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Dec 13, 2018

EU FX I Currencies: Euro slips as ECB ends bond purchases.

David Reid

The euro fell against the dollar on Thursday after the European Central Bank as expected halted new bond purchases and promised to maintain policy support for the euro zone due to risks from trade tensions, Brexit and budget woes in Italy and France.
Sterling held steady following UK Prime Minister Theresa May’s prevailing in her party’s vote on her leadership the previous day. It had rallied on Wednesday in anticipation as traders bet her win might allow her to negotiate more generous terms for Britain in its exit from the European Union in March.
The dollar strengthened against most major currencies stemming from optimism on some progress between China and the United States to resolve their trade issues, analysts said. “Continuing confidence and increasing caution,” was how ECB President Mario Draghi at his news conference described ECB’s decision for ending the 2.6 trillion euro ($2.95 trillion), four-year-long quantitative easing program. It will reinvest cash from maturing bonds.
On the other hand, ECB kept its primary rate target at -0.40 percent. It also marked down its outlook on regional growth.
“The balance of risks remains on the downside,” said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston. “It’s hard for the euro rally from its current trading range.”
At 10:47 a.m. (1547 GMT), the single currency was 0.25 percent lower at $1.13405. Against the pound, it slipped 0.27 percent at 89.815 pence.
Traders’ attempt to extend sterling’ gains faded on uncertainty on what more May, who is currently in Brussels, could get from EU leaders to improve on her Brexit proposal. On Monday, May scrapped a parliamentary vote on her current plan, sending the pound to a 20-month low against the dollar and triggering a no-confidence vote on her leadership. The sterling was little changed at $1.263, retreating from an earlier peak of $1.2687. An index that tracks the greenback against the euro, sterling and four other currencies was 0.23 percent higher at 97.271.
U.S. President Donald Trump’s upbeat comments on trade talks with China and Beijing’s first major purchase of U.S. soybeans in months boosted the dollar. “While not settled, sentiment has improved,” Upadhyaya said of renewed optimism about U.S.-Sino trade relations.
Among other major currencies, the Norwegian crown had risen as much as half a percent versus the euro and dollar after Norges Bank reiterated its plans for a March rate increase. The crown gave up its earlier gains and was little changed against the dollar and only up 0.15 percent versus the euro

Source: CNBC

Bond Yields at Close Report: Treasury yields slip amid ECB rate decision, inflation data

Thomas Franck,Ryan Browne

U.S. government debt yields slipped on Thursday after the European Central Bank said it will end its enormous bond-buying program at the end of December.

The end of the central bank’s so-called quantitative easing policy will result in a steep drop in the amount of debt purchased by the ECB, from 15 billion euros per month to zero.
At 9:51 a.m. ET, The yield on the benchmark 10-year Treasury note drifted lower to 2.9 percent, while the yield on the 30-year Treasury bond dipped to 3.143 percent. Bond yields move inversely to prices.
The ECB’s asset purchasing program — under which the bank bought more than 2.6 trillion euros ($2.9 trillion) — was introduced in March 2015 in a bid to rescue the euro zone economy from deflationary forces and rebuild confidence.
Trade relations between the U.S. and China continue to dominate the headlines, as the two countries attempt to resolve their differences during a 90-day period for talks.
President Trump earlier this week tweeted that discussions with Beijing had been “very productive” and that some “important announcements” were forthcoming.
Trump has also said he would intervene in the Department of Justice’s case against Meng Wanzhou, chief financial officer of China’s Huawei, if it would help secure a trade deal with Beijing.
On Tuesday, the Labor Department’s Consumer Price Index showed no change in inflation from the previous month, following a 0.3 percent rise in October. In the last 12 months, the headline index increased 2.2 percent, down from the October year-on-year reading of 2.5 percent. Core CPI, which does not include volatile energy or food prices, increased 0.2 percent in November and is up 2.2 percent in the past 12 months.
Investors continue to look ahead to an upcoming two-day meeting of the Federal Open Market Committee (FOMC), which is scheduled to take place on Dec. 18-19. The Federal Reserve is expected to raise interest rates, however expectations for further hikes next year have tempered lately due to fears of waning economic growth.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Dec. 7, 2018.
Michael Nagle | Bloomberg | Getty Images
Trump criticized the Fed’s rate hiking path again recently, saying it would be “foolish” for the central bank to hike the federal funds rate. He said he thought of Fed Chair Jerome Powell as a “good man,” but that he disagreed with his “aggressive” stance on monetary policy.
Elsewhere in Europe, fixed-income investors looked to political developments in the U.K., after Prime Minister Theresa May won a vote of confidence from her fellow Conservative lawmakers. May’s relief over winning the vote may be short-lived, however, as she still has to convince disgruntled Conservatives as well as opposition parliamentarians to vote for her Brexit deal.

Wall Street at Close Report: Dow rises in wobbly session as Wall Street digests latest US-China trade developments

Fred Imbert,Sam Meredith

Stocks seesawed on Thursday while investors digested new developments in the ongoing U.S.-China trade war and Wall Street’s volatile week approached its end.
The Dow Jones Industrial Average closed 67 points higher after alternating between gains and losses throughout the day. The S&P 500 fell marginally, while the Nasdaq Composite dipped 0.4 percent as Amazon and Alphabet gave up their initial gains.
Equities rose broadly earlier in the day, with the Dow rising more than 200 points at its session high. The S&P 500 and Nasdaq both rose as much as 0.7 percent.
“It seems like things are headed in the right direction,” said JJ Kinahan, chief market strategist at TD Ameritrade. But “we’re going to be moving a lot until we get some resolution on tariffs.”
He said positive sentiment around trade and a sharp rebound in General Electric contributed to the early rise in equities.
On Wednesday, Reuters reported Chinese state-owned companies had bought at least 500,000 tons of U.S. soybeans. It was the first major U.S. soybean purchases in more than six months, and the clearest sign to date that China plans to step up efforts to support its slowing economy.
President Donald Trump also said he would intervene in the Justice Department’s case against Huawei CFO Meng Wanzhou if it would help smooth over U.S.-China trade relations. Meng was arrested earlier this month; her arrest is seen as a possible detriment to U.S.-China trade talks.
Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on January 17, 2018 in New York.
Bryan R. Smith | AFP | Getty Images
U.S. stocks finished higher on Wednesday, buoyed by the perceived progress in trade talks between Washington and Beijing.
Uncertainty around these trade talks have sent stocks for a wild ride as Wall Street gauges the potential impact of a prolonged conflict on corporate earnings and the global economy. The major indexes have also traded around correction territory recently, down 10 percent from all-time highs set earlier this year.
Stocks have also traded in wide ranges lately. The Dow has posted intraday swings of at least 570 points in five of the past eight sessions.
“There have been lots of reversals this week,” said Willie Delwiche, investment strategist at Baird. “If you want to get constructive in this market, tentativeness at the open is better than widespread gains.”
Jeff Saut, chief investment strategist at Raymond James, said Thursday the S&P 500 has finally reached a bottom. “On Oct. 2, we had on our short-term model a sell signal and we told people if you have trading positions you should sell,” Saut told CNBC’s “Squawk Box. ” “And we have put some of that money back to work.”
General Electric shares jumped more than 7 percent after J.P. Morgan analyst Stephen Tusa, a longtime bear on the company, upgraded GE. The analyst cited a more “balanced risk reward at current levels. ”

Source: CNBC

Gold Price at Close Report: Gold eases to 1-week low as dollar, stocks

Gold eased to its lowest in nearly one week on Thursday as the dollar rose and investors latched on to gains in global stocks, while palladium touched record highs on expectations of higher demand.
Spot gold eased 0.21 percent to $1,242.74 per ounce at 11:21 a.m. EST (1621 GMT), while U.S. gold futures settled at $1,247.40 per ounce, down $2.60.
The dollar gained against a basket of major currencies, helped by a dip in the euro after the European Central Bank reduced growth and inflation projections for next year and said the balance of risk was tilted toward the downside.
“It looks like ECB President Mario Draghi was a little more dovish than expected, so we are seeing the euro currency back off and the dollar strengthening, and this is weighing on gold prices,” said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
Also weighing on bullion was an upbeat sentiment for risk, with global stock markets receiving a boost on signs of easing U.S.-China trade tensions. “With equities rebounding this week, gold has fallen slightly out of favor as traders unwound their safe-haven bets,” said Fawad Razaqzada, an analyst with
Markets would now be turning their attention to the Federal Open Market Committee (FOMC) meeting on Dec. 18-19, with the focus on the future path of interest rate hikes in 2019.
“If the Fed adopts a more dovish stance, we should see the dollar quickly retreat and that should give gold an opportunity to rally,” Streible said.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making it cheaper for holders of other currencies.
“Gold’s recent breakout above the $1,240 resistance means the path of least resistance is still to the upside and it should get a lift if the dollar were to fall on the back of a dovish Fed,”’s Razaqzada said.
Among other precious metals, spot palladium was down 0.7 percent at $1,253.24 per ounce, having touched a record high of $1,269.25 earlier in the session.
“Palladium has got a very firm upward trend with good fundamentals behind it. There is a lot of demand for palladium right now and it should continue to move up on a favorable supply and demand structure,” RJO Futures’ Streible said.
Silver was steady at $14.73 per ounce, having hit $14.81 earlier, its highest since Nov. 2. Platinum fell 0.6 percent to $793.60, after rising to a more than one-week peak earlier.

