discussions between the White House and congressional Democratic leaders.
So far, Trump has been uncharacteristically quiet in response to Pelosi's letter. He hasn't said anything about it publicly, even on Twitter, where he often spouts off about everything from his frustrations with world leaders to his opinions about cable news.
During a speech at the Pentagon on Thursday, he glossed over the State of the Union showdown, instead reiterating his demand for money for his border wall. "We need strong borders. We need strong barriers and walls," he said. "Nothing else is going to work. Everybody knows it.”
He also used the speech to criticize Pelosi by name for, in his view, preventing moderate Democrats from striking a deal. But he didn't mention her State of the Union power play. "While many Democrats in the House and Senate would like to make a deal, Speaker Pelosi will not let them negotiate," he said.
A handful of Republicans have floated the idea of inviting Trump to hold the State of the Union address in the Senate, though GOP members have generally dismissed the idea.
Sen. Rand Paul (R-Ky.) and Rep. Mo Brooks (R-Ala.) both suggested that Senate Majority Leader Mitch McConnell invite the president to deliver the annual address, with Brooks circulating a letter that so far has collected 10 cosponsors.
On Twitter earlier Thursday, Trump struck a similar tone, bashing Democrats while ignoring Pelosi's letter.
"The Left has become totally unhinged. They no longer care what is Right for our Countrty!" he wrote on Twitter, misspelling the word "country."
John Bresnahan, Sarah Ferris and Burgess Everett contributed to this report.

Source: Politico

Crude Oil Closing Prices Report: Oil prices slip on increased US output and trade fears

Tom DiChristopher

3 minutes

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Men work for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq,
Essam Al-Sudani | Reuters

Oil prices were lower on Thursday on concerns over surging U.S. crude production and slack global demand, particularly in light of the ongoing trade dispute between the United States and China.
International Brent crude oil futures were down 12 cents at $61.20 per barrel around 1:45 p.m. ET. The contract earlier fell as low as $60.04 per barrel.
U.S. West Texas Intermediate crude futures fell 35 cents to $51.96 per barrel, bouncing from a session low at $50.98.
In its monthly market report, OPEC cut its forecast for the average demand for its crude in 2019 to 30.83 million bpd, down 910,000 bpd from the 2018 average.

OPEC said its output fell 751,000 barrels per day in December, suggesting it was on its way to fulfilling terms of a pact to cut production between those nations and other producers, including Russia.
Even as OPEC and allied exporters cut production, however, U.S. output has surged close to 12 million bpd in the latest week, and some traders and investors are concerned that growth in global supply this year will outpace demand.
“That’s going to weigh on the market at least until we get some new information,” including from OPEC, said Thomas Saal, senior vice president of INTL Hencorp Futures in Miami.
Still, Saal said, investors had already expected increasing U.S. production and priced it into the market, “so that’s why prices are down a little bit and not down a lot.”
U.S. output has climbed by 2.4 million bpd since January 2018 and stockpiles of crude and refined products have risen sharply, U.S. Energy Information Administration data showed.

In response to the drop in price in the second half of last year, OPEC and non-members plan to cut production by a joint 1.2 million bpd this year.
Oil is still about 20 percent above the lows reached in late December, but analysts said Brent has been trading in the low $60s and U.S. crude in the low $50s due to ongoing nervousness about relations between Washington and Beijing and China’s economic outlook.
“Brent needs to move past $62 before we can talk about $65,” BNP Paribas head of commodities Harry Tchilingurian told the Reuters Global Oil Forum.
“From there, the door will be open to target $70, (if) we do not have negative news emerging around U.S.-China trade talks that caused high levels of angst and de-risking last December.”
— CNBC’s Tom DiChristopher contributed to this report.

Source: CNBC

Metals Closing Prices Report: Palladium surges to new record on tight fundamentals

3-4 minutes

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Leonhard Foeger | Reuters

Palladium surpassed the $1,400 mark for the first time on Thursday, as demand for the auto-catalyst metal overtook its availability in the market, while gold edged lower as the dollar gained on better-than-expected U.S. jobs data.
Spot palladium gained 2.35 percent to $1,391 per ounce as of 1:15 p.m. ET, having earlier hit an all-time high of $1,434.50, and rising more than 10 percent so far this month.
"The palladium market is laboring under production-consumption deficits," said James Steel, chief precious metals analyst at HSBC.
Adding to palladium's appeal were policy initiatives to help support demand that were unveiled by China, the biggest auto market, Steel said.
The price of palladium, used mainly in emissions-reducing catalysts for vehicles, has jumped more than 70 percent since hitting a trough in mid-August. The metal overtook gold in price terms for the first time in 16 years late last year.
"We are seeing steady buying in modest amounts; just no supply and no one willing to sell because you don't know where it will stop," said Tai Wong, head of base and precious metals derivatives trading at BMO.
Holdings in palladium exchange-traded funds (ETFs) tracked by Reuters have nearly halved from January last year as prices rose.
"There is not sufficient supply in the market, so people are purchasing metals from the ETFs," said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Meanwhile, gold fell 0.07 percent to $1,292.51 per ounce, with a psychological resistance of $1,300 holding a solid roof over its head U.S. gold futures fell 0.11 percent to $1,292.40.
"Gold dipped after the good jobless claims number from the United States, and has not recovered since. Now, the dollar is grinding higher with yields backing up, further weighing on the metal," BMO's Wong said.
The greenback ticked up on Thursday after stronger than expected economic data reports, while the pound stabilized as British policymakers sought consensus on how to exit the European Union.
The number of Americans filing applications for jobless benefits unexpectedly fell last week, pointing to sustained labor market strength that should continue to underpin the economy.
A stronger dollar makes gold more expensive for holders of other currencies.
However, the metal remains supported by a variety of factors, including a prolonged partial U.S. government shutdown, a possible pause in the U.S. Federal Reserve's rate hike cycle, and concerns surrounding Brexit, analysts said.
Spot gold is about to exit a neutral range of $1,285-$1,299, and either rise to $1,311 or drop toward $1,268, according to Reuters technical analyst Wang Tao.
In other metals, platinum held steady at $804.50 an ounce, while silver fell 0.46 percent to $15.52.

Source: CNBC