Major US stock indexes rose significantly on Monday, helped by the rise in price of trade-sensitive industrial and technological stocks after the United States and China agreed on a temporary truce.

This agreement was reached this weekend in Argentina, where a meeting of G20 leaders was held. According to the agreement, the moratorium is introduced for a 90-day period in order for the parties to work out a final agreement on trade issues. In addition, China agreed to increase purchases of US-made agricultural and industrial products, as well as reduce tariffs on imported cars from the US, which now account for 40%.

In addition, as shown by a report published by the Institute for Supply Management (ISM), in November, activity in the US manufacturing sector rose sharply and exceeded forecasts. The PMI index for the manufacturing sector rose to 59.3 points from 57.7 points in October. Analysts had expected the index to improve to 57.8.

At the same time, construction spending in the United States fell for the third consecutive month in October, as spending on private projects declined. The Ministry of Commerce reported that in October, construction spending fell by 0.1% to $ 1.31 trillion, after declining by 0.1% in September (revised from 0.0%). Economists had forecast growth in construction spending by 0.4%. Meanwhile, in annual terms, construction costs increased by 4.9%.

Most of the DOW components showed a rise (21 out of 30). The growth leader was NIKE, Inc. (NKE, + 3.79%). The outsider was Verizon Communications Inc. (VZ, -3.53%).

All sectors of the S & P finished trading in positive territory. The growth leader was the commodity sector (+ 2.6%).

The November PMI registered 59.3 percent, an increase of 1.6 percentage points from the October reading of 57.7 percent. The New Orders Index registered 62.1 percent, an increase of 4.7 percentage points from the October reading of 57.4 percent.

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index rebounding to above 60 percent, the Customers’ Inventories Index declining and remaining too low, and the Backlog of Orders Index steady.

Consumption strengthened, with production and employment continuing to expand, both at higher levels compared to October. Inputs — expressed as supplier deliveries, inventories and imports — gained as a result of inventory growth.

Supplier delivery easing improved factory consumption as well as inventory growth, and import expansion was relatively stable. Lead-time extensions continue, while steel and aluminum prices are declining. Supplier labor issues and transportation difficulties are at more manageable levels, but they continue to limit production potential”.

Before the bell: S&P futures +1.44%, NASDAQ futures +2.06%

U.S. stock-index futures surged on Monday, as investors cheered U.S.-China trade truce.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Verizon (VZ) downgraded to Neutral from Overweight at JP Morgan

AT&T (T) upgraded to Outperform from Market Perform at Cowen

AT&T (T) upgraded to Overweight from Neutral at JP Morgan
Caterpillar (CAT) upgraded to Buy from Neutral at BofA/Merrill

• The 10-year Treasury note yield rose 2.2 basis points to 3.035%. The 2-year note yield picked up 2.6 basis points to 2.837%, while the 30-year bond yield added 1.2 basis points to 3.323%. Bond prices move in the opposite direction of yields

• Says Outlook For U.S. Economy Looks Very Solid

• Fed Meeting Goals Helps With Financial Stability

“The Governing Council of the European Central Bank (ECB) adopted legal acts on the regular five-yearly adjustment to its capital key and the contributions paid by the national central banks (NCBs) of the European Union. The new key for subscription to the ECB’s capital will enter into force on 1 January 2019.

The shares of the NCBs in the ECB’s capital are weighted according to the share of the respective Member States in the total population and gross domestic product of the European Union (EU), in equal measure.*

The weightings are based on data provided by the European Commission. NCBs will transfer capital shares among themselves to the extent necessary to ensure that the distribution of the shares corresponds to the adjusted key.

Following the latest review, 16 central banks will have a higher share in the ECB’s capital than before and 12 central banks will have a lower share. The new distribution of the NCBs’ shares is set out in the table below. The total amount of the subscribed capital of the ECB remains unchanged at €10,825,007,069.61”.

• Modest Inflation Overshoot Wouldn't Require Fed Rate Increases

• Fed Should Show Its Inflation Target Is Truly Symmetric

• Not Forecasting Recession, But Risk of Downturn Is Higher

• Sees a Number of Triggers That Could Cause Recession

• Overly Aggressive Fed Rate Rises Could Cause Recession

• Tame Inflation Doesn't Support Push for Rate Rises

• Fed Has Plenty of Time to Gauge Whether Hot Job Market Will Fuel Inflation

• Strong, Sustained Job Gains Indicate Full Employment Not Yet Reached

• 'Political Noise' Not Affecting Fed Policy Deliberations

The seasonally adjusted IHS Markit/CIPS PMI rose to 53.1, up from October's 27-month low of 51.1. However, the performance of the sector remained comparatively lacklustre, with the latest PMI reading still among the weakest registered over the past two-and-a-half years.

The trend in output strengthened slightly during November, as new order intakes rose following October's decline. The domestic market remained the prime source of new contract wins. Where an increase was reported, this was linked to new product launches and client stock-building. Output and new orders rose across the consumer, intermediate and investment goods sub-industries

Although remaining above the crucial 50.0 nochange mark for a sixty-fifth month running, the final PMI came in at 51.8 in November, down from 52.0 in October and the lowest reading since August 2016.

Weakness was centred on the investment goods sector, according to market groups data. Capital goods producers registered net falls in both production and new work. Export trade was also down for a third month running, whilst cost pressures remained elevated. In contrast, solid growth continued to be recorded amongst consumer goods producers.  

Phil Smith, Principal Economist at IHS Markit, which compiles the Germany Manufacturing PMI survey, commented: "The PMI showed the recent slowdown in the manufacturing sector extending into the penultimate month of the year. "With the car industry still struggling and geopolitical uncertainties affecting client demand, manufacturers reported a deepening decline in new orders, and export sales in particular.

