FxPro: The less market knows, the higher growth

Asian markets returned to growth on Friday after a report on progress in trade negotiations between the U.S. and China. As a result, the China A50 Blue Chip Index has been growing by more than 2% on Friday morning. In addition, the pattern of behavior when U.S. markets are growing out at the very end of the trading session is preserved. S&P500 and China A50 rose to mid-December highs, by 13.5% and 8%, respectively, during a sharp rally from the beginning of the year.

Despite the fact that the statistics from China indicates that there are many problems with growth, and the U.S. faces with the longest period of government shutdown, the stock markets are full of optimism. Belief in a bright prospect is supported by a U-turn in rhetoric of the Fed and the ECB to softening, while the Bank of Japan maintains a bias towards soft policy due to reduced inflationary pressure.

Another indirect factor is the growth of oil. The signs that OPEC+ countries are fulfilling the terms of an agreement to restrict production made this growth possible. A sharp price collapse at the end of the last year was an obstacle for stock markets, supporting the mood to reduce risky assets, despite the fact that in the medium term, cheaper oil spurs economic growth.

Much of the statistics from the United States was postponed due to the partial government shutdown, but the published data are encouraging. The Philadelphia Fed Manufacturing Index interrupted the series of decline, jobless claims have been reduced for the second week in a row. Because of the U.S. government shutdown, we still do not see reports on retail sales, foreign trade balance and housing starts.

Observers note that the suspension of the government’s work seriously harms consumer spending. The planned publication of the consumer confidence index from the University of Michigan will open the veil of secrecy over the mood of the consumers. In addition, the Fed will publish industrial production release, which will be one of the few pieces of information about the U.S. economic trends.

Alexander Kuptsikevich, the FxPro analyst