Over the week, the dollar rose 1.3%, sovereign yields jumped and oil also advanced, hoping for a trade deal. Friday’s announcement of improved US consumer confidence in October also reassured markets about the state of the US economy.
The mood of US consumers to the highest in 4 months
At this stage, the question of the extent of the dismantling of the customs barriers put in place for 16 months between the United States and China, remains unresolved. On Thursday, Chinese Trade Ministry spokesman Gao Feng had given much hope that the “Phase 1” agreement provided for both parties to lift existing tariffs in comparable proportions and simultaneously.
On the macroeconomic level, the American indicators published recently are rather well made. The US Consumer Preliminary Index at the University of Michigan came in slightly better than expected, at 95.7 vs. 95 consensus, reaching a four-month high. It was 95.5 at the end of October (revised reading initially estimated at 96). The confidence index thus improves very slightly with economic and commercial hopes.
“Although consumers have become a little more cautious, they see no reason to hire restrictions (consumption) could cause a recession,” summarized Richard Curtin, chief economist in charge of this bimonthly survey.
In addition, wholesalers’ inventories fell by 0.4% in September over one month, against -0.3% market consensus and + 0.1% for the revised reading of August 2019, according to the government report of the day.
Bullish week for rates, the dollar and oil, gold at half-mast
The dollar index, which measures its evolution against 6 reference currencies, continued its rise on Friday, rising 0.23% to 98.37 points, bringing its growth to 1.3 % on the week. The euro fell by 0.25% Friday, to $1.1021.
On the side of sovereign rates, the 10-year T-Bond yield gained 2 basis points to 1.94%, and sign its largest weekly increase for nearly 6 years (+22 bps in 5 sessions!) This rate had fallen to 1.53% a month ago, in fear of a recession, which now seems to be moving away after a 3rd Fed rate cut on October 30, and thanks to the easing in the trade war between Washington and Beijing.
Oil ended up slightly higher on Friday, in the hope that a trade deal will boost global growth, and thus the demand for crude oil. The price of a barrel of US light crude (WTI) gained 0.2% to $57.24 on the Nymex (December futures contract), while the North Sea Brent gained 0.4% to 62%. $51 (January futures contract). Over the week, WTI regained about 1.7%.