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ICBC Financial Market Daily Review - January 24, 2018
 

I. Yesterday’s News
International News

1. U.S. President Donald Trump signed into law a steep tariff on imported solar panels on Tuesday, a move billed as a way to protect American jobs but which the solar industry said would lead to thousands of layoffs and raise consumer prices. "You're going to have people getting jobs again and we're going to make our own product again. It's been a long time," Trump said as he signed the order. But the solar industry countered that the move will raise the cost of installing panels, quash billions of dollars of investment, and kill tens of thousands of jobs, raising questions about whether Trump’s move will backfire by triggering mass layoffs.

2. The U.S. Senate on Tuesday voted 85-12 to approve Federal Reserve Governor Jerome Powell as the next head of the central bank, in a move likely to provide continuity in U.S. monetary policy. A lawyer and investment manager by training, he has served on the Fed's board since 2012.

3. Silicon Valley billionaire Elon Musk could earn as much as $55.8 billion in Tesla Inc stock and own more than a quarter of the electric car company in the next decade if he hits all targets of a bold new pay plan. The unexpected compensation arrangement - announced in the middle of the night in California - involves no salary or cash bonus but sets up rewards for Musk multiplying Tesla's market value as much as ten-fold to $650 billion over the next 10 years. That ambitious target implies Tesla stock will grow by 1,000 percent over a decade, or about 27 percent per year, a feat achieved by only a handful of major U.S. companies recently, including Amazon.com Inc, Priceline Group Inc and Domino’s Pizza Inc. Netflix has surged 6,600 percent in the past 10 years.

4. Euro zone consumer confidence jumped much more than expected in January, a flash estimate from the European Commission showed on Tuesday, further underlining the momentum in the economy that is growing at its fastest in a decade. The Commission said consumer confidence in the 19 countries sharing the euro in January rose to 1.3 points from 0.5 points in December, well above market consensus of an increase to 0.6. The mood among German investors surged in January, a survey showed on Tuesday, reflecting their upbeat outlook for Europe's largest economy despite political uncertainty in Berlin. The Mannheim-based ZEW research institute said its monthly survey showed its economic sentiment rose to 20.4 from 17.4 in December. That compared with the Reuters consensus forecast for a reading of 17.8.

5. Eleven countries aiming to forge an Asia-Pacific trade pact after the United States pulled out of an earlier version will sign an agreement in Chile in March, Japan's economy minister said on Tuesday, in a big win for Tokyo. Trade officials had been meeting in Tokyo to resolve rifts including Canada's insistence on protections for its cultural industries such as movies, TV and music.

Domestic News

6. China invited Latin American and Caribbean countries to join its "One Belt, One Road" initiative on Monday, as part of an agreement to deepen economic and political cooperation in a region where U.S. influence is historically strong. Chinese Foreign Minister Wang Yi said in the opening remak at the Second Ministerial Meeting of the Forum of China and the Community of Latin American and Caribbean States (CELAC), “ the Belt and Road is an open, transparent and inclusive international cooperation platform, opening to any country as long long they share the Silk Road spirit.”

7. China on Tuesday criticized U.S. President Donald Trump's decision to raise import duties on solar power components and washing machines as an abuse of trade remedies. China will resolutely safeguard its interests along with other WTO members, the Ministry of Commerce said in a post.

8. Chinese state-owned enterprises (SOEs) saw 23.5 percent profit growth to 2.89859 trillion yuan last year, 9.9 percent higher over revenue growth, the Ministry of Finance said. SOEs in coal, oil and petrochemicals enjoyed relatively large profit increases, but power generation firms suffered significant declines.

9. In a statement issued Thursday by the Ministry of Industry and Information Technology (MIIT), the country’s administration reiterated its commitment to strictly ban the launch of new steel capacities, forbid excess steel capacity to reopen, and eliminate recycled steel scrap. In addition to reinforcing supervision, China will organize special checks on key regions to ensure that all recycled steel scrap will be banned.

10. Shanghai has pegged its economic growth target at about 6.5 percent in 2018, and more measures will be introduced to realize real estate market regulation, Mayor Ying Yong said. He added that more rental housing will be constructed in addition to increasing the supply of medium- and small-sized apartments and effective commercial residential housing.

