· The dollar rose on Tuesday, rebounding from a nearly three-month low in the previous session amid expectations of a pause in the U.S. rate hike cycle, as investors focused on the risk of a euro zone recession after data showed more signs of slowing in the region.
An unexpected fall in German industrial output for the third straight month helped to weaken the euro. The drop was modest, but it underscored concerns about a slowdown and the European Central Bank’s caution as it tries to wean the region off stimulus. German exporters are struggling with weaker global demand and trade disputes driven by U.S. President Donald Trump’s policies.
In mid-morning trading, the euro fell 0.24 percent to $1.1447. It has traded in a tight range of $1.12 to $1.15 since mid-November.
Weakness in the euro supported the dollar, which rose 0.21 percent against a basket of currencies to 95.88. The dollar index has lost around 2 percent since mid-December and remains near a three-month low of95.638 reached on Monday.
Dollar sentiment, however, has been bolstered by optimism about a possible U.S.-China trade agreement. U.S. Commerce Secretary Wilbur Ross said on Monday there was a good chance Beijing and Washington would reach a trade deal that “we could live with.”
· Treasury yields rose on Tuesday as optimism that a U.S.-China trade deal could be in the works boosted risk sentiment.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.71 percent, while the yield on the 30-year Treasury bond was also higher at 2.9949 percent.
· The United States and China will continue trade talks in Beijing for an unscheduled third day, U.S. officials said on Tuesday amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China’s markets.
“Talks with China are going very well!” U.S. President Donald Trump tweeted without elaborating, as talks wound down late on Tuesday evening in Beijing.
In what is widely seen as a goodwill gesture, China on Tuesday issued long-awaited approvals for the import of five genetically modified crops, which could boost its purchases of U.S. grains as farmers decide which crops to plant in the spring.
· Apple CEO Tim Cook was notably reassuring when asked about the prospects of U.S.-China trade talks in a Tuesday interview with CNBC's Jim Cramer.
“It is a very complex trade agreement and it needs to be updated, but as I’ve said before, I’m very optimistic that this will happen,” Cook said.
· Aiming to bolster his case for a wall along the U.S. border with Mexico, President Donald Trump said on Monday he would make a prime-time televised address and visit the border this week as the government marked its 17th day of a partial shutdown.
Democrats, who now control the U.S. House of Representatives, have rejected Trump’s demand for $5.7 billion to help build a wall. Without a deal on that sticking point, talks to fund the government have stalled.
President Donald Trump and Vice President Mike Pence will meet with Senate Republicans on Wednesday on Capitol Hill, amid a government shutdown now in its 18th day, the White House said on Tuesday.
· The growth of the global economy is expected to slow to 2.9 percent in 2019 compared with 3 percent in 2018, the World Bank said on Tuesday, citing elevated trade tensions and international trade moderation.
The World Bank outlook comes as the United States and China have been engaged in a bitter trade dispute, which has jolted financial markets across the world for months. The two economies have imposed tit-for-tat duties on each other’s goods, although there were signs of progress on Tuesday as the two countries prepared to enter a third day of talks in Beijing.
Growth in the United States is likely to slow to 2.5 percent this year from 2.9 percent in 2018, while China is expected to grow at 6.2 percent in the year compared with 6.5 percent in 2018, according to the World Bank.
Emerging market economies are expected to grow at 4.2 percent this year, with advanced economies expected to grow at 2 percent, the World Bank said in the report.
· Markets from equities to high-yield bonds that have been flashing warning signs are probably an overreaction to slowing growth rather than a precursor of imminent recession, according to J.P. Morgan Chase CEO Jamie Dimon.
"I think markets are overreacting to short-term sentiment around a whole bunch of complex issues," Dimon said in a Fox Business interview released Tuesday. He quickly added that the market moves were a "rational response" to slower growth and the U.S.-China trade dispute.
"My view is that the consumer is in good shape and is continuing to grow, and they have backwinds with jobs and wages going up," Dimon said, adding that consumers were paying back credit card debts.
"I think you're going to have decent growth in 2019 in America," Dimon said. "Therefore sentiment might reverse course at some point in the future."
· Oil prices rose on Tuesday, supported by hopes that demand may rise more quickly if talks between U.S. and Chinese officials resolve the trade dispute between the world’s two biggest economies.
A possibility that OPEC-led supply cuts could be extended also supported prices.
U.S. West Texas Intermediate (WTI) crude oil futures ended Tuesday’s session up $1.26, or 2.6 percent, at $49.78 per barrel. International Brent crude futures gained $1.29, or 2.3 percent, to $58.62 per barrel by2:26 p.m. ET.
The talks are going well so far and will continue on Wednesday, U.S. delegation member Steven Winberg said.
Reference: CNBC, Reuters
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