Source: CNBC

Metals I CMI I Spot Prices as of the Close of Trading in New York.

Spot Prices as of close of trading in New York
Thursday, December 13, 2018

Crude Oil Price at Close Report: US crude rises 2.8%, settling at $52.58, on signs of tightening oil supply

Tom DiChristopher

GS: Oil pumpjacks 171121
Pumpjacks pump petroleum from the ground on September 23, 2014 near Ruehlermoor, Germany.
David Hecker | Getty Images
Oil prices rose on Thursday, after data showed inventory declines in the United States and as investors began to expect that the global oil market could have a deficit sooner than they had previously thought.
OPEC’s output agreement with Russia and Canada’s decision to mandate production cuts could create an oil market supply deficit by the second quarter of next year, if the top producers stick to their deal, the International Energy Agency said in its monthly Oil Market Report.
U.S. crude inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures, fell by nearly 822,000 barrels in the week through Dec. 11, traders said, citing data from market intelligence firm Genscape.
Stockpiles fell by 1.2 million barrels in the week to Dec. 7, disappointing some investors who had expected a decrease of 3 million barrels. The data showed stockpiles jumping by 1.1 million barrels in Cushing during that week.
Benchmark Brent crude oil was up $1.19, or 2 percent, at $61.34 per barrel by 2:28 p.m. ET. U.S. West Texas Intermediate light crude ended Thursday’s session up $1.43, or 2.8 percent, to $52.58.
“The market over the last week has attempted to stabilize and I still think that’s what is happening today,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
“For further weakness in the market you need to see even stronger signs that demand growth is going to deteriorate and supply will continue to increase.”
Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November.
OPEC and other big producers, including Russia, said last week they would try to trim surplus supply, agreeing to cut production by a total of 1.2 million barrels per day.
Still, Oil demand growth is slowing, OPEC says.
OPEC said on Wednesday that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.
Iranian Oil Minister Bijan Zanganeh said his country has no plans to reduce its oil production, but will remain a member of OPEC, the official news agency IRNA reported.
Factors such as production cuts and output losses elsewhere should keep markets tight in the first half, Jefferies analyst Jason Gammel said. But he added that U.S. production growth “will almost inevitably re-accelerate in 2H19 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into oversupply.”
The United States, where weekly crude production has hit a record, is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia.
Stock market investors worried about U.S.-China trade tensions breathed a sigh of relief as China made its first major U.S. soybean purchases in more than six months on Wednesday.
Crude future also drew support from indications that the trade war between the United States and China may be easing.
In a sign that China wants to lower trade tensions with the United States, the country made its first major U.S. soybean purchases in more than six months on Wednesday. Investors breathed a sigh of relief across broader stock markets.
— CNBC’s Tom DiChristopher contributed to this report.

Source: CNBC

Tentative Outright Agency Mortgage-Backed Securities Operation Schedule

The Desk plans to purchase a maximum of $8.1 billion in agency MBS over the period beginning December 14, 2017 on FedTrade.