"Output levels are now teetering on the brink of contraction. November's small increase in production was the weakest since the upturn began more than five-and-a-half years ago and was due in large part to firms catching up on backlogs of work. With backlogs shrinking at an accelerated rate, manufacturers will need inflows of new work to recover to maintain growth”.

Turnover in the retail sector rose by 1.2% in nominal terms in October 2018 compared with the previous year. Seasonally adjusted, nominal turnover rose by 1.9% compared with the previous month. These are provisional findings from the Federal Statistical Office (FSO).

Real turnover in the retail sector also adjusted for sales days and holidays rose by 0.8% in October 2018 compared with the previous year. Real growth takes inflation into consideration. Compared with the previous month, real, seasonally adjusted retail trade turnover registered an increase of 1.9%.

The latest results reflected falling new orders and job shedding. Meanwhile, prices continued to rise sharply as input cost inflation hit a nine-month high and charges increased at a solid pace.

At 50.8 in November, down from 51.2 in October, the seasonally adjusted IHS Markit France Manufacturing PMI pointed to a slower improvement in business conditions. In fact, the upturn was the weakest since September 2016, when a deterioration was recorded.

In addition to the contraction in output, export sales declined for the second consecutive month amid reports of weaker external demand. Meanwhile, confidence towards the 12-month outlook fell to the lowest level since early 2013. On the prices front, input cost inflation moderated to a 16-month low and manufacturers continued to raise their output charges.

Growth of Spain's manufacturing economy strengthened again during November, supported by improved gains in both output and new orders. Jobs continued to be created as capacity pressures persisted, but confidence about the future softened amid worries over subdued trends in global autos production and demand.

The seasonally adjusted IHS Markit Spain Manufacturing – a composite single-figure indicator of manufacturing performance – posted 52.6 in November. That was up from 51.8 during October and pointed to the strongest growth for three months. The PMI has now posted above the 50.0 no-change mark that separates growth from contraction throughout the past five years.

• Economic Panel Says 1.3M B/D Output Cut Would Balance Market

• OPEC ECB Panel Advises Oil Output Cut Ahead of Dec. 6 Cartel Gathering

• Doesn't Set Policy for the Group

• Qatar to Withdraw from OPEC from Jan.1

• Qatar Has Informed OPEC of Decision

The headline Nikkei Japan Manufacturing Purchasing Managers’ Index fell from 52.9 in October to 52.2 in November, therefore pointing to a slower rate of improvement in business conditions. The latest reading for the headline index was the lowest since August 2017.

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said: “The fall in Japan’s manufacturing PMI tells us that October’s bounce-back was indeed a transitory jump back to normality following weather-related disruptions in September. The underlying picture remains subdued, with momentum tilting towards a slowdown. New orders rose at just a slight pace as goods producers raised concerns about the demand environment. Subdued sales performances reflected fragile conditions both domestically and abroad. According to firms, weak demand from China and parts of Europe hampered export growth. “As such, expectations for future growth were reduced, with business confidence towards the year-ahead sliding for a sixth straight month to the lowest in two years.”

Total dwelling units:

• The trend estimate for total dwellings approved fell 1.1% in october.

• The seasonally adjusted estimate for total dwellings approved fell 1.5% in october.

Private sector houses:

• The trend estimate for private sector houses approved fell 0.5% in october.

• The seasonally adjusted estimate for private sector houses rose 2.7% in october.

• Private sector dwellings excluding houses

• The trend estimate for private sector dwellings excluding houses fell 1.8% in october.

• The seasonally adjusted estimate for private sector dwellings excluding houses fell 4.8% in october.

Value of building approved:

• The trend estimate of the value of total building approved fell 1.5% in october and has fallen for 12 months. The value of residential building fell 1.4% and has fallen for ten months. The value of non-residential building fell 1.8% and has fallen for 15 months.

• The seasonally adjusted estimate of the value of total building approved rose 2.8% in october. The value of residential building rose 2.1%, while the value of non-residential building rose 4.0%.

Companies signalled a slightly stronger increase in total new work, despite reduced amounts of export orders. Production was meanwhile stable for the second month in a row. Relatively muted client demand and efforts to lower costs contributed to a further reduction in staff numbers, while confidence towards the year ahead remained subdued. At the same time, inflationary pressures eased, with input costs increasing at the softest pace for seven months and selling prices falling for the first time in a year-and-a-half amid efforts to attract new business.

The headline seasonally adjusted Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – was little-changed from October’s reading of 50.1 at 50.2 in November. This signalled a further fractional improvement in the health of China’s manufacturing sector.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1459 (3662)

$1.1418 (2778)

$1.1385 (3051)

Price at time of writing this review: $1.1363

Support levels (open interest**, contracts):

$1.1262 (4240)

$1.1229 (5000)

$1.1211 (5864)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date December, 7 is 126023 contracts (according to data from November, 30) with the maximum number of contracts with strike price $1,1200 (5864);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2924 (2410)

$1.2854 (1486)

$1.2804 (614)

Price at time of writing this review: $1.2778

Support levels (open interest**, contracts):

$1.2697 (2342)

$1.2675 (1292)

$1.2647 (3316)

Comments:

- Overall open interest on the CALL options with the expiration date December, 7 is 59362 contracts, with the maximum number of contracts with strike price $1,3500 (4720);

- Overall open interest on the PUT options with the expiration date December, 7 is 47016 contracts, with the maximum number of contracts with strike price $1,2500 (3614);

- The ratio of PUT/CALL was 0.79 versus 0.79 from the previous trading day according to data from November, 30

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.