US stocks remain close to record highs as trade tensions abated further after China cut tariffs on an array of goods including frozen pork, pharmaceuticals, smart-phone parts, and consumer items starting on January 1st, another sign that the phase-one deal will get finalized in early January. President Trump is entering the holiday in a good mood as US stocks continue to make fresh record highs and as his phase-one trade deal will likely see significant support from farmers in battleground states.
The holiday hit trading week will likely see little reaction to both a rebound with US November durable goods and new home sales which are expected to keep its recent trend of higher prints.
China’s Premier Li Keqiang will study further overall and targeted reserve-ration requirement (RRR) cuts next year. China has been slowly delivering stimulus over the 20-month long US-China trade war, saving a bazooka of stimulus in the event of a complete collapse in talks. If China is confident that the phase-one trade deal will see a period of calm, we could see the PBOC begin to increase further efforts to further stimulate their economy.
The dollar is little changed on the session but the it seems the recent depreciation could only be taking a break in this holiday-stricken trading week. With the Fed likely on hold next year, the key to a weaker dollar in 2020 could depend on further momentum from Europe. Europe is likely to benefit the most from continued progress with the US-China trade war and if we see any hints of a manufacturing rebound the euro could eye the 1.15 level.
Oil prices remained soft after Friday’s drop that stemmed from the Saudi Arabia and Kuwait deal to resume production along their border. The Saudi-Kuwait neutral zone could produce as much as 500,000 bpd and that eat away at some of the additional promised production cuts promised by the Saudis. The short-squeeze on oil may be running out of steam but if WTI and Brent prices can hold $60 and $65 respectively, we could see prices remain supported going into the first few weeks of January.
In quiet trade, gold is having the best start to the trading week. Gold prices have been able to thwart off a wave of optimism that saw fresh record highs for many global indexes as geopolitical risks remain and as the longest ever US expansion seems it could possibly end just beyond the 2020 election. Gold could have a strong start to the year on strong central bank buying, a depreciating dollar and a plethora of geopolitical risks.
And like that Bitcoin’s bearish trend has been snapped. The broad crypto-rally saw Bitcoin bounce just ahead of the heavily touted $6,300 level which is where mining costs are reportedly averaging. Bitcoin sellers rushing for the sidelines and we could see this illiquid time of the year see further momentum initially target $8,000 and possibly $8,500 over the next couple of weeks.
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