As an operational note, the Desk does not plan to conduct agency MBS operations between December 22, 2017 and January 1, 2018. Instead, the Desk will purchase the reinvestment amount through more frequent or larger operations from December 14, 2017 through December 21, 2017 and from January 2, 2018 through January 12, 2018. Purchases on these days, and throughout the period, will continue to be guided by general MBS market conditions, including market liquidity and demand conditions.
Schedule pdf

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Name Type 5 Minutes 15 Minutes Hourly Daily
GBP/USD 1.2633
Moving Averages: Strong Sell Neutral Sell Sell
Indicators: Buy Strong Sell Sell Strong Sell
Summary: Neutral Sell Sell Strong Sell
EUR/USD 1.1362
Moving Averages: Buy Buy Buy Sell
Indicators: Strong Buy Strong Buy Sell Neutral
Summary: Strong Buy Strong Buy Neutral Neutral
USD/JPY 113.66
Moving Averages: Neutral Buy Strong Buy Strong Buy
Indicators: Strong Sell Strong Buy Strong Buy Strong Buy
Summary: Sell Strong Buy Strong Buy Strong Buy
FTSE 100 6,877.50
Moving Averages: Strong Sell Neutral Buy Sell
Indicators: Strong Sell Sell Buy Strong Sell
Summary: Strong Sell Neutral Buy Strong Sell
S&P 500 2,647.12
Moving Averages: Strong Sell Strong Sell Strong Sell Sell
Indicators: Strong Sell Strong Sell Strong Sell Strong Sell
Summary: Strong Sell Strong Sell Strong Sell Strong Sell
Dow 30 24,565.55
Moving Averages: Strong Sell Strong Sell Strong Sell Sell
Indicators: Strong Sell Strong Sell Sell Strong Sell
Summary: Strong Sell Strong Sell Strong Sell Strong Sell
Gold 1,247.50
Moving Averages: Buy Neutral Sell Buy
Indicators: Strong Buy Strong Buy Strong Sell Strong Buy
Summary: Strong Buy Buy Strong Sell Strong Buy
Crude Oil WTI 51.92
Moving Averages: Buy Strong Buy Strong Buy Sell
Indicators: Strong Buy Strong Buy Strong Buy Sell
Summary: Strong Buy Strong Buy Strong Buy Sell
Natural Gas 4.175
Moving Averages: Neutral Sell Strong Sell Neutral
Indicators: Buy Strong Sell Buy Strong Sell
Summary: Neutral Strong Sell Neutral Sell
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Source: Investing

European Markets at Close Report: European markets close lower after ECB ends QE purchases

David Reid,Sam Meredith

European stocks were slightly lower on average Thursday as the European Central Bank formally brought its 2.6 trillion euro ($3 tn) QE program to a close.
The pan-European Stoxx 600 was little changed from the previous session with sectors and major bourses pointing in opposite directions.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE6877.01-3.18-0.05492447205
The ECB is poised to bring an end to its crisis-era bond-buying program after nearly four years. European lenders have generally been critical of the central bank’s QE program, arguing it has a negative impact on their net interest income. Unicredit has led the gains, up almost 2 percent on the prospect of the ECB ending its contentious stimulus program.
Attention will now turn to Mario Draghi’s statement, with particular focus on inflation and growth projections.
Looking at other stocks on the move, Britain’s Antofagasta surged toward the top of the European benchmark during mid-morning deals. It comes after Exane BNP Paribas raised its stock recommendation to “outperform” Thursday morning, prompting shares of the London-listed stock to rise 4 percent.
Meanwhile, Germany’s Metro slumped to the bottom of the index after the company reported persistently challenging business conditions in Russia. Shares of the wholesale tumbled more than 7 percent on the news.
President Donald Trump (L) shakes hand with China’s President Xi Jinping at the end of a press conference at the Great Hall of the People in Beijing on November 9, 2017.
Fred Dufour | AFP | Getty Images
Market focus is largely attuned to global trade developments, after a flurry of upbeat comments from Washington and Beijing heightened expectations of a comprehensive trade deal.
On Wednesday, Reuters reported Chinese state-owned companies had bought more than 1.5 million tons of U.S. soybeans. It was the first major U.S. soybean purchases in more than six months, and the most clear sign to date that China is making good progress on pledges at the start of the month.
In Asia, MSCI-s broadest index of Asia-Pacific shares, excluding Japan, rose more than 1 percent on Thursday.
Back in Europe, sterling pared some its gains after rallying up from 20-month lows in the previous session. It comes after British Prime Minister Theresa May survived a party no-confidence vote.
The U.K. currency was up around 0.20 percent to trade at $1.2655 against the U.S. dollar at around 1:00 p.m. London time.
Meanwhile, investors are likely to closely monitor a series of interest rate announcements on Thursday. Norway’s central bank left its main interest rate unchanged, as expected, while the Swiss National Bank said there was no reason at all to change their expansive monetary policy.
The European Central Bank (ECB) gives its latest update on euro area monetary policy later in the session.

