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Dec 14, 2018

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EU FX I Currencies: Dollar hits 19-month peak on gloom outside U.S.

Chloe Taylor

The dollar shone on Friday, reaching a 19-month high against a basket of currencies, as investors preferred the safety of the world’s reserve currency in the wake of worrisome political and economic news outside the United States.
The Chinese yuan fell after data showed retail sales grew in November at their slowest pace since 2003 and industrial output rose the least in nearly three years. The offshore yuan shed 0.38 percent at 6.9038 per dollar. The euro weakened as the euro zone economy showed more signs of a slowdown.
Sterling tumbled as traders worried British Prime Minister Theresa May was struggling to secure assurances from the EU over her Brexit withdrawal deal.
“The dollar is not so much rallying as much as everyone else is falling,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. An index that tracks the greenback versus six major peers hit its highest level since May 2017 at 97.711. At 11:02 a.m. (1602 GMT), it was up 0.49 percent at 97.536. The greenback’s appeal increased in the aftermath of upbeat data on domestic retail sales and industrial output.
The dollar’s gains were limited by bets the Federal Reserve might reduce the number of interest rate increases after a widely expected hike next week. The futures market implied traders saw an 82 percent chance the U.S. central bank would increase key short-term rates by a quarter point to 2.25-2.50 percent at its policy meeting next Tuesday and Wednesday, up from 79 percent on Thursday, according to CME Group’s FedWatch program.
“The market is skeptical about the U.S. economy and whether the Fed would hike further after December,” Schlossberg said.
The greenback was also held back by the probability of a partial government shutdown as U.S. President Donald Trump and federal lawmakers disagree over funding for a border wall, analysts said. The euro was down 0.5 percent at $1.12965 after German data showed private-sector expansion slowed to a four-year low in December. French business activity unexpectedly contracted, further fanning fears about slowing growth in the euro area.
Worries about the European economy were also stoked by uncertainty whether May could convince the British parliament to approve her Brexit deal. The pound was 0.79 percent lower at $1.256, holding above a 20-month low of $1.2477 reached on Wednesday.

Source: CNBC

Bond Yields at Close Report: Treasury yields fall as Chinese data disappoints; traders look to Fed meeting

Thomas Franck, Ryan Browne

U.S. government debt yields fell on Friday as traders digested fresh economic data out of China and looked ahead to next week’s Federal Reserve meeting.
The yield on the benchmark 10-year Treasury note fell steeply to 2.895 percent, while the yield on the 30-year Treasury bond dropped to 3.152 percent. Bond yields move inversely to prices.
China’s industrial output in November grew 5.4 percent from the previous year, less than the 5.9 percent estimated by Reuters; retail sales, meanwhile, rose 8.1 percent last month, falling short of an expected 8.8 percent.
News of the disappointing figures comes as China and the U.S. try to negotiate a trade deal within a 90-day tariffs truce. Positive headlines around trade relations between the two had buoyed market sentiment earlier this week.
President Donald Trump said discussions with Beijing had been “very productive” and that some “important announcements” were forthcoming, while a Wall Street Journal report said China was preparing to widen foreign access to its economy.

GP: Trader NYSE concerned Christmas 181206
Traders work on the floor of the New York Stock Exchange.
Bryan R. Smith | AFP | Getty Images
Meanwhile, traders are anticipating the latest meeting of the Federal Open Market Committee (FOMC) next week, where the central bank sets interest rates. The Fed is largely expected to raise rates at the Dec. 18-19 meeting, however expectations for how many times — or if at all — the bank will hike rates next year have dampened amid worries around a potential slowdown in economic growth.
In other news, the European Central Bank on Thursday said it was to formally end its vast quantitative easing program. The institution will bring its bond purchases down from 15 billion euros per month to zero. The ECB, however, said it would continue to reinvest cash from maturing bonds for an extended period of time.
On the data front, investors are likely to closely monitor retail sales figures for November at around 8:30 a.m. ET. Industrial production data for November and manufacturing and services PMI data for December is scheduled to follow later in the session.
- CNBC’s Sam Meredith contributed to this report.

