The Daily Close
* US data were strong yesterday with December car sales pointing at more wealth effects from the run away equity markets gains. ISM Manufacturing data suggested a strengthening economic backdrop as well, likely supported by dollar weakness. December Fed minutes were a snooze. No mention was made of the crypto mania raging in December despite bitcoin gaining some 50% that month, as the Fed omitted to comment on an important element of financial (in)stability. * US stocks are losing no time this year and the S&P added +0.6%, supported by strong US data and positive momentum showing no sign of abating. Nasdaq gained +1%. While we would not necessarily fight this move (now), we are mindful that the first week of the year can be treachorous and the second equally as vicious in the other direction, at times. * European stocks recovered slightly, starting to follow up on US stock market gains, helped at the margin by Chancellor Angela Merkel saying chances of a successful conclusion to exploratory talks to build a coalition have improved. * While the dollar regained some footing against EUR (+0.4%), it weakened further against most EM with MXN adding 0.8% yesterday in line with gains of RUB, ZAR and BRL. EM stocks and bonds are leading the pack so far this year. * EUR was otherwise strong, gaining slightly vs. CHF and GBP. * Bloomberg reported that” UK PM Theresa May believes Michel Barnier is bluffing when he says there will be no special deal for financial services.” We are not so sure... GBP volatility is on the rise in this context as there is little reason to believe in a standstill for the finance industry in a post Brexit world. * Gold (and silver) dropped -0.5%, leaving XAUEUR mostly unchanged. * Oil climbed +2.5% as political tension in Iran and geopolitical unease mount (despite financial markets showing little concern, having in some ways stopped functioning as a price discovery mechanism), perhaps helped by the recent “rhethoric” of D. Trump. * The Turkish lira dropped -0.5% “after a Turkish banker was convicted of helping Iran evade U.S. financial sanctions in a verdict likely to further strain relations between Turkey and the U.S.”, Bloomberg reported. ”Foreign banks and bankers have a choice,” acting U.S. Attorney J. H. Kim in Manhattan said following the verdict. “You can choose wilfully to help Iran and other sanctioned nations evade U.S. law, or you can choose to be part of the international banking community transacting in U.S. dollars. But you can’t do both.” We may agree or disagree. But at least the message is clear... BentinPartner Advisers, Basel There is more to our research than the Daily Close. To receive a comprehensive wrap up every day and our tactical FX and global models positioning or if you wish to be notified 24/7 with updates on key macro economic releases and/or technical breaches on our comprehensive investment universe covering world equity indices, bonds, FX, precious metals and commodities, take a free trial to the Bentin Daily, our premium research service. You may join our free trial by clicking here.
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