31.12. Experts predict global economic growth in 2020

Analysts positively assess the prospects for the development of the global economy in 2020.

Economists expect the active phase of the US-China trade war to end and consumer spending to remain high, which will contribute to economic growth despite low investment in business.

According to Goldman Sachs experts, the risk of a global recession will decrease and unemployment will drop to the lowest level since the Korean War. In 2020, the global economy will reach 2.25–2.5%, while the unemployment rate will reach 3.25% by the end of the year.

Analysts also expect key Fed rates to remain unchanged. Regulatory officials made it clear that a significant and constant increase in inflation was needed before considering the issue of raising rates.

07.01. Gold rolled back from seven-year highs 

On Tuesday, the price of gold in Asia fell back from seven-year highs in the $1,582.59 area after tensions in the Middle East declined slightly. Earlier, the metal demonstrated skyrocketing amid the news of escalating tensions in the US and Iran after the assassination of Iranian General Qassem Suleimani by the US military. Today, gold prices fell to around $1,558.45 per troy ounce.

According to experts, the reduction of geopolitical risks occurred due to the lack of an immediate response from Iran. In addition, some profit taking is observed in the markets.

However, market participants continue to exercise caution in their actions. We believe that the conflict between the United States and Iran is at its starting point, so further measures by Tehran and Washington could significantly aggravate the situation.

08.01. US Senate Profile Committee approves USMCA Trade Agreement

The United States Senate Committee on Finance has approved the U.S.-Mexico-Canada Trade Agreement Implementation Act (USMCA). The document was adopted by a majority vote (25 votes in favor / 3 against).

A further trade agreement process will include a vote in the US Senate and the final signature of President Donald Trump. Previously, the agreement was approved by the House of Representatives.

The revised agreement includes the rules for participants to access the domestic markets of the three countries, tariffs and some labor laws. The new standards are expected to enter into force in June 2020.

Recall that work on revising the provisions of the North American Free Trade Agreement began in 2017. The parties faced many contradictions and conflicts during the negotiations between the USA, Canada and Mexico.

09.01. U.S. weekly jobless claims fall, ranks of unemployed swelling

According to the US Department of Labor, the number of Americans applying for unemployment benefits for the first time fell to the lowest level in 5 weeks. The indicator decreased by 9 thousand – up to 214 thousand. A week earlier, the number of applications was 223 thousand.

Analysts predicted that the number of applications will decrease by only 3 thousand -– up to 220 thousand.

The average number of applications for unemployment benefits over the past 4 weeks (a less volatile indicator) decreased from 233.5 thousand to 224 thousand. The number of people continuing to receive unemployment benefits increased by 75 thousand – to 1.803 million, which was the highest since April 2018.

10.01. U.S. job growth slows in December, unemployment rate steady at 3.5%

According to the Labor Department data, the U.S. economy has shown less job growth outside the agricultural sector (Nonfarm Payrolls), as the jobs market cooled at the end of 2019.

The number of new jobs rose only 145 thousand in December, while analysts had expected an increase of 164 thousand.

The unemployment rate remained stable at 3.5%, as predicted. The average hourly earnings for the month rose 0.1% compared with growth expectations of 0.3%.

13.01. UK industrial production drops 1.2% in November

According to the UK Office for National Statistics, industrial production in the country in November fell by 1.2% compared to October. In annual terms, industrial production decreased by 1.6%.

Fresh data were worse than analysts' forecasts. In particular, experts predicted that industrial production in the reporting month decreased by 0.1% on a monthly basis, and on an annual basis – decreased by 1.4%.

14.01. US consumer prices increase by 2.3% in December

According to the US Labor Department, consumer prices in December rose 2.3% year-on-year; on a monthly basis, inflation was 0.2%. The annual indicator coincided with the analysts’ forecast, and the monthly indicator was expected at the November level of 0.3%. In November, consumer price growth accelerated by 2.1%.

Core inflation (excluding food and energy prices) in December year on year amounted to 2.3%, which coincided with analysts' forecasts. On monthly terms, a deflation of 0.1% was recorded.

This data may allow the Federal Reserve to keep interest rates unchanged for at least this year.

15.01. Eurozone industrial production rose 0.2% in November

According to Eurostat data, Eurozone industrial production rose in November for the first time in three months.

Industrial production rose 0.2% in November on a monthly basis, while the October figure fell -0.9%. Nevertheless, the current indicator was still worse than analysts' forecasts, expecting growth of 0.3%.