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Source: CNBC

Wall Street at Close Report: Dow dives about 500 points to its lowest close since May

Fred Imbert,Sam Meredith ,Yen Nee Lee

Stocks fell sharply on Friday after weaker-than-expected data in China and Europe exacerbated concerns of a global economic slowdown.
The Dow Jones Industrial Average fell 550 points, led lower by declines in Apple and Johnson & Johnson. The S&P 500 dropped 2.1 percent as the consumer staples and health care sectors lagged. The Nasdaq Composite pulled back 2.4 percent. Friday’s losses wiped out the gains for the week.
China reported industrial output and retail sales growth numbers for November that missed expectations. This is the latest sign shown by China that its economy may be slowing down. The data also underscored the rising risks to China’s economy as Beijing works to resolve an ongoing trade war with the U.S.
“The economic data continues to bear out growth is slowing,” said Tom Martin, senior portfolio manager at Globalt. “There is still a lot of positive positioning out there. As the data continues to slow, people are feel less comfortable with that and start to sell.”
“Where we are is trying to measure how uncomfortable people are with their positioning,” Martin said. “There just hasn’t been any follow-through in any rally we’ve seen in the past few weeks. That’s very telling of the market.”
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., December 4, 2018.
Brendan McDermid | Reuters
Industrial production in China grew by 5.4 percent for November on a year-over-year basis, the slowest pace in almost three years. Retail sales, meanwhile, grew at their slowest rate since 2003.
European shares also fell after the release of weaker-than-forecast data. The IHS Markit Flash Eurozone PMI index fell to 51.7 in December, its lowest level in four years. “New business inflows almost stalled, job creation slipped to a two-year low and business optimism deteriorated,” IHS Markit said in a release. The Stoxx 600 index, which tracks a broad swath of European stocks, fell 0.3 percent.
Friday’s moves come after U.S. equities seesawed in the previous session. The Dow closed slightly higher, while the S&P 500 and Nasdaq Composite fell slightly.
Stocks initially surged this week amid hopes the U.S. and China would be able to strike a permanent deal on trade. On Friday, China said it would suspend an additional tariff on U.S. autos. China also confirmed it would reduce a 40 percent charge on U.S. auto imports to 15 percent for 90 days.
But the uncertainty around the ongoing negotiations has kept investors on edge recently. Data from research service Lipper found that more than $46 billion were pulled out in a week from U.S. stock mutual funds and ETFs, the most ever.
“At this point, a lot of investors are very cautious heading into 2019,” said Yousef Abbasi, director of U.S. institutional equities at INTL FCStone. “There’s a lot of frustration among investors that have been whipsawed by this volatility.”
Volatility has picked up this quarter. This is the third decline of more than 500 points for the Dow in December, following two declines of that magnitude or greater in November and three in October.
Shares of Apple fell 2.3 percent after influential analyst Ming-Chi Kuo, of TF International Securities, slashed his iPhone shipment estimates by 20 percent.
Johnson & Johnson, another Dow member, fell more than 9 percent after Reuters reported the company knew about asbestos in its baby powder for decades.

Source: CNBC

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Crude Oil at Close Report: US oil drops 2.6% to $51.20 a barrel amid weak China economic data

Tom DiChristopher

reusable oil china
Jerome Favre | Bloomberg | Getty Images
Oil prices dropped on Friday, weighed down by a falling U.S. stock market, while weak economic data from China pointed to lower fuel demand in the world’s biggest oil importer.
Brent crude futures fell $1.33, or 2.16 percent, to $60.12 a barrel. U.S. West Texas Intermediate (WTI) crude futures dropped 2.6 percent to settle at $51.20 a barrel.
Global benchmark Brent was set for a weekly loss of about 2 percent, while WTI was on track to decline 2.7 percent.
“The oil complex remains vulnerable to heavy selling into the equities especially when combined with a strengthening in the U.S. dollar as is the case so far today,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
U.S. equity markets broadly fell as China’s November retail sales grew at their weakest pace since 2003 and industrial output rose the least in nearly three years. The report highlighted the risks of Beijing’s trade dispute with the United States and added to nerves about U.S.-China trade talks.
Chinese oil refinery throughput in November fell from October, suggesting an easing in oil demand, though runs were 2.9 percent above year-ago levels.
“The energy complex is on the back foot this morning as a batch of soft Chinese economic data triggers a flurry of pre-weekend profit-taking,” PVM Oil analyst Stephen Brennock said.
Concerned by mounting oversupply, the Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed last week to reduce output by 1.2 million barrels per day (bpd), or more than 1 percent of global demand.
“For the time being until the OPEC cuts start kicking in, the market is oversupplied in the short term,” said Tony Nunan, oil risk manager at Mitsubishi Corp. “If China is slowing down, that’s definitely a concern.”
The International Energy Agency said on Thursday it expected a deficit in oil supply by the second quarter of next year, provided OPEC members and other key producers stuck closely to last week’s deal to cut output.
As part of the agreement, de facto OPEC leader Saudi Arabia plans to reduce its output to 10.2 million bpd in January.
The IEA kept its 2019 forecast for global oil demand growth at 1.4 million bpd, unchanged from its projection last month, and said it expected growth of 1.3 million bpd this year.
Barclays said on Friday it expects oil prices to rebound in the first half of 2019 on falling inventories, Saudi Arabia’s export cuts and an end to the Iran sanction waivers. 

Source: CNBC