German private sector activity shrank for the fourth month running in December as a decline in manufacturing offset the services sector growth in Europe’s largest economy. The reading was the fourth in a row below the 50 mark that separates growth from contraction. Europe’s biggest economy has been going through a soft patch as its export-oriented manufacturers struggle against a backdrop of trade friction, an ailing car industry and uncertainties over Britain’s planned departure from the European Union. The euro fell sharply against the USD last week but has since recovered some of the losses trading currently at $1.1136.
Senior Japanese and South Korean trade officials met for the first time today since Japan imposed controls on exports to its neighbour of high-technology materials, plunging testy relations between the two Asian countries into a new crisis. Japan imposed the curbs on exports to South Korea of three materials used to make semiconductors in July, threatening a pillar of the South Korean economy and the global supply chain of chips. South Korea responded by dropping Japan from its favoured-trade list and threatening to end security cooperation. Japan’s chief cabinet secretary Yoshihide Suga played down expectations for any quick solution to the dispute on Monday. Relations between the neighbours have been plagued by years of bitterness over Japan’s colonization of the Korean peninsula from 1910 to 1945. The trade dispute has raised fears about security cooperation although South Korea last month decided to retain an intelligence-sharing pact with Japan, after threatening to end it. As investors move towards riskier assets, safe-haven Yen has been losing ground against both the EUR and the USD since last Thursday, currently trading at 121.9€ and 109.48$ respectively.
Oil prices slid off near three-month highs hit last week as investors searched for clarity beyond the initial impact of a trade deal between the United States and China that’s expected to boost flows between the top two global economies. Brent fell 10 cents, to $65.12 a barrel while WTI was down 10 cents to $59.97 a barrel. The United States and China cooled long-simmering trade tensions on Friday, announcing a “phase one” agreement that reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods. The Friday agreement averted additional tariffs on Chinese goods totalling $160 billion that the United States was set to impose over the weekend, but investors remained cautious as they awaited precise details of how the trade deal would work. Data from China showed industrial output and retail sales growth accelerating more than expected in November offering some support for oil prices. Still, investors remained cautious as growth in China is expected to slow further next year, with the government likely to set its economic growth target at around 6% in 2020 compared with this year’s 6-6.5%. Brent has rallied this year, supported by efforts by OPEC and allies including Russia to cut production. The alliance, known as OPEC+, has agreed to lower supply a further 500,000 barrels per day as of Jan. 1, which could boost oil prices.
Asian shares hit their highest in nearly eight months after the United States and China agreed on a preliminary trade deal, with Australian shares leading the way on expectations of more easing of monetary policy there. In early European trade, Euro Stoxx 50 gained 0.62%, German DAX was 0.5% higher and FTSE rose 0.6%. Positive sentiment helped push the MSCI’s index of Asia-Pacific to its highest level since April 18, last up 0.25%. Australia's S&P/ASX 200 jumped 1.63% while shares in Taiwan added 0.22%. The CN50 turned higher on Friday afternoon and was last up 0.3% as retail sales jumped more than expected in November. The S&P 500 climbed to a record closing high of 3,168.8, the Nasdaq Composite added 0.2% to end at 8,734.88, also a record, and the Dow Jones Industrial Average rose to 28,135.38. The dollar index was down 0.12% at 97.053 while gold was flat at $1,475.68 per ounce.