Production of capital goods rose by 1.2% and energy by 0.8%, while production of intermediate goods fell by 0.5%, non-durable consumer goods by 0.7% and durable consumer goods by 0.8%.

On an annualized basis, industrial production fell by -1.5% in November against a fall of -2.6% in October. Experts forecasted a decline of -1%.

In all 28 countries of the European Union, industrial production dropped -0.1% in monthly terms and by -1.3% in annual terms.

16.01. U.S. and China sign phase one of trade deal

The ceremony of signing the agreement on the first phase of the trade dispute between the US and China took place last night. US President Donald Trump and Vice Premier of the State Council of China Liu He met at the White House in Washington.

The heads of states noted that trade negotiations were tough, but honest. At the meeting, a letter by Chinese President Xi Jinping was presented, in which it was noted that this agreement «is useful for China, the United States and the whole world».

The first phase of the deal suggests that China will increase US imports of at least $200 billion during two years. In exchange for this, the States will slightly reduce some duties and will not introduce additional measures in relation to China. However, the full range of duties on Chinese goods will not be canceled in the first phase, and the further fate of the tariffs will be discussed at the negotiations on the second stage of the trade deal.

Despite the fact that this agreement did not solve the key problems in trade relations between the US and China, it significantly reduced the degree of tension in world markets.

17.01. China’s GDP grows at slowest pace in 29 years

According to the official forecast of the National Bureau of Statistics of China, GDP growth in the IV quarter of 2019 amounted to 6.0% in annual terms, which coincided with analysts' expectations and the previous value of the indicator for the III quarter. The gross domestic product of China in 2019 amounted to 99,086 trillion yuan ($14.4 trillion).

Experts note that the growth rate of the second largest economy in the world continues to be kept near a minimum for almost 30 years while the country’s birth rate fell to a record low. The reason for this was sluggish demand at home and abroad, as well as pressure in the trade from the United States.

For the whole of 2019, the Chinese economy grew by 6.1%, a minimum of 29 years. A year earlier, GDP growth was 6.6%. However, the current indicator is still within the range set by the government at 6-6.5%.

20.01. Oil jumped to a maximum in more than a week amid closure of fields in Libya

The price of oil today rose to more than a weekly maximum after the shutdown in two large fields in Libya, which could drastically reduce supplies from an OPEC member country.

Brent futures rose 1.23% to $65.65, previously reaching $66.00 per barrel, the peak since January 9. Futures for WTI crude oil rose 1.11% to $59.50 a barrel.

Before, the Libyan National Oil Corporation (NOC) reported that two large oil fields in the south-west of the country began to suspend operations after the forces of the Libyan National Army blocked the pipeline. If export from Libya is suspended for a long period, oil production may slow down to 0.8 million barrels per day. Recently, Libyan production was at 1.2 million barrels per day.

21.01. Global stocks fall amid fears of new virus in China

Chinese and European stocks show a decline amid concerns about the spread of a new coronavirus in China. The virus, which broke out at the beginning of the year in the Chinese city of Wuhan, has already spread to many cities of the country and claimed the lives of several people.

The Shanghai Composite index fell 1.4%, hitting its lowest level for the year, while the blue-chip CSI300 index fell 1.7% to a two-week low. Both benchmarks lost all the growth caused earlier by the signing of the first phase trade agreement between the US and China. In particular, shares of airlines, movie theater operators and casinos fell. At the same time, the quotes of drug manufacturers increased.

European stocks are also getting cheaper. The Stoxx Europe 600 Index fell 0.75%. Shares of LVMH Moet Hennessy Louis Vuitton SE fell 2.7%, Burberry Group – 3.43%, and Compagnie Financiere Richemont shares fell 3.4%.
Chinese President XI Jinping said that the authorities intend to make containment of the epidemic a top priority, which drew the attention of investors to the seriousness of the crisis situation.

22.01. US intends to cut a middle-class tax

During an interview with The Wall Street Journal at the World Economic Forum in Davos, U.S. President Donald Trump said his administration is working on a middle-class tax cut proposal that will come into effect if he is reelected and Republicans gain full control of Congress.

Thus the president declined to provide any details but said that the plan will be announced in 90 days. “We are going to lower taxes for the middle class, very much,” Trump said in his speech.

