Stock Rally Arrested, But Bond And Oil Advance Continues, Leaving Dollar In A Lurch

Overview: Equity markets are unable to build on yesterday's advance, but bonds and oil are extending gains. The dollar remains on the defensive and is off again all the major currencies. The lack of a joint statement over the weekend by the US and China and seemingly different interpretations of what was agreed leaves investors in a lurch. Saudi Arabia noted that there has been no agreement to cut output, but investors are anticipating one and have extended oil's recovery after last month's shellacking. A new twist in the Brexit drama emerged as opposition parties first debate whether the government is in contempt of Parliament for not releasing the legal advice underpinning the Withdrawal Agreement. Asian equities mostly fell after strong gains yesterday. China and Hong Kong markets were the chief exceptions. European bourses are lower and the national indices are working on filling the gaps created by yesterday's higher opening. The Dow Jones Stoxx 600 is off about 0.30% in late morning turnover after gaining 1% on Monday. The S&P 500 jumped higher yesterday too and looks set to try to enter and possibly fill the gap today, which extends to around 2761.  


With Chinese President Xi visiting the Iberian Peninsula before returning home, officials have not formally responded to the various claims the US is making regarding the weekend agreement. There are several accounts in the media showing the contrasting statements of the US and China. The US statements themselves are changing. Initially, the US said that there would be negotiations over the next 90-days, during which time additional tariff action would not take place. Late yesterday, Kudlow indicated that 90-day period begins January 1. The Chinese statements do not appear to show a reference to the 90-day term at all. Kudlow also suggested that an agreement on intellectual property rights was close, while Chinese officials have denied a systematic problem. As if prepared for release after the meeting between the two presidents, China announced new punishments for violations of intellectual property rights today. Will this satisfy transactional-oriented US officials or will they emphasize the gap between China's declaratory and operational policies?

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Read more by Marc on his site Marc to Market.

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