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January 14, 2020

Rates Rise as US-China Trade Tensions Calm

 

Rates climb, US equities hit record highs as Treasury Department removes China’s currency manipulator designation. US-China relations continue to thaw ahead of Wednesday’s scheduled signing of the “phase one” trade agreement, the latest sign of de-escalation helping the S&P 500 rise 0.70% to 3,288 (a new record). Treasurys fell on the risk-on mood, the 10-year yield climbing 2.5 basis points to close at 1.84% while the curve flattened modestly. While the market cheered on the latest development in US-China relations, the signing of a phase one agreement marks only the the beginning of negotiations on a broader US-China trade deal. Later this week, the EU’s trade negotiation team will also arrive in Washington, beginning what could be another protracted and contentious trade conflict.

 

 

JPMorgan sets record for US bank profitability with Q4 results, rises 1.4% in pre-market on the back of strength in FICC trading and loan growth. JPMorgan’s blockbuster quarter was echoed by similar results for Citigroup, both banks beating estimates after posting better than expected results in fixed-income trading. Net-interest margins came in better than expected, while credit quality remained pristine for both banks, net-charge off’s coming in below expectations.

 

 

Day ahead. This morning, the Labor Department will release the latest CPI data for the month of December. Current forecasts call for headline inflation to come in at 2.4% (marginally higher than the prior month’s 2.1% rate). New York Fed President John Williams and Kan1sas City Fed President Esther George will discuss their outlook on the current economic state and monetary policy later in the day.

 

 

 

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