Market Commentary

Treasuries are rallying across all maturities amid global equity sell-off as the U.S.-China trade tensions flared up overnight. The tensions reignited following the arrest of tech giant Huawei Technologies Co.’s CFO Meng Wanzhou by Canadian authorities over potential violations of U.S. sanctions on Iran. The arrest provoked outrage from China and threatened the hope for an immediate progress on a U.S.-China trade deal. Elsewhere, oil prices slid as West Texas crude fell toward $51 a barrel after Saudi Energy Minister Al-Falih said OPEC has not yet reached a deal on production cuts. Also, the Fed’s December Beige Book was released yesterday which described economic activity and inflation pressures slightly softer compared to October’s release. There are two Fed Officials scheduled to speak today including Atlanta Fed President Bostic who will speak on the U.S. economic outlook, and New York Fed President Williams who will speak later this evening.

Today’s economic calendar kicked off with the November ADP Employment Change release which showed that private payrolls increased by 179k versus an expected 195k gain per market consensus. Initial Jobless Claims for the week ended December 1 fell 4k to 231k from a revised 235k the week prior and Continuing Claims for the week ended November 24 fell 74k to 1631k from a revised 1705k prior. We also received the Trade Balance which showed that the U.S. trade deficit widened to a 10-Year high from a revised $54.60 Billion in September to $55.50 Billion in October, underscoring the continued fallout from the trade dispute with China. Merchandise-trade deficit with China widened to a record as imports of goods and services increased. Also released was the 3Q Nonfarm Productivity which came in line with expectations at 2.30% while the 3Q Unit Labor Costs fell from 1.20% prior to 0.90%.