Market Talk – April 10, 2019

Asia:

The EU has pledged to improve trade relationships with China, as well as improving the climate for foreign investors in the mainland. The signed declaration allowed for broader and non-discriminatory market access to the Chinese economy. Also mentioned was IP rights, which was an issue with the U.S.-China trade deal. Lastly, efforts were made to strengthen international rules against state subsidies for industries. In the meantime, in Taiwan, who has faced tensions with China, has welcomed U.S. officials to strengthen their existing relationship.

Thousands of tech-programmers have recently deluged Github, an online community of software developers (acquired by Microsoft in 2018), to protest to the “996” working schedule in which workers are forced to work from 9 AM to 9 PM 6 days a week.

Today voting began in India where hundreds of millions of voters are expected to vote. PM Modi is expected to win, but with the huge diversity India has to offer this is not a guaranteed victory. Elsewhere in India, the Dalia Lama has been taken to the hospital at the age of 83. Doctors diagnosed him with a chest infection and he is expected to recover.

The Japanese Times reported that the U.S. has sailed a war ship into the South China sea carrying 10 f35 war planes. Part of the Pacific Ocean, the South China sea is widely claimed by surrounding countries such as Indonesia, Taiwan, China, Vietnam, Singapore, Malaysia, amongst others. The Chinese and Taiwanese claiming the whole region to be under their control.

The major Asian stock markets had a mixed day today: ASX 200 increased 1.70 points (0.027%) to 6,223.50, Shanghai increased 2.27 points (0.07%) to 3,241.93, KOSPI increased 10.83 points (0.49%) to 2,224.39. However, SENSEX, Hang Seng, NIKKEI 225 took the opposite route. SENSEX decreased 353.87 points (-0.91%) to 38,585.35, Hang Seng decreased 37.93 points (-0.13%) 30,119.56, NIKKEI 225 decreