Weekly Market Update
Weekly Market Update
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Author : Rachel Poole
Date : January 4, 2020
Market Action
Global equities changed little this week after gains made earlier in the week were given up after a US airstrike killed the top Iranian general in Baghdad, Iraq. The note on the 10-year US Treasury note dropped to 1.82 percent while the price of a barrel of West Texas Intermediate crude oil rose about 4 percent to $63.50. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), increased to 14.1.
Early Friday morning, the US launched an airstrike in Baghdad, Iraq which killed top Iranian general, Qassem Soleimani. General Soleimani was in charge of directing Iranian proxies deemed terrorists by the US. Markets grew risk averse upon reports of the attack due to fears of intensifying conflict and the possibility that the flow of oil through the Strait of Hormuz could be disrupted. The fears that a retaliation from Tehran would disrupt energy supplies has already boosted oil prices $3.
The People’s Bank of China appears to be loosening monetary policy conditions in an attempt to stabilize the country’s growth. The bank lowered its reserve requirement ratio, freeing up liquidity for bank lending. However, the central bank did ensure that they will avoid large-scale liquidity injections and that they are focused on the nation’s growth outlook and job stability.
The Hongkong and Shanghai Banking Corporation (HSBC) was forced to close branches in Hong Kong due to the intensification of protests. The bank recently became a target of protesters after it closed an account used to raise funds for demonstrators. HSBC officials said the decision to close the account in November was solely for compliance reasons.
What Could Affect the Markets in the Days and Weeks Ahead
A signing ceremony has been scheduled for January 15th at the White House to make official phase one of a US-China trade agreement. US President Donald Trump has also announced that he will be traveling to Beijing at a later date to begin negotiations on phase two of the agreement.
British lawmakers will convene on Tuesday next week to debate Prime Minister Boris Johnson’s Brexit deal. The bill will go to parliament’s upper house on Thursday, making it more than likely that Johnson fulfills his promise to “get Brexit done” by January 31st. The next big step for the United Kingdom will be to reach a trade agreement with the European Union by the end of 2020 or else they may be cut loose without arrangements in place.
The US labor picture suggests the US-China trade war has not had a major impact on the greater US economy as growth continued at a 2.1 percent pace in the third quarter. The US jobless rate in November was the lowest it has been in 50 years at 3.5% and 266,000 jobs were added in November as well. The results of the first US jobs release will be revealed this weekend.
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