Morning Report

Headlines

Stocks in Asia were mixed in the morning despite an improvement in market risk sentiment after British Prime Minister Theresa May said she had obtained enough support for her proposed Brexit deal to move forward. But market watchers say that there are doubts over whether the draft agreement will get parliamentary approval.

U.S. Federal Reserve Chairman Jerome Powell on Wednesday expressed confidence in U.S. economic strength and said that markets will have to get used to the idea that the central bank could raise rates at any time starting in 2019.

Stocks

Stocks in Asia were mixed in the morning despite an improvement in market risk sentiment after British Prime Minister Theresa May said she had obtained enough support for her proposed Brexit deal to move forward.

Japan’s Nikkei 225 slipped 0.4 percent in early trade while the Topix index saw losses of 0.5 percent, as shares of conglomerate SoftBank fell 1.3 percent.

In Australia, the benchmark ASX 200advanced 0.11 percent as most sectors gained, with materials adding 0.29 percent.

The heavily weighted financial subindex declined 0.29 percent as Australia’s so-called Big Four banks fell. Shares of Australia and New Zealand Banking Group slipped 0.28 percent, Commonwealth Bank of Australia shed 0.84 % , Westpac fell 0.88 percent and National Australia Bank declined by 0.33 percent.

South Korea’s markets are set to open at 9:00 a.m. HK/SIN today, according to a notice by the Korea Exchange.

May gets support for Brexit deal

Theresa May said on Wednesday she had obtained enough support for her proposed Brexit deal to move forward.

“I firmly believe that the draft withdrawal agreement was the best that could be negotiated,” May told reporters in London. “The choices before us were difficult … but the collective decision by Cabinet was that the government should agree the draft withdrawal agreement and the outlying political declaration.”

“This is a decisive step which enables us to move on and finalize the deal in the days ahead,” May added.

Following her announcement, the British pound rebounded against the greenback. On Thursday morning during Asian hours, Sterling traded at $1.2988 after touching an earlier high of $1.3006.

Some market watchers said that the uncertainty surrounding a deal had earlier weighed on risk sentiment.

Parliamentary approval for the Brexit draft agreement is still in “considerable doubt,” according to Ray Attrill, head of foreign-exchange strategy at the National Australia Bank.

“We still can’t say with any confidence whether this deal, no deal, or indeed a second referendum, is now the most probable outcome to this ongoing saga,” he said in a morning note.

Fed ‘can and will move at any meeting’

U.S. Federal Reserve Chairman Jerome Powell on Wednesday expressed confidence in U.S. economic strength and said that markets will have to get used to the idea that the central bank could raise rates at any time starting in 2019.

During a question-and-answer session in Dallas, Powell conceded that the global economy is not growing at the same pace it was last year. But he said overall the domestic picture looks good. He described the global picture as a “gradual chipping away” at the pace of growth but said it is “not a terrible slowdown.”

“I’m very happy about the state of the economy now,” he said in an interview with Dallas Fed President Robert Kaplan. “Our policy is part of the reason why our economy is in such a good place right now.”

“Over time, folks will get used to the idea that we can and will move at any meeting,” he added.

Trade concerns weigh on Wall Street

In overnight market action on Wall Street, the S&P 500 slipped around 0.76 percent to close at 2,701.58 while the Dow Jones Industrial Average declined by 205.99 points to finish the trading day at 25,080.50. The Nasdaq Composite also saw declines of 0.9 percent to close at about 7,136.39.

Market sentiment was also hurt by comments from Rep. Bill Pascrell, D-NJ. In an interview with Bloomberg News, Pascrell said the updated trade deal between the U.S., Canada and Mexico needs to be changed before it can pass through Congress. There needs “to be not only changes in the legislation but more enforcement,” said Pascrell, who is in line to be the head of the House Ways and Means subcommittee on trade.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.213 after seeing an earlier high around the 97.4 handle.

The Japanese yen traded at 113.54 against the dollar after seeing lows above 113.9 yesterday. The Australian dollarwas at $0.7267, climbing from lows around $0.7226.

On Thursday, PBOC sets the USD/ CNY mid-point at 6.9392 versus 6.9402 Wednesday’s close.

The Chinese central bank skipped open market operations (OMOs) today. There was no RRS mature today, thus neutral potions from the bank.

U.S. oil prices resume decline as oversupply worries drag

U.S. oil prices fell on Thursday, resuming declines after an industry group said U.S. inventories had risen more than expected and shrugging off a report that OPEC and other producers plan to cut output.

U.S. crude futures were down 33 cents, or 0.6 percent, at $55.92 a barrel by 0004 GMT.

The contract rose 1 percent on Wednesday, after sliding for 12 straight sessions and touching its lowest since November 2017.

Brent crude was yet to trade. It settled up 65 cents, or 1 percent, at $66.12 a barrel, after hitting a session-high of $67.63, having also slumped in recent weeks.

The oil market reversed course on Wednesday after Reuters reported that the Organization of the Petroleum Exporting Countries (OPEC) and its partners were discussing a proposal to cut output by up to 1.4 million barrels per day (bpd), more than officials had mentioned previously.

But it did not taken long for concerns about potential oversupply to return to the fore.

The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to Nov. 9 to 440.7 million, compared with analyst expectations for an increase of 3.2 million barrels. [API/S]

Oil markets are being hit by surging supply from OPEC, Russia, the Unites States and other producers and concern that a global economic slowdown will cut into energy demand.

That has pushed the price of global benchmark Brent down more than 20 percent since early October, one of the biggest declines since the price collapse of 2014.

The Paris-based International Energy Agency (IEA) also said on Wednesday that the implied stock build for the first half of 2019 is 2 million bpd.

The IEA left its forecast for global demand growth for 2018 and 2019 unchanged from last month, but cut its forecast for non-OECD demand growth, the engine of expansion in world consumption.

U.S. crude output from its seven major shale basins was expected to hit a record 7.94 million bpd in December, the U.S. Energy Information Administration (EIA) said earlier this week. The EIA announces official crude stocks and other data later on Thursday.

The surge in onshore output has helped overall U.S. crude production hit a record 11.6 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Amid the general market decline, late on Wednesday the CME raised December oil futures margins by 14.5 percent to $3,550 per contract, with the new rate effective from Thursday.

Source

Reuters

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