20171207-大华银行-Markets_Overview_5页_255kb

Global Economics & Markets Research Summary (07 December 2017)

Core Content Overview

This report provides a comprehensive analysis of global economic and financial market trends, focusing on key data releases, central bank outlooks, FX movements, equity performance, US Treasury yields, and commodity prices as of 7 December 2017. The emphasis is on the US, Europe, Asia, and related geopolitical and economic developments.

Key Market Highlights

US Market Focus

• Jobless Claims & Tax Reform: The US data focus is on weekly initial jobless claims and November challenger job cuts. US political uncertainty, particularly around the federal spending plan extension and potential government shutdown, remains a major concern.
• ADP Jobs Report: The November ADP jobs report showed 190,000 new jobs, in line with forecasts, highlighting continued strength in the US labor market.
• Equity Market Volatility: US equities saw a mixed session with the S&P 500 closing lower for the 4th consecutive session, reflecting caution amid near-record highs and political uncertainty. The Nasdaq was the best performer among major indices, with tech stocks rebounding.
• Federal Reserve Outlook: The Fed is expected to maintain a cautious stance on interest rates, with potential rate hikes in the near future due to inflationary pressures from tax reforms.
• US Treasury Yields: US bond yields declined slightly across the curve as investors turned risk-averse, with the 2-year yield at 1.81%, 10-year yield at 2.34%, and 30-year yield at 2.73%.

European Market Outlook

• ECB Asset Purchase Programme: ECB Executive Board member Yves Mersch suggested that the asset purchase program may no longer be necessary, but warned against premature withdrawal due to risks of asset price collapse and yield spikes.
• Moody's Assessment: ECB's purchases have lowered Euro area bond yields by 50–150 bps, with the program expected to reach EUR 2.3 trillion by year-end.
• Eurozone GDP: The final print for Eurozone's 3Q GDP is a key data point for the week.
• FX Movements: The euro continued to weaken against the dollar, with EUR/USD trading near 1.1796. The UK pound faced pressure due to Brexit concerns, ending at 1.3393.

Asian Market Insights

Regional Economic Data

• New Zealand: November house prices rose 6.4% y/y, the highest increase in 4 months.
• Australia: October trade surplus narrowed to AUD105mn, below expectations, with exports down 3% y/y and imports up 2% y/y.
• Thailand & Indonesia: Will release November consumer confidence data.
• Malaysia: October exports rose 18.9% y/y, with strong manufacturing activity. The Nikkei PMI Manufacturing index hit a 43-month high in November.
• Singapore: The SGD NEER is expected to trade between 1.0% and 1.5% above the midpoint, implying a USD/SGD range of 1.3492–1.3426.
• China: Foreign reserves for November are expected to be reported, along with the CPI and PPI data.
• Other Asian Currencies: The SGD, THB, TWD, KRW, and PHP all declined against the USD during Asian hours.

Equity Market Performance

• Asian Indices: Asian equities mostly fell for the second day, with the Nikkei 225 down 1.97%, Hang Seng down 2.14%, and TAIEX down 1.64%.
• Southeast Asia: The STI and KLCI closed lower, while the JCI rose 0.58%.
• Expectations: The recent selloff may be abating, with equity-index futures in Japan signaling a recovery in the Nikkei 225.

Central Bank Outlook

Bank of Canada

• Kept the benchmark overnight rate unchanged at 1%.
• Stressed a cautious approach to future rate hikes, as the economy is near capacity and geopolitical risks persist.

Reserve Bank of India (RBI)

• Maintained the repurchase rate at 6%.
• Cited inflation concerns as the primary reason for inaction, despite improving GDP growth.
• Upgraded inflation projections for 2H FY18 to 4.3%–4.7%, with the next meeting scheduled for 6–7 February 2018.

Commodities

• Crude Oil: US and global crude oil prices fell sharply after the EIA reported a larger-than-expected build in inventories.
• Gold: Prices rose slightly to US$1,262.80, supported by risk aversion.

Key Economic Indicators

FX Rates (as of 06 Dec 2017)

Interest Rates

Conclusion

The global market landscape in early December 2017 was shaped by US political uncertainty, the potential for a government shutdown, and the ongoing effects of ECB's asset purchase program. Asian markets faced mixed performance, with some showing signs of recovery while others continued to decline. FX markets were influenced by the US dollar's strength, while equity indices reflected cautious sentiment. Central banks like the BoC and RBI maintained a cautious stance, and commodities saw declines due to concerns over oil demand and inflationary pressures.