Market Brief: Bulls on Parade Following “Phase One” US-China Trade Deal

See a summary of the top market themes and trends from today's US trading session!

  • Risk assets exploded higher today as the US and China signed a “Phase One” trade deal, with President Trump stating that the deal covers intellectual property, financial services, and agricultural purchases. Technology transfers are reportedly up for discussion in Phase Two when US official visit China next month. As of writing, there’s no clarity on whether scheduled tariffs on Chinese goods will be enacted as scheduled.
  • FX: The British pound surged against all of its major rivals for the second straight day as the EU and UK agreed to “intensify discussions over the coming days” ahead of next week’s highly-anticipated EU Summit. The safe haven Japanese yen was the weakest major currency in generally optimistic trade, taking USD/JPY to its highest level since August 1.
  • The loonie was the day’s second-strongest major currency after a much stronger-than-expected jobs report, which showed 53.7k new jobs created and the unemployment rate dropping to 5.5%, within a tick of the multi-decade low set earlier this year. Traders will no doubt pare back their expectations for a BOC interest rate cut later this month after such a strong report.
  • US data: The UofM Consumer Sentiment index recovered to 96.0 (vs. 92.0 eyed), though longer-term inflation expectations nonetheless fell to a record low. Separately, the Federal Reserve announced $60B in monthly purchases of short-term Treasury bills.
  • Commodities: Oil gained more than 2% on the day (see the key events and themes we’ll be watching next week), while gold shed roughly -1%.
  • US indices closed sharply higher on trade deal optimism (growing odds of a Brexit deal didn’t hurt), with all major bourses rising roughly 1.5% on the day.
  • All eleven sectors rose on the day led by Industrials (XLI) and Materials (XLB). Utilities (XLU) rose the least.
  • Stocks on the move:

*No major economic data is scheduled for release during Monday’s Asian session (though traders should keep an eye out for Chinese trade balance figures (no set release schedule) *

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