In 2018, Trump had already promised to lower taxes for the middle class by 10% shortly before the midterm elections in 2018, but this plan was never implemented. Last year, similar promises also took place.

23.01. ECB holds rates unchanged

Today, the European Central Bank (ECB) held a meeting, following which the regulator left key interest rates at the same levels, and began reviewing its strategy for the first time since 2003.

The ECB kept the interest rate on loans at zero, the deposit rate was left at -0.5% per annum, and the margin rate – at 0.25% per annum. Central Bank officials noted that the ECB's key interest rates will remain at their current or lower levels until inflation approaches the regulator's target level (just below 2%).

The ECB also announced the continuation of net asset purchases under the QE program, resumed from November 1. The asset purchase volume is € 20 billion per month.

At a press conference held by ECB President C. Lagarde after the meeting, the first revision of the European regulator’s strategy since 2003 was announced. The review will continue throughout most of the year and will cover a wide range of issues, from inflation targets to digital money and combating climate change.

24.01. Eurozone business activity index unchanged in January

According to preliminary data from the Markit Economics Research Organization, the composite index of business activity in industry and services (PMI) of 19 Eurozone countries in January remained at the mark 50.9 points. The indicator coincided with the data for December and turned out to be worse than analysts' forecasts (growth to 51.2 points).

Despite the decline, the indicator remains slightly above level 50, which separates the expansion from the reduction.

IHS Markit Associate Director Andrew Harker said that recent data suggests that the eurozone economy again failed to capture an increase in growth. The manufacturing PMI was 47.8 and has remained below 50 for the 12-th consecutive month, although it has grown compared with 46.3 in December and well above the 46.8 forecast.

27.01. Experts: China's GDP growth in I quarter may slow down below 6% due to the outbreak of pneumonia

Experts note that due to the outbreak of pneumonia in China, the growth rate of the Chinese economy may slow down below 6% in the first quarter of 2020. The risk of a slowdown in GDP growth is observed amid the expected fall in consumer spending due to the current situation in the country.

The Chinese authorities in the past couple of years have relied on the development of the consumer sector, hoping that it will become the main engine of economic recovery. However, in the context of the rapidly spreading epidemic of the deadly virus, Chinese people refrain from visiting shops and public places.

Many key segments of the service sector, such as theaters, museums, and exhibitions that can attract many customers during the New Year's Eve on the Lunar calendar, have almost stopped working. In addition, in many cities, local authorities decided to suspend the operation of urban and suburban transport.

«The PRC’s economy had difficulties even before the outbreak of pneumonia, and such a large-scale crisis in the healthcare sector poses a threat of a more significant weakening of growth,» said economist Chen Gong. The expert believes that the current epidemic may cost China more than 40 billion yuan ($5.77 billion), which will take away about 1 percentage point from the country's GDP growth in 2020.

28.01. OPEC wants to extend production cuts until June due to virus in China

OPEC representatives said the organization is ready to extend the current decline in oil production until June, if the spread of the new coronavirus significantly affects the demand for oil in China. At the same time, the possibility of increasing the volume of production reduction is considered.

The sharp drop in oil prices observed recently worries OPEC officials. Representatives of many participating countries have already begun to consider their own options for resolving the situation and have intensified their internal discussion of how best to respond to falling prices.

At the same time, experts predict a longer extension of measures to reduce global oil production. The possibility of extending the agreement until the end of 2020 is not excluded.

29.01. Germany raises 2020 growth forecast slightly to 1.1%

The German government raised its forecast for GDP growth for 2020 and promised to create all conditions for the influx of investments into the country in order to maintain the competitiveness of Europe’s largest economy.

According to the forecast, this year German GDP growth will amount to 1.1%. Such expectations coincided with forecasts of the International Monetary Fund, presented last week.

It is noted that last year, the German economy grew by only 0.6%, at the lowest rate since 2013. Experts note a significant slowdown in the country's economic development compared to a 1.5% rise in 2018. The reason for this was a slowdown in the global economy, trade tensions and uncertainty regarding Brexit.

Germany predicts high consumer spending and export growth, while trade is still a serious risk due to the potential imposition of U.S. duties on European cars. The German government also outlined a spending plan that would allocate more than €160 billion by 2023 in the areas of digital infrastructure and transport.

