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Stocks and commodities continue their upward trajectory to start 2018, while attention turns to the upcoming U.S. payrolls report, and President Donald Trump makes moves to check China's influence in Latin America. Here are some of the things people in markets are talking about.
Global Stocks Keep Climbing
Stocks rallied around the world Thursday on signs the global economic expansion that pushed benchmarks to records in 2017 remains intact. The dollar slipped and shorter-dated Treasuries declined as the private ADP report showed U.S. employment strengthening. The Dow Jones Industrial Average surpassed 25,000 for the first time, while the Standard & Poor's 500 Index and the Nasdaq Composite reached all-time highs. Trading in S&P 500 stocks wasn't slowed by the storm lashing the U.S. East Coast, with volumes above their 30-day average. Builders and carmakers led the advance in Europe, with most of the sectors in the Stoxx Europe 600 Index strengthening, after the MSCI Asia Pacific Index hit a record and benchmarks in Tokyo closed at their highest in more than a quarter century.
Busy Factories Boost Commodities
The strongest manufacturing activity since the aftermath of the global financial crisis is slowly draining commodity surpluses, sending prices to a three-year high as investors pour money into everything from oil to copper. The Bloomberg Commodities Spot Index, tracking the price of 22 raw materials, jumped to its highest since December 2014 on Thursday. The gauge has risen for a record 14 days in a row through Wednesday. For the global economy, the pickup in commodities poses a conundrum. It could show how years of ultra-lax monetary policies have finally boosted activity and may even be enough to revive long-dormant inflationary pressures. The risk is inflation reemerges faster than central banks expect, forcing them to raise interest rates more aggressively than they now plan or investors anticipate.
Trump, China and Latin America
The Trump administration is pushing back against China's efforts to boost its economic ties with Latin America, as the rivalry between the world's two largest economies intensifies. The U.S. Treasury Department took steps to check the Asian nation's growing influence in the region last month, when it raised questions about Beijing's overtures to Latin America's multilateral lender. The U.S. is the largest shareholder of the Inter-American Development Bank at 30 percent, whereas China's stake in the lender is a minuscule 0.004 percent. In a Dec. 19 letter obtained by Bloomberg, U.S. Under Secretary for International Affairs David Malpass asked IDB President Luis Alberto Moreno why he had selected China to host the bank's 60th anniversary meeting next year. “I have serious reservations about the bank's process that led to that initial decision, and I do not think the 2019 meeting could be nearly as successful in Beijing as it would be if held in the region,” Malpass wrote.
What to Expect from Friday's U.S. Jobs Report
The U.S. job market performed better than economists expected during President Donald Trump's first full year in office. Repeating such gains may be considerably tougher in 2018. The economy probably added 2.11 million jobs in 2017, including an estimated 190,000 workers in December, the median projection of economists surveyed by Bloomberg ahead of Labor Department data due Friday. That would exceed the roughly 1.98 million that analysts were forecasting before the year began. The expected unemployment rate of 4.1 percent last month, unchanged from November, is well below the 4.6 percent economists had penciled in a year ago for the fourth quarter. While not impossible, a similar performance is seen as unlikely given the jobless rate is below what the Federal Reserve regards as sustainable and employers are struggling to find quality applicants to fill openings.
Coming Up…
Asia will kick the day off with reports on South Korea's balance of payments, Japan's monetary base, Australian and Malaysian trade, inflation for Taiwan and the Philippines and Thailand's foreign reserves. An India tribunal is due to hear a request by China Development Bank to place billionaire Anil Ambani's Reliance Communications Ltd. into insolvency. Europe brings German retail sales, EU CPI and French consumer confidence. Then there's Brazilian industrial output, along with labor-market data for the U.S. and Canada and U.S. reports on trade and factory orders. The U.S. day also features appearances from Philadelphia Fed President Patrick Harker and Cleveland Fed President Loretta Mester.
What we've been reading
This is what caught our eye over the last 24 hours.
- Hong Kong home prices are unsustainable, $2.6 billion fund says.
- Global wealth is shifting to Asia.
- You'd be crazy to actually spend bitcoin.
- South Korea says Trump agreed to pause drills during the Olympics.
- India takes steps to fix its bank system with $12.6 billion bond plan.
- Global warming is starving the world's coral reefs faster than ever.
- Intel may be a buying opportunity.
--With assistance from Garfield Clinton Reynolds
To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net.
©2018 Bloomberg L.P.
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