26.12. Oil is on the way to new highs

Oil prices continue their upward movement. Growth is supported by expectations of a Washington and Beijing trade deal, as well as data on a decrease in US inventories.

Futures for Brent crude this morning are trading at $67.40 per barrel. February quotes for WTI crude oil are $61.35 per barrel.

According to the American Petroleum Institute data (API), US commercial oil inventories fell 7.9 million barrels last week. API is a private company that receives information from refinery operators, oil storage facilities and pipelines on a voluntary basis. However, these statistics do not always coincide with official data from the US Department of Energy. This data will be released this week on Friday.

We also note that on Wednesday the market was closed in connection with the celebration of Catholic Christmas. The oil market continues to get support from the optimism about the trade agreement between the US and China. US Treasury Secretary Steven Mnuchin confirmed that an agreement with China will be signed soon.

Analysts note that oil prices are likely to change little over the next year, as OPEC+ actions to reduce production will be balanced by production growth in other countries, and the prospects for demand are still unclear. Experts predict a rise in oil prices in the middle of the year amid rising demand from developing countries and OPEC+ measures.

30.12. Beijing authorities urged to abandon cryptocurrency trading

Several municipalities in Beijing, including the Financial Supervision and Administration Service, the People’s Bank of China Business Administration Division, the Banking and Insurance Regulatory Service, and the Securities Market Regulatory Service, have called on businesses to abandon cryptocurrency trading activities.

The regulatory authorities noted that some cryptocurrency platforms have already seriously violated the rules prohibiting ICOs issued in 2017. Moreover, the institutions called on Chinese companies to impede the promotion of cryptocurrency projects and platforms, as well as to report on all violations of the relevant rules.

It is worth noting that such policy of the Chinese authorities is conducted in parallel with the development of a national cryptocurrency. As you know, the People's Bank of China is preparing to test the electronic payment system in digital currency (DC / EP) in the cities of Shenzhen and Suzhou.

Seven state enterprises were selected as a platform for testing the digital renminbi: four commercial banks and three telecommunications giants (China Mobile, China Telecom and China Unicom). The pilot program will affect the field of transport, education, trade and medical services.

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.

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.

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%.

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.

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%.

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.

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.

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.

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.

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%.