3 Things to Look for in December
It’s year-end season again and we’ll be marching into another New Year. The last eleven months have been challenging as we walked through BREXT impact, U.S.-China trade war, UAE- Qatar dispute, oil prices see-saw trend, European recession etc.
Advancing into a more turbulent year in 2019, the propelling forces that will keep us thriving forward is the much coveted profits to be bagged from the market whipsaw. Before we sum up the year, December might be an important month to observe some signals for the coming movement in January. As usual, we foresee there will be low market participation after the 20th day of the month due to the long holiday seasons. However, be patient to harvest your gains in January if you have ploughed some homework this month by observing the three events below.
In early December, the G20 nations will hold their bi-annual meeting in Argentina. President Trump has voiced that the U.S. Government will impose new import tariffs on Chinese goods if no deal is reached with Chinese leader. Strategically, Trump is hoaxing and trying to intimate China’s President Xi to talk and succumb to an unfair trade deal during the G20 meeting that will help to cut the U.S. trade deficits. Of course, the proposal is obviously forcing China to shift the wealth to U.S. Government by adjusting the Yuan value and increase imports American goods!
No one knows if the two leaders will shake hands to make a fudged deal or walk away from each other. Since U.S. started the trade war in April, China has retaliated by halted the import of U.S. oil from August. If no deal is made in this G20 meeting, commodity prices will pose erratic instability in January after the holiday seasons.
On 6 December, OPEC is going to meet in Vienna HQ for discussing curtail of oil production. OPEC has always favoured higher oil prices for enhancing their revenues. Ironically, the murder of reporter Khashoggi in Turkey has sowed a discord between U.S. and Saudi for a while, which Trump has clarified later of his preference to be allied nation and his stance to forego the investigation on the Saudi’s royalties linked to the murder.
Since the last U.S. rate hike in September, Trump has reiterated many times of his favour to cap oil at low prices. In recent statement, he defended that Saudi will spur the oil prices to the rooftop if U.S. damages the relationship for pursuing Khashoggi’s death and thus loses the grip on Saudi’s oil policy.
Finally, the last FOMC meeting in 2018 will fall on 20 December (Asia date). We reckon the policymakers will most likely tighten another 25 bp in FED fund rate for the 9th time since 2015. Effectively, market traders will start going for their year-end break with not much reaction aftermath. We expect the market reaction will start only in January!
After the long holiday over the year-end, we would be able to see the market effect from the above 3 fundamentals. In summary, we might see a flat oil prices with small recovery while major stock indexes will create whiplash trends. Soft commodity and grains may be suppressed by low demand. Putting all markets aside, what could be viewed as safe haven for the traders will be Gold instrument as a hedge against high risk assets!
Do some homework as you enjoy the year-end holiday. The market may pay you off some pocket monies to spend in Chinese New Year. Be prudent and always stay abreast of market rout. Have fun trading.
~ DAR Wong is a veteran in global financial markets based in Singapore. The opinions are solely at his own. He can be reached at email@example.com
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