Source: CNBC

Analysis | The Finance 202: Brexit for Dummies: What just happened in the U.K. and what’s next

By Tory Newmyer

The Brits can’t get no satisfaction. Prime Minister Theresa May is limping, victorious but wounded, out of a no-confidence vote that leaves the future of her Brexit plan as muddy as ever and not much to cheer about for partisans across the spectrum in the United Kingdom. 
May won a year-long reprieve from another such challenge by surviving the vote, 200-117. But the surprising strength of the revolt from within her own party reflects the widespread antipathy at home to the deal she negotiated for the British withdrawal from the European Union. And to hold off the rebellion, she pledged to step aside once a Brexit plan is approved.  (“This must be the first time a premier has won a leadership challenge by turning herself into a lame duck,” the FT’s Robert Shrimsley writes. “She has paid a very high price for a pretty poor win.”)
The whole thing is pretty complex. Let's break it down.
What’s next:
 May has until March 29 — 106 days — to win support for her lengthy plan aimed at providing an orderly exit from the European Union. It won’t be easy. “May and her Brexit plan have been pummeled for weeks by members of Parliament, both from her own party and the opposition,” The Post’s William Booth, Karla Adam and Michael Birnbaum write. “Hardline Brexiteers want a cleaner break from the E.U., while Remainers worry about the economic and other costs of what May has proposed.”
And May’s critics from the left and right continued heaping disapproval on her in the wake of her putative win. Hardline Brexiteer Jacob Rees-Mogg called on her to resign; Labour leader Jeremy Corbyn said the vote revealed May’s “government is in chaos and she is unable to deliver a Brexit deal that works for the country and puts jobs and the economy first.”
Why it matters:
 A failure to secure an agreement could lead to a “no-deal Brexit,” in which the country crashes out of the European bloc with no grace period and no legal arrangements in place to smooth ongoing cross-border commerce. “A no-deal Brexit could bring chaos at ports, a freeze in trade, empty grocery store shelves, grounded aircraft and the threat of recession, economists have warned,” Booth and Co. write.
Bank of England Governor Mark Carney has estimated in the worst-case version of a no-deal Brexit, the British economy could shrink by 8 percent in a year, with property prices diving by a third. 

Prime Minister Theresa May makes a statement in Downing Street, London, on Wednesday. (Kirsty O'Connor/PA via AP)
May’s game plan:
 Via the New York Times: “Her strategy appears to be to delay the critical vote — now probably in the middle of January — and to hope that the growing risk of a disorderly departure brings some lawmakers back into line. But many doubt that will work.” May heads to Brussels today as part of a last-ditch effort to shore up the deal she spent 17 months negotiating.
The key flashpoint:
The so-called Irish backstop, a piece of May's plan guarding against the reemergence of a physical border between Ireland, which is remaining in the E.U., and Northern Ireland, which will still be part of the United Kingdom.
Both sides agree they don't want to see the return of the checkpoints and patrols that once marked the dividing line on the island. But the E.U., which wants to ensure substandard goods aren't snuck into its market from Northern Ireland, has proposed preserving the bloc's rules there if the E.U. and U.K. fail to reach a long-term trade agreement. Critics say that would keep the U.K. under the E.U.'s thumb. (Bloomberg has a good summary of the issue's history and state of play here.)
What’s really going on with the British right:
Post columnist Anne Applebaum breaks it down elegantly. “Any Brexit deal involves bad choices,” she writes. “Either Britain pays an economic price for losing access to markets, or — if Britain stays inside European customs arrangements without helping to set the rules — there is a price to be paid in influence. With an eye on voters’ wallets, May chose the latter. And now — now! — after months of debate and thousands of hours of broadcast news and millions of words — most of the Brexiteers still will not accept their own responsibility for this outcome, the least bad of the bad outcomes on offer. They still do not want to admit that they misled the British people.
“They still pretend there is some better, alternate reality. And they are still jockeying for power. Instead of taking responsibility, they have blamed May — claiming, again falsely, that a different prime minister would get a different deal.”