II. Market Overview
FX
1. Global Market

The dollar extended recent weakness against a basket of major currencies to hit a fresh three-year low on Tuesday, after the euro surged on consumer confidence data indicating strong momentum in the region's economy. The dollar index, which measures the greenback against six rival currencies, was down 0.32 percent at 90.115, after slipping as low as 90.063, its lowest since December 2014. The euro was up 0.29 percent to $1.2295 against the greenback. The British pound powered past $1.40 to its highest level since the vote to leave the European Union in June 2016, extending a rally on the back of growing optimism around Britain's chances of securing a favourable Brexit deal.

2. Home Market

China's yuan rose slightly against the U.S. Dollar on Tuesday morning, trading above 6.4 per dollar throughout the session, while the the central bank's midpoint rates hit an over 25-month high. The lower dollar index boost market appetite for forex buying, but forext settlement remained high. Yuan is expected to remain strong in the near term.

Precious Metals

Gold prices rose on Tuesday as the U.S. dollar fell to fresh three-year lows, but an end to uncertainty created by a three-day U.S. government shutdown capped gains. Spot gold was up at $1,341.01 an ounce, while U.S. gold futures for February delivery settled up $4.80, or 0.4 percent, at $1,336.70 per ounce.

Commodities
1.Crude Oil

Oil rose more than 1 percent on Tuesday, with benchmark Brent crude hitting $70 a barrel for the first time in a week, boosted by healthy world economic growth prospects and expectations for continued production curbs by OPEC, Russia and their allies. U.S. West Texas Intermediate (WTI) crude futures closed up 90 cents to $64.47 a barrel. Brent crude futures settled up 93 cents, or 1.4 percent, to $69.96, not far off the three-year high of $70.37 reached on Jan. 15.

2.Base Metals

Copper prices fell to their lowest in a month on Tuesday after rising inventories showed healthy supplies of refined metal. Lead, however, climbed to the highest since 2011 after stocks declined. Three-month LME copper closed 2.1 percent weaker at $6,923 a tonne, the weakest since Dec. 20. LME lead climbed to an intraday peak of $2,636.50 a tonne, the strongest since August 2011, but gave up its gains and closed down 0.4 percent at $2,610.

U.S. Treasuries
1. U.S. Bonds

U.S. Treasury debt yields weakened on Tuesday in quiet trading, moving in tandem with Japanese government bond yields, after the Bank of Japan kept interest rate targets unchanged and its top official quashed speculation of a move away from an easy monetary policy. In late trading, U.S. 10-year Treasury yields fell to 2.627 percent, from 2.663 percent late on Monday. U.S. 30-year bond yields, meanwhile, hit a one-week low of 2.879 percent and was last at 2.907 percent, down from Monday's 2.927 percent. U.S. 2-year note yields were also down, trading at 2.048 percent.

2. Chinese bonds

Cash bond yields in China’s interbank bond market slipped on Tuesday morning, while Treasury bond futures edged up. Both contracts extended yesterday’s upward momentum on upbeat liquidity and as government regulation took a breathe, trader said. But investors remained cautious, awaiting entry opportunity in anticipation of strict regulation.

Stock Market
1. U.S. Equities

U.S. stocks advanced on Tuesday, as strong results from Netflix helped lift the S&P and Nasdaq Composite, but the Dow Industrials were hemmed in by declines in Johnson & Johnson and Procter & Gamble. The Dow Jones Industrial Average fell 3.79 points, or 0.01 percent, to 26,210.81, the S&P 500 gained 6.17 points, or 0.22 percent, to 2,839.14 and the Nasdaq Composite added 52.26 points, or 0.71 percent, to 7,460.29.

2. Hong Kong Equities

Hong Kong stocks hit another fresh record on Tuesday, aided by continuous inflows of mainland money, and strength in IT and financial stocks. At close of trade, the Hang Seng index was up 537.29 points or 1.66 percent at 32,930.70. The Hang Seng China Enterprises index rose 2.16 percent to 13,490.45.

3. China Equities

Chinese stocks rose for the sixth consecutive day on Monday, hitting a 25-month high and the largest one-day growth in five months. Major indexes remained at highs throughout the day, boosted by heavyweights including bank and property names. Fueled by bullish sentiment, new funds, a new peak can be expected. The benchmark Shanghai Composite Index rose 45.15 points or 1.29 percent to 3,546.51. The Hushen 300 Index ended at 4,382.61, up 1.06 percent.


(2018-01-24)
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