Global equities cautious ahead of Q4 earnings; copper shines

Global stocks hold broadly steady, awaiting more earnings; copper outperforms oil and gold

Global stocks traded cautiously, as earnings season got underway on Wall Street. Copper prices rallied ahead of the US and China’s tentative trade deal and the pound found some stability.

On Wall Street, the major indices opened on the back-foot, despite expectations-beating fourth-quarter results from the likes of JPMorgan and Citigroup.

The S&P 500 was last down 0.1 per cent at 3,286.21 points, while the Nasdaq was also down 0.1 per cent at 9,262.65 points.

On the currency markets, the pound gained some respite, rising against the dollar for the first time in over a week, bringing losses for 2020 so far to 2 per cent.

Part of the strength in the pound towards the end of last year was on the back of hopes of a decisive Conservative win at the December 12 general election. This was thought to clear up the uncertainty around Brexit that has plagued the economy.

Since then, the pound has fallen by almost 4 per cent against the dollar as investors have taken profit.

In addition, evidence that the economy is struggling has undermined the value of sterling. Data on Monday showed that UK economic growth contracted by 0.3 per cent in the run-up to the election.

“Given the soft economic backdrop, we maintain our view that GBP/USD could struggle to hold levels above $1.30 on a three to six month view unless solid progress is made in the UK/EU future relationship talks,” Rabobank currency strategist Jane Foley said.

Sterling was last up 0.2 per cent against the dollar at $1.3011 and up 0.2 per cent against the euro at 85.50 pence.

With pressure now mounting on the Bank of England to cut rates, UK stocks, led by the financial sector, got a modest boost. The FTSE 100 closed up 0.06 per cent on the day at 7,622.35 points. European stocks were little changed on the day. Germany’s DAX closed virtually flat on the day at 13,456.49 points, while France’s CAC-40 closed up 0.1 per cent at 6,040.89 points.

Elsewhere, the euro fell against the dollar, as trade tensions between the European Union and the United States showed no signs of abating.

With a tentative deal in the bag with China, Washington has not eased up on European companies. In December, the US government threatened to impose tariffs of 100 per cent on French goods in retaliation for France’s digital services tax.

EU Trade Commissioner Phil Hogan will head to Washington this week for talks with Robert Lighthizer, the lead US trade negotiator. Hogan has said publicly he wishes to “reset” the relationship between the two sides.

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The euro was last down 0.1 per cent against the dollar at $1.113 and up 0.1 per cent against the yen at 122.49 yen.

On the commodity markets, copper prices sizzled at multi-month highs, after Chinese trade data showed a big pickup in copper imports in December and ahead of the signing of the tentative phase-one trade deal between the US and China this week.

Copper futures on the London Metal Exchange were last up 0.3 per cent at $6,309 a tonne, having hit a session peak at $6,314, its highest since last April.

Like crude oil, copper is highly sensitive to the global economic cycle. Most analysts expect the price to continue to gain this year, as growth in supply may fall short of an anticipated pickup in demand.

“Dr. Copper is indicating that we are in the midst of a global growth upturn. Copper is back in a positive trend and is above its 200-day moving average,” said Clint Sorenson from asset manager WealthShield. “A breakout above the 2019 highs would be a good sign that the global economy has possibly bottomed.”

Oil prices, meanwhile, steadied around one-month lows. Last week, a brief flare-up in tensions between the US and Iran over the assassination of a prominent Iranian general pushed the oil price above $70 a barrel.

Both sides have since stepped back and oil has since receded below $65 a barrel. Brent crude futures were last up 0.8 per cent on the day at $64.73 a barrel, having recovered from a session low of $63.98.

Gold, which had also benefited from the standoff between Washington and Tehran, eased by 0.3 per cent to $1,542.85 an ounce. The price last week rallied above $1,600 an ounce for the first time since April 2013 when the two sides appeared to be on the brink of war.

As the situation has calmed down, gold has seen some of its safe-haven premium ebb, but is still worth 20 per cent more than it was this time last year.

“The US conflict with Iran never materialised and the imminent signing of the phase one trade deal has got investors excited again about global growth,” said London Capital Group strategist Jasper Lawler. “We still like gold short term above $1,520 an ounce and look at the recent fall as a healthy pullback from a seven-year peak.”

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