A woman walks past a mural that states 'Derry Girls Against Borders' at Free Derry Corner on October 9, 2018 in Londonderry, Northern Ireland. (Photo by Charles McQuillan/Getty Images)
The silver-lining scenario:
Sebastian Mallaby, writing for The Post, sees a hard Brexit as unlikely in the event May can’t muster support for her plan. Instead, he writes, “Brexit will probably be postponed or put to a new vote. Britain might exercise its right to freeze the exit process and then never return to the negotiating table. Or it could freeze and hold a new referendum.”
The local angle:
Candidate Trump recognized Brexit’s isolationism as kindred to his own #MAGA movement, taking its success as a harbinger for his bid and declaring himself “Mr. Brexit.” The affinity runs deeper: Both campaigns were covertly boosted by Russian operatives, raising questions about the hand that Russian President Vladimir Putin has played in sowing internal discord among Western powers. (Indeed, congressional Democrats have probed whether Brexit leaders served as a conduit between the Kremlin and Trump’s operation.)
Trump’s own push to cut off the U.S. economy from its traditional trading partners by raising new barriers has similarly unnerved business leaders and rattled stock markets around the world.
And both Brexit and Trumponomics prove moving to withdraw from the global order as a shortcut to prosperity is a promise easier made than kept. 
You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.
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Employees of the New York Stock Exchange take a break on Dec. 6. (Photo by Yana Paskova for The Washington Post)
— Recession coming in 2019, CFOs say. CNBC's Jeff Cox: “Chief financial officers at companies are pessimistic heading into 2019, with nearly half expecting a recession by the end of that year, according to a survey released Wednesday. Duke University's look at where 212 CFOs stand showed that 48.6 percent think the next negative growth period is less than 12 months away. If the U.S. manages to make it through the year without a recession, 82 percent figure one will start by the end of 2020. . . .
“The results show 86 percent see a Canada recession by the end of 2019, with the figure at 66.7 percent for Europe, 54 percent for Asia and 42 percent for Latin America. Overall, respondents expect the U.S. to grow by 2.7 percent for the year, with the bulk of the gains front-loaded, while there's a 1-in-10 chance of GDP rising just 0.6 percent. Primary risks include the inability to attract and retain qualified workers, an oft-cited issue referred to as the 'skills gap.' ... Other issues the CFOs cited were government policies, benefit costs, economic uncertainty and rising employment costs.”
— Stocks closed higher amid trade war. CNBC's Fred Imbert: “Stocks closed higher on Wednesday as investors digested news related to the ongoing trade war between the United States and China. The Dow Jones Industrial Average rose 157.03 points to 24,527.27, led by gains in Caterpillar. The S&P 500 climbed 0.6 percent to close at 2,651.07 as the consumer discretionary sector outperformed. The Nasdaq Composite jumped 1 percent to 7,098.31 as Facebook, Amazon, Netflix and Google-parent Alphabet rose.
“The major averages came off their highs in afternoon trading. The Dow had risen as much as 458.05 points, while the S&P 500 gained 1.85 percent at its session high. The Nasdaq rose as much as 2.35 percent . . . Shares of Caterpillar and Boeing both rose more than 1 percent. These stocks are considered global trade bellwethers because of their exposure to markets abroad.”
— Fed takes a big hit. Bloomberg's Rich Miller: “The Federal Reserve is piling up unrealized losses on its $4.1 trillion bond portfolio, raising questions about its finances at a politically dicey moment for the independent central bank. The Fed had losses of $66.5 billion on its securities holdings on Sept. 30, if it marked them to market, according to its latest quarterly financial report. That dwarfed its $39.1 billion in capital, effectively leaving it with a negative net worth on that basis, a sure sign of financial frailty if it were an ordinary company.
“The Fed, of course, is not a normal bank and does not mark its holdings to market. As a result, officials play down the significance of the theoretical losses and say they won’t affect the ability of what they call 'a unique non-profit entity' to carry out monetary policy or remit profits to the Treasury Department. Case in point: the Fed handed over $51.6 billion to the Treasury in the first nine months of the year. The risk though is that any perceived deterioration in the Fed’s finances could dent its standing with Congress and the public when it is already under attack from [Trump] as being a bigger problem than trade foe China.”
Shares of China-based music streaming company Tencent Music Entertainment Group ...

Donald Trump shakes hand with China's President Xi Jinping in Beijing in Nov. 2017. (Fred Dufour/AFP)
China budges on its industrial plan. WSJ's Lingling Wei and Bob Davis: "China is preparing to replace an industrial policy savaged by the Trump administration as protectionist with a new program promising greater access for foreign companies, people briefed on the matter said. China’s top planning agency and senior policy advisers are drafting the replacement for Made in China 2025, President Xi Jinping’s blueprint to make the country a leader in high-tech industries including robotics, information and clean-energy cars. The revised plan—Beijing’s latest effort to resolve trade tensions with the U.S.—would play down China’s bid to dominate manufacturing and be more open to participation by foreign companies, these people said.
"Current plans, they said, call for rolling out the new policy early next year, when the U.S. and China are expected to be accelerating negotiations for a deal to end their bruising trade battle... Odds are long that Beijing’s new industrial policy will go far enough in addressing U.S. complaints.
China is buying American soybeans again — but not very many. CNBC's John W. Schoen: "China is back in the market for U.S. soybeans, but the recent purchases represent just a fraction of sales American farmers have lost since the Trump administration embarked on a trade war with Beijing in July. Chinese state-owned companies bought at least 500,000 tons of U.S. soybeans on Wednesday ... in the first major purchases since [Trump] and [Xi] met in early December. The deals — valued at some $180 million — helped propel U.S. soybean prices to a 4-1/2-month high on the futures market Wednesday."
— Trump still deciding what to do in Huawei case. Jennifer Jacobs at Bloomberg: "Commerce Secretary Wilbur Ross cautioned against assuming [Trump] will stop the extradition of a Huawei Technologies Inc. executive arrested in Canada, and said the president hasn’t yet decided to intervene in a case that’s roiled trade talks between Washington and Beijing. 'Let’s see what he actually decides,' Ross told reporters at the White House... Trump said in an interview with Reuters on Tuesday that he would intervene in the U.S. effort to extradite Huawei chief financial officer Meng Wanzhou if it would help him win a trade deal with China."
— China detains two Canadian diplomats. The Post's Anna Fifield and Amanda Coletta: "A second Canadian has been detained in China on charges of 'suspected involvement in activities that jeopardize China’s national security,' increasing fears that Beijing is taking hostages in retaliation for the arrest in Vancouver of a top Chinese business executive. China’s Foreign Ministry confirmed that both Michael Kovrig, an analyst for the International Crisis Group, and Michael Spavor, who runs cultural exchanges with North Korea, were detained on Monday on 'suspicion of engaging in activities that endanger national security.'
"Both men worked for nongovernmental organizations and appear to have been picked up for violating China’s strict new rules aimed at controlling the work that foreign NGOs do in China, part of a broader crackdown on civil society and freedom of expression."
It's Chinese hardball. Christopher Bodeen at AP: "In many ways it looks like a classic Chinese response to perceived slights: Deny any wrongdoing, seize the moral high ground and exert maximum pressure to extract concessions. But Beijing’s detention of Michael Kovrig also reflects an increasingly bold approach to international disputes under President Xi Jinping, who has overseen a vast expansion of China’s diplomatic, military and economic power."
FBI official: Chinese threat not properly understood. ABC News: "FBI Assistant Director Bill Priestap said he is still 'amazed at the lack of understanding of the gravity' of the threat among some of those being targeted the most by China. 'I believe this is the most severe counterintelligence threat facing our nation today,' Priestap said during the Senate Judiciary Committee hearing. 'What hangs in the balance is not just the future of the U.S., but the future of the world.'"
Proposals for reforming the World Trade Organization fail to deal with problems ...

