Attention now turns to Wednesday’s signing of the U.S.-China Phase 1 trade agreement, tomorrow’s start to the fourth-quarter U.S. corporate earnings season and how Friday’s data showing a below-forecast increase in U.S. jobs and wages last month keeps pressure off the Fed to rethink monetary settings.
Wall Street’s S&P 500 set an intraday high on Friday, although it closed lower on the day as it consolidated full-week net gains of almost 1% and as Boeing dropped 2% amid further worries about its 737 Max.
Asian markets focused on the U.S.-China trade agreement and rallied earlier on Monday. Shanghai, Hong Kong and Seoul’s equity benchmarks all gained about 1%. Japanese markets were closed for a holiday.
China’s offshore yuan surged to its best levels since July. China releases fourth-quarter GDP numbers on Friday.
Australian stocks bucked the trend and retreated from last week’s record highs amid concern about the economic and political effect of the devastating bushfires there.
Brent crude oil prices tested levels below $65 per barrel after falling last week from highs above $70.
The Iranian government’s admission at the weekend that it accidentally shot down the Ukrainian airliner in Tehran last week sparked two days of anti-government street protests and have changed perceptions on the ultimate outcome of last week’s military tension.
Tuesday sees the big U.S. banks opening the fourth-quarter reporting season. Aggregate annual U.S. profit growth is expected to be flat to slightly negative for the quarter, although the actual outcome defied those forecasts throughout the earlier part of last year.
European earnings are expected to be the strongest in 18 months. In Europe on Monday, sterling fell to its lowest for the year against the dollar and the euro.
Bank of England policymaker Gertjan Vlieghe said on Sunday that he would vote for an interest rate cut later this month unless economic data improved significantly – adding his voice to rising chorus in favour of more easing, as Brexit finally begins at the end of this month.
Outgoing BoE governor Carney surprised markets last week by indicating the BoE could cut rates again if last year’s UK economic weakness persisted into 2020. BoE policymaker Silvana Tenreyro said on Friday a rate cut was possible in the coming months.
Irish government bond yields were steady amid speculation PM Leo Varadkar will call a snap general election as early as February.
In European corporate news, global automakers sounded cautious about sales this year in China's vehicle market, the world's biggest. Data out on Monday showed Chinese auto sales dropped 8.2% last year, the second calendar year decline.
The FT reported that Nissan executives have stepped up planning for potential split from Renault and the Peugeot family said it intended to increase its stake in the company resulting from PSA and Fiat Chrysler’s merger.
Aston Martin shares extended Friday’s recovery and gained 4% on news that China’s Geely is in talks about taking a stake in the carmaker. Industrial conglomerate Thyssenkrupp rose after the FT said it had stepped up efforts to sell its Industrial Solutions unit, which builds plants and industrial sites.
In earnings, William Hill rose almost 2% after the British bookmaker said it expects 2019 profit to exceed its and analysts' estimates.
UCB rose more than 3% after the Belgian drugmaker raised its revenue and earnings per share guidance for 2019. MorphoSys was up more than 6% in early trade, boosted by a licencing deal with Incyte that envisages an equity investment in the German drug maker.
— A look at the day ahead from EMEA Markets Editor Mike Dolan. The views expressed are his own —
Editing by Larry King