Macro Roundup (Jan 7)

SHANGHAI, Jan 7 (SMM) – This is a roundup of global macroeconomic news last night and what is expected in the day ahead.

Last night

The US dollar index, which measures the greenback against a basket its rivals, fell on Monday, after rising for three consecutive trading days, due to flows to more traditional safe-haven alternatives.

LME base metals rallied across the board on Monday. Aluminium added 0.7% to lead the gains, tin rose 0.6%, zinc advanced 0.4%, nickel gained 0.3%, lead climbed 0.2% and copper inched up 0.1%.

The SHFE complex, except for nickel, also drifted higher overnight. Zinc rose 0.8%, lead increased 0.4%, tin gained 0.3%, aluminium and copper advanced about 0.1%.

Investor risk appetite took a hit after Iranian Major-General Qassem Soleimani was killed last week in a US drone strike on his convoy at Baghdad airport. Iran said Sunday it would not abide by the uranium-enrichment limits set by the 2015 nuclear deal.

Upbeat economic data on Monday, however, offered some relief. China’s services sector continued to expand in December, albeit at a slower pace following a strong rebound to a seven-month high in the previous month. The Caixin services purchasing managers' index (PMI) dipped to 52.5 last month from 53.5 in November.

“Looking forward, the phase one trade deal between China and the US should be able to help corporate sentiment recover. China’s economy is likely to get off to a quick start in 2020, but it will still be constrained by limited demand for the rest of the year,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group Ltd., an affiliate of Caixin Global.

Activity in Germany’s services sector grew at the strongest pace in four months in December, a survey showed on Monday. IHS Markit’s final services index for the eurozone’s largest economy rose to 52.9 from 51.7 in November. The figure was much higher than the flash reading of 52 and far above the 50 mark that separates growth from contraction.

A separate report from Germany’s Destatis on Monday showed the country’s retail sales rebounded 2.1% month on month in November versus +1.0% expected and -1.9% last.

On an annualised basis, German retail sales jumped 2.8% in November versus +0.8% seen in October and +0.9% expected.

France, Italy as well as the US also saw their service sector PMIs pick up in December to either match or beat forecasts. Final US Markit Services PMI rose to 52.8 versus the 52.2 projected and previous figure.

Investor confidence in the eurozone unexpectedly improved in January amid US-China trade deal signing, escalating Mid-East tensions and improving German economic situation, the latest data published by the Sentix research group showed on Monday.

The gauge jumped to 7.6 in January from 0.7 in December and against a reading of -4.9 expected. The investors’ morale hit the highest since November 2018.

Day ahead

US ISM non-manufacturing index for December, durable goods orders and trade balance data for November as well as weekly crude inventory data from the American Petroleum Institute (API) are slated for release today.

China will publish its December foreign exchange reserves, while the eurozone will release its December consumer inflation data and November retail sales.