30.01. Interest rates left at 0.75% amid signs of rebound for UK economy

Today, the Bank of England held a meeting, at which left rates unchanged at 0.75%. Representatives of the Central Bank noted that there is no need for additional incentive measures, as the British economy began to show signs of accelerating growth. At the same time, two out of nine Bank of England officials, Michael Saunders and Jonathan Haskell, again voted to lower rates.

The regulator also said that it was ready for changes in monetary policy after the departure of Central Bank head Mark Carney in March. His place will be taken by Andrew Bailey, head of the Office of Financial Regulation and Supervision. 

If the British economy continues to show a visible acceleration of growth, it may require «some modest tightening» of monetary policy, said the representatives of the Bank of England. 

31.01. Annual inflation in the Euro zone accelerated to 1.4 in January%

According to the European statistical Agency Eurostat, annual inflation in the 19 countries of the Eurozone in January, according to a preliminary estimate, accelerated to 1.4% from the level of 1.3% in December. The indicator coincided with the forecasts of analysts polled by Reuters.

A year earlier, in January 2019, annual inflation in the Eurozone was also 1.4%.

Core inflation in January, according to preliminary estimates, was 1.1% compared to 1.3% in December. Analysts were expecting a reading of 1.2%.

03.02. The index of business activity in the manufacturing sector in Germany in January amounted to 45.3

According to the final data of the research organization IHS Markit, the index of business activity in the manufacturing sector of Germany (PMI Manufacturing) in January amounted to 45.3 points. Preliminary data were noted at the level of 45.2 points. Experts expected both indicators to match.

The index of purchasing managers in the manufacturing sector of the eurozone's largest economy rose from the December level of 43.7, reaching the highest level in 11 months.

The manufacturing PMI of all 19 eurozone countries in January showed growth from 46.3 to 47.9, peaking since April 2019.

04.02. Boris Johnson does not want to accept EU standards

The sterling lost more than 1% after British Prime Minister Boris Johnson said he would not accept EU standards as the price for securing a free trade deal.

Britain officially left the EU on Friday, January 31, but it has yet to agree on the details of new relations with the European Union. Both sides stated what they want from a future trade deal, but the positions were so far apart, that economists do not exclude the possibility of a sharp break in relations at the end of the year.

The UK is currently in a transition period during which EU law and regulations still apply to the entire country, and the UK government can trade with other countries. During this period, London also seeks to develop new trade agreements with Brussels. Its absence will lead to higher costs for British and European exporters.

Boris Johnson said yesterday that Britain wants to conclude a free trade agreement with the EU, similar to the 2016 Canadian agreement. However, representatives of the European Union noted that the parties do not have enough time to agree on a similar deal.

05.02. Retail sales in the eurozone in December fell 1.6%, worse than forecast

According to the European statistical agency Eurostat, retail sales in the eurozone in December fell by 1.6% compared with November. Analysts had expected a decline of 0.9% month-on-month.

On an annualized basis, retail sales in the eurozone in December increased by 1.3%, although analysts had expected growth of 2.4%.

In all EU countries, retail sales in December decreased by 1.3% compared with November, and year-on-year – increased by 1.9%.

The largest annual sales growth in December was recorded in Hungary (+ 6.1%), Romania (+ 8.5%), as well as in Malta (+ 5.9%). The decrease was recorded in Slovakia (-2.5%), Slovenia (-6.6%) and Finland (-1.6%).

07.02. The number of applications for unemployment benefits in the US fell to a minimum since April

According to the U.S. Department of Labor, the number of Americans applying for unemployment benefits for the first time fell by 15 thousand to 202 thousand. This has become the lowest level since mid-April 2019.

A week earlier, according to revised data, the number of applications was 217 thousand, and not 216 thousand, as previously reported.

Analysts surveyed by Bloomberg predicted predicted a decrease in the indicator by 1 thousand, to 215 thousand.

The number of Americans continuing to receive unemployment benefits for the week increased by 48 thousand, to 1.751 million. Last week, a similar indicator was recorded at the mark around 1.703 million.

10.02. Gold rises in price, the market estimates the economic damage from the coronavirus

Today, Gold quotes rose to a week maximum, reaching $ 1,580 per troy ounce. The precious metal is getting more expensive as rising concerns about the effects of Chinese coronavirus have increased the attractiveness of defensive assets.

The number of coronavirus victims on Sunday increased by 97 and exceeded 900 people. Thus, more people have already died from the new virus than from SARS almost two decades ago.

Gold also gained support as the dollar moved away from a four-month high versus a basket of major currencies.