The Market Today

Markets Close 2019 with Gains Across-the-Board


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

Happy New Year – Hoping all our readers had a safe New Year and a prosperous 2020.

Jobless Claims Inch Lower During Christmas Week: Initial jobless claims for the week ending December 28 inched down from 224k to 222k.  The data covering the holiday-affected week is unlikely to give any meaningful indication of which way claims are heading.  However, any report showing that claims are not trending back up, as the mid-December data showed, is seen as positive.

Markit Manufacturing Index: The December final revision to Markit’s U.S. manufacturing index is scheduled for release at 8:45 a.m. CT.

 

OVERNIGHT TRADING:

Treasury Yields Pull Back, Stock Futures Rise Ahead of First Trading Day of 2020: Treasurys are coming into the first trading day of 2020 having recouped their losses from a thinly trade New Year’s Eve.  The 10-year yield rose 4 bps from 1.88% to 1.92% on the final day of 2019 before rising to 1.94% in early trading this morning. The yield has since pulled back to 1.88%.  Eurozone stocks are up 1.3% and U.S. futures are up 0.6% coming into the morning. In the overnight data, China’s Caixin manufacturing index fell more than expected, dropping from 51.8 to 51.5.  In the Eurozone, the final December report on manufacturing activity from Markit rose from 45.9 to 46.3, a better-than-expected result but still in contractionary territory.

China Eases Reserve Requirements Ahead of Challenging Year: Chinese officials announced on the first day of 2020 that they were easing monetary policy by reducing required reserves for commercial banks.  The Chinese economy grew at close to 6% in 2019, its slowest rate of growth in 30 years as global growth languished and a trade spat with the U.S. hurt demand.  Large banks will now be required to keep 12.5% in reserves while smaller banks will be required to keep 10.5%, both down 0.5%.

Banner Year for Markets: 2019 was a banner year for most asset classes as geopolitical uncertainty and weak global growth pressured central banks to shift from a tightening posture to easing monetary policies.  Sovereign yields were down across the globe with the 2-year Treasury yield down 92 bps and the 10-year yield down 77 bps.  Stocks were up globally (see Chart of the Day) led by China’s 36% gain and the S&P’s 29% rise.  Eurozone stocks rose 23% followed by Japan’s 18% gain.


NOTEWORTHY NEWS

WSJ: Recession Rises on List of CEO Fears for 2020 – Economic slowdown and trade uncertainty are top concerns in survey of global business leaders

WSJ: Governments in Europe Find Workarounds to Bail Out Ailing Banks – State injections into banks in Germany and Italy continue to protect investors over taxpayers


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