Bulls on Wall Street pull indices higher

Summary:

• Major US indices manage to close the Monday’s session with moderate gains

• US dollar slightly poised, safe haven assets lead

• More details on the big fiscal boost in Japan

Bounce off

Despite heavy losses seen across European equity markets US indices managed to recover before the closing bell on Monday registering moderate gains. The SP500 (US500) rose 0.2%, the Dow Jones (US30) climbed 0.1% while the NASDAQ (US100) increased as much as 1%. Initially technology stocks were trading higher mostly due to Apple as the company was trading 2% down following a Chinese court’s ruling. It said that the US company had infringed on two Qualcomm patents and therefore it must stop selling seven of its most popular iPhones in the world’s second largest economy. However, this ban does not include the newest models - iPhone XS, iPhone XS Plus and iPhone XR. Let us remind that Qualcomm, the US microchip maker, claims that Apple has violated two of its patents in the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X. The mentioned patents allow people to edit and change the size of photos on a device, the US company says. However, the sell-off seen in Apple’s shares ended after the firm said that it was still selling all iPhone models in China and that it had filed a request for “reconsideration” with the court. As a result, the stock ended Monday’s trading with a 0.7% increase and it gained in after-hours trading. On top of that, it is worth mentioning Microsoft and Facebook as both gained markedly finishing higher by 2.6% and 3% respectively. Why did Wall Street open lower yesterday? The prime reason seems to have been the Brexit story and a Theresa May’s speech where she announced to delay the vote on a deal for the UK’s exit from the European Union. Nevertheless, she did not specify a date when the vote could take place. It means subsequent days or even weeks with uncertainty which is expected to weigh on UK GDP in the final three months of the year.

From a technical standpoint one could hope for a bounce in the upcoming hours after the US500 managed to close the day above its critical support nearby 2600 points. In theory the price could revisit the area around 2815 points but it could turn out to be too hard to do given the death cross drawn several days ago. This technical pattern has undoubtedly increased sellers’ conviction (at least among those who look at technical indicators and patterns) which could be hard to eradicate. Thus, we reckon that any bounces might be only temporary and might be quite quickly faded. Source: xStation5

Dollar lags, Japan readies for fiscal stimulus

On the currency front we may notice that the US dollar is lagging compared to its major G10 peers while safe haven currencies - JPY and CHF - are placed among the best performers in early trading in Europe. Notice that the greenback saw a rally on Monday with the EURUSD falling back to 1.1350 from 1.1440. The Asian session did not abound in many crucial macroeconomic readings. We got readings from Australia in Japan. The weekly consumer confidence indicator in the Antipodean economy fell to 117.5 from 119.5. In addition to that we were offered NAB indicators for November. The first one concerning conditions slid to 11 from 12, the second one as for confidence declined to 3 from 4. From Japan a preliminary reading on machinery tool orders for November was released and produced a 16.8% MoM decrease compared to a fall of 0.7% in the prior month. Writing about the Japanese economy it is worth mentioning a handful of details concerning the planned fiscal boost for the next year. Overall shopping incentives will amount 2 trillion JPY ($17.7 billion) and are aimed to ease the blow from plans to rise the Japan’s consumption tax rate to 10% from 8% in October 2019. The package is to include a “premium gift card” providing shoppers with vouchers offering extra value or a 5% cashback program for those using cashless payments at small and midsize merchants. Moreover, the next fiscal year’s budget is expected to include 1 trillion JPY expenditures on infrastructure following many natural disasters affecting Japan this year. The tax increase is a downside risk for the Japan’s economy despite a spending package planned by the government. On top of that, the economy will be burdened with massive costs related to the 2020 Tokyo Olympics.

The USDJPY has bounced off its trend line once again. Therefore, it could head to the resistance placed at 114.30 from where seller might take control again. Looking forward, we see downside risks for the pair. Source: xStation5

In the other news:

• New Zealand’s credit card spending fell 0.4% MoM in November missing the consensus of a 0.3% MoM increase