China intervenes to support yuan - 13.1.2016

US stock markets recorded solid gains on Tuesday despite continued decline in oil prices. The dollar strengthened as investor confidence recovered after China intervened to support the offshore yuan exchange rate. This move reassured markets that China is not planning a sharp devaluation of its currency. According to live dollar index data the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.3% to 98.978. The S&P 500 closed 0.8% higher, with eight of its ten main sectors finishing in positive territory. Energy and materials companies were the biggest decliners. The Dow Jones Industrial Average rose 0.7%. The Nasdaq Composite index ended 1% higher snapping an eight-day slump. Analysts note there were no particularly good reports that could explain the rebound, especially in the light of recent bearish recommendations of investment bankers such as J.P. Morgan advising to sell stocks on any rally. In economic news Job Openings and Labor Turnover Survey showed slightly higher job openings in November - 5.43 million compared with 5.34 million in October. Today at 13:00 CET Mortgage Applications will be released in US. At 14:00 CET Federal Reserve Bank of Boston President Eric Rosengren speaks on economic outlook in Boston. At 18:30 CET Federal Reserve Bank of Chicago President Charles Evans speaks on economic conditions in Iowa. At 20:00 CET Federal Reserve’s Beige Book and December Federal Budget Balance will be released.

European stock markets rebounded on Tuesday as Chinese markets stabilized. The euro edged lower against the dollar, trading at $1.0856 late Tuesday in New York compared with $1.0861 late Monday. The Stoxx Europe 600 index ended 0.9% higher, Germany’s DAX 30 rallied 1.5% to 9985.43 after closing on Monday at its lowest level since early October, and France’s CAC 40 added 1.6%. Retailers advanced, with shares of Wm. Morrison Supermarkets and Debenhams rallying 8.7% and 15% respectively after the UK retailers posted better-than-expected sales over the Christmas period. Mining companies fell with Glencore ending lower 2%, Antofagasta dropped 3.5%, and Rio Tinto closed down 2.7%. Today at 11:00 CET December Industrial Production will be released in euro-zone. The tentative outlook is positive.

Nikkei closed sharply higher today posting a 2.9% gain after investor sentiment was buoyed by better-than-expected Chinese trade data. China’s exports rose 2.3% in yuan terms in December from a year earlier while imports fell 4.0%. In US dollar terms, the 1.4% fall in exports was less-than-expected as imports fell by 7.6%. The yen weakened supporting exporters such as Toyota and Pioneer which rose 2.93% and 3.9% respectively.

Oil futures prices are still moving lower today after falling to 12-year lows on Tuesday. February WTI closed down 3.1% at $30.44, lowest finish since December 2003 . February Brent crude fell 2.2% to $30.86 a barrel on London’s ICE Futures exchange, the lowest settlement since April 2004. Investors are concerned the global glut will not clear soon. The Energy Information Administration agency report on Tuesday said that a limited decline in US supplies next year and steady growth in global demand will help ease the glut only in the third quarter of 2017. The American Petroleum Institute said US crude-oil inventories fell by 3.9 million barrels last week, while gasoline and distillate stocks rose by 7 million and 3.7 million barrels respectively. Today at 16:30 CET US Crude Oil Inventories will be released by Energy Information Administration.