Daily Market Color

Rates Fall Ahead of Today’s Phase-One Deal Signing


US-China “phase one” deal set to be signed today. The hard-fought deal will leave significant tariffs in place and levy additional tariffs if China fairs to deliver on pledges relating to intellectual property and trade balance. The deal is said to commit China to making an additional $200B in additional purchases of US goods (mostly farm goods) in exchange for an indefinite hold on further punitive measures from Washington. The deal is unlikely to halt the deep rivalry between the two nations and still leaves a larger trade deal to be negotiated.



Bank earnings mixed as Bank of America joins trading comeback, but Goldman Sachs misses estimates. Bank of America became the latest big bank to beat estimates on the back of a strong quarter for fixed income trading- revenue for trading climbing 13% on the quarter. CEO Bryan Moynihan was bullish on the prospects of 2020 as well, saying that strong US consumers and easing geopolitical tensions should provide a needed tailwind this year. Goldman Sachs similarly posted a strong quarter for trading, but results missed due in part to a $1B legal charge. While net charge-offs ticked higher for both banks, credit remained stable, neither bank providing much commentary on CECL’s impact going forward. US equity futures are modestly lower as a result of the mixed earnings, point to a lower open to start the day.



Day ahead. The Producer Price Index data was released this morning by the Bureau of Labor Statistics. Data released for November showed below target inflation, and December numbers show a 0.1% increase. Shortly after, Empire Manufacturing data will be released by the New York Fed. This monthly survey of manufacturers in New York showed slowing orders in December, and forecasters expect this month’s index to be marginally higher by 0.1. The Fed’s Beige Book will be released at 2:00 PM ET. Dallas Fed President Robert Kaplan and Philadelphia Fed President Patrick Harker will both speak in New York and will address low interest rates.


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