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December Ready to Start on Temperate Note



Chief Market Analyst

December has arrived in more ways than one, as some weather-stricken and weary travelers are bound to attest. For the stock market, the weather remains pretty temperate.

Trade winds have been blowing in a mostly favorable direction, central banks continue to blow hot air into the market with accommodative policies, and economic data have been offering some signs of early spring as it relates to the 2020 growth outlook — growth being the operative word.

The latter has rang true this morning as the arrival of manufacturing PMI data from around the globe has helped engender a sense that the worst of the global manufacturing downturn just might be in the rearview mirror.

China’s official manufacturing PMI moved back into expansion territory with a 50.2 print for November versus 49.3 in October. In turn, final manufacturing PMI readings for November for Japan, the eurozone, and Germany were revised slightly higher from the flash readings and were above the final readings for October.

This news helped boost economic sentiment, which was reflected in the overnight futures trade that saw the S&P 500 futures reach 3157. They have since pulled back, however, to 3145 and are basically flat now.

Currently, the futures for the major indices are trading approximately 0.1-0.2% above fair value, so the cash market is on course for a slightly higher start.

Aside from the manufacturing data, there has been a lot of news for market participants to digest this morning.

  • China is reportedly not inclined to sign a Phase One trade deal unless the U.S. includes tariff rollback provisions versus a concession simply to hold off implementing the December 15 tariff hike.
  • In response to the U.S. passing the Hong Kong Human Rights and Democracy Act, China has said U.S. military ships and aircraft won’t be permitted to visit Hong Kong, according to Reuters
  • President Trump announced in a tweet that he is restoring tariffs on all steel and aluminum imports from Brazil and Argentina, as he isn’t happy that their currency devaluation has left U.S. companies at a competitive disadvantage. In the same tweet, he called on the Fed to lower interest rates.
    • note: the futures market started rolling over after this tweet hit
  • Reuters is reporting that Saudi Arabia is going to push to cut oil output further at this week’s OPEC+ meeting, knowing that higher oil prices ($56.23, +1.06, +1.9%) are more supportive for the pending Saudi Aramco IPO.
  • The Financial Times has written that the Fed is considering a new rule that would let inflation run above 2.0%. The Wall Street Journal for its part has posited in an article that the Fed is unlikely to raise rates for a long time.
  • Adobe Analytics said Black Friday online sales hit a record $7.4 billion, whereas, brick-and-mortar sales declined by 6.2%, according to Shopper Trak. 

There isn’t much corporate news of note, although Roku (ROKU) is garnering some added attention after Morgan Stanley downgraded the stock to Underweight from Equal Weight and assigned a $110 price target. Shares of ROKU are indicated 7.7% lower in pre-market trading.

After the opening bell, the market’s attention will soon shift to the release of the ISM Manufacturing Index for November ( consensus 49.2; prior 48.3) at 10:00 a.m. ET. This report will be a market mover since it will be pitted against other global manufacturing PMI data and will shed light on whether manufacturing activity in the U.S. is trending in a better direction.

Originally Posted on December 2, 2019 – December Ready to Start on Temperate Note

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