Markets Adrift As Traders Search For Catalysts Amid Trade Lull

Equities were adrift on Wednesday amid a lack of fresh catalysts.

Investors are set to weigh Fedex’s egregious results and the pound extended Tuesday’s slump. Donald Trump is set to be impeached.¬†Beyond that (and there’s something amusing about saying “other than the President of the United States being impeached” nothing is going on), there are few real notables.

German business confidence rose a third month, as Ifo printed 96.3, better than the 95.5 the market was looking for, up from November’s 95.1 and better than the most optimistic estimate from 39 economists.

The expectations gauge rose to 93.8 from 92.3 last month. That looks like the largest jump in more than a year.

This may reflect optimism around the trade deal. As denoted in the visual, it comes at a time when the data still refuses to completely acquiesce to the “Germany has bottomed” narrative. Earlier this week, the flash manufacturing PMI showed an unwelcome tick lower in December, undercutting optimists at a time when the “green shoots” story was trying to get its sea legs.

Meanwhile, exports fell for a 12th month in Japan, which joins South Korea and Hong Kong on the list of countries where shipments abroad have fallen for a dozen consecutive months. It’s the worst slump since 2016, although November’s 7.9% drop was actually better than the nearly 9% decline economists were expecting.

Japan recently rolled out a new stimulus package designed to help avert a recession.

Third quarter growth was revised sharply higher earlier this month, but the tax hike and the typhoon are set to throw the economy for a loop in Q4, when output is expected to contract by more than 2.5%.

Finally, it’s worth noting that China “unexpectedly” cut the 14-day repo rate by 5bps on Wednesday. The move of course comes after November’s cuts in the 7-day rate, the MLF rate and, ultimately, the loan prime rate. Analysts expect more RRR cuts in the first half of 2020. China also injected a net 200 billion yuan on Wednesday.

All in all, markets will be looking for fresh catalysts. Expect details around the trade deal to remain scant in the near-term. And maybe in the long-term too.


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