A train carrying cars loaded with coal leaving a nearby coal mine is seen in front of Dry Fork Station, a coal fired power plant in Gillette, WY. (Matt McClain/The Washington Post)
Apple to spend $1 billion on new Austin campus. CNN Business: "Apple is putting more detail on its plan to create 20,000 jobs in the United States over the next five years. The company said Thursday it will spend $1 billion to build a new campus in Austin, Texas. The city is already home to one Apple campus, a sprawling facility with 6,200 employees that is the company's largest outside its headquarters in Cupertino, California. Apple's new Austin campus will be less than a mile from the existing one and will be spread across 133 acres, the company said in a statement. It is expected to make Apple the city's largest employer, with a workforce of 5,000 employees and the capacity to add 10,000 more.
— States sue to stop coal. AP's Matthew Brown: "Four states that say burning coal will hurt their residents as it makes climate change worse are trying to stop the Trump administration from selling vast reserves of the fuel that are beneath public lands. Attorneys for California, New Mexico, New York and Washington argue the coal sales have been shortchanging taxpayers because of low royalty rates and cause pollution that puts the climate and public health at risk."
— The national debt is rising fast. Bloomberg's Alexandre Tanzi: "U.S. government debt is on track this year to rise at the fastest pace since 2012, as a stronger economy fails to keep pace with the wave of red ink that’s rising under the Trump administration. Total public debt outstanding has jumped by $1.36 trillion, or 6.6 percent, since the start of 2018, and by $1.9 trillion since [Trump] took office ... The latter figure is roughly the size of Brazil’s gross domestic product. If this year’s growth rate is sustained through the end of the year, it would be the biggest jump in percentage terms since the last year of President Barack Obama’s first term, at a time when the economy needed fiscal stimulus in the aftermath of the financial crisis. As of Monday, the nation’s debt stood at a record $21.9 trillion."
General Motors Chief Executive Mary Barra faces bipartisan anger in Washington over the company’s plans to cut 14,800 jobs and close four plants despite robust profits and a strong economy.
Timothy Springer invested $5 million in the startup’s early days. His windfall is one in a series of savvy investments.

Trump debates with House Minority Leader Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) as Vice President Mike Pence listens during an Oval Office meeting on Tuesday. (Photo by Jabin Botsford/The Washington Post)
Trump's border wall ultimatum squeezes GOP. The Post's Erica Werner and co.: "Trump’s increasingly urgent push to construct a massive wall on the border with Mexico has created a nightmare scenario for congressional Republicans as they race to avert a partial shutdown of the federal government at the end of next week. A day after Trump declared he would be proud to let funding lapse for dozens of government agencies if he does not get the money he wants for the wall, congressional Republicans signaled little appetite Wednesday to join his cause.
"Some expressed befuddlement at Trump’s strategy, while others sidestepped his comments, marking a new rift between the president and his party on Capitol Hill with just weeks left at the helm of both chambers of Congress... The disconnect reflects the divergent priorities of Trump and Republicans in Congress during the twilight of their two-year grip on the federal government. While Trump made the wall a signature issue in his 2016 campaign, congressional GOP leaders have displayed less enthusiasm for it."
The longtime House Democratic leader is now on track to claim the speaker’s gavel for second time on Jan. 3.
Mike DeBonis
Regardless of the motives, rank-and-file senators have employed a mix of unique techniques, old-fashioned threats and insider persuasion to spark debates that had been previously blocked or delayed.
Paul Kane

Federal Reserve Board Chairman Jerome Powell, left, and Vice Chair Randal Quarles listen during an open meeting in Washington. (AP Photo/Cliff Owen, File)
Trump appointees ease up on banks. WSJ's Lalita Clozel: "After years of acrimony, the nation’s top banking regulators are seeking a detente with the firms they oversee. Two Trump-appointed officials have spent several months touring the country, visiting bank examiners in regional offices and asking them to adopt a less-aggressive tone when flagging risky practices and pressing firms to change their behavior.
The officials—the Federal Reserve’s Randal Quarles and the Federal Deposit Insurance Corp.’s Jelena McWilliams—aim to change policy in a subtle but significant way and reshape regulators’ relationship with banks, which officials have said was too contentious during the Obama years that followed the financial crisis. Changing the supervision culture 'will be the least visible thing I do and it will be the most consequential thing I do,' Mr. Quarles, the Fed’s vice chairman for supervision and regulatory point person, said in an interview. 'The banks should feel that their supervisor is going to be firm but fair.'"
The stock market doesn't care about government shutdowns. Via LPL Senior Market Strategist Ryan Detrick: "Although shutdowns get a lot of media hype, the reality is that stocks tend to take them in stride. In fact, the S&P 500 has gained during each of the five previous shutdowns."

Coming soon:
— From The New Yorker's Navied Mahdavian:
The revolving door between Fox News and the Trump administration:
'Truth isn't truth': Rudy Giuliani tops 2018's quotes of the year list
A brief history of Capitol Hill's 'Monopoly Man'