In November, the US-China “phase one” trade deal was very positive to be signed in the beginning, and then was delayed. The optimism on trade negotiations and low interest rates renewed appetite for risk, which lead to the weekly U.S. equities inflows are largest in nearly two years. The FOMC Minutes confirmed that the interest rates are likely to be on hold after three rate cuts as expected, absent a “material reassessment” of the economic outlook, the probability of another Fed rate cut in April remains above 50%. The U.S. economic data came in better than expected. The commodities were also enjoying a revival, with gold price edged down to a new 3 month low to US$1450/oz level then up to US$1460/oz level. We’ve also noted that the Fed has expanded its balance sheet to $4.05T from as little as $3.76T at the end of August, effectively reversing 40% of the shrinkage that the Fed began in late 2017. Moody’s warns on Europe will be hit by a much larger wave of debt defaults in the next downturn compared with the financial crisis, PBOC also warns high financial risks amid rising economic headwinds.
US equities reached new high level, but Hong Kong stocks slump as violent protests rocky city. Precious metals equities were stable compared to the metal prices, even some silver equities were moving higher. As we expected at the beginning of 2019, we’ve seen more gold sector M&A during this gold price moving down trend-Barrick sell 50% of super-pit to Saracen Mineral, Kirkland acquired Detour Gold, and Zijin Mining acquired Continental Gold. We are still positive on precious metals sector due to the low-to negative-yielding bond rates, prospects of global renewed easing, the continued trade tensions and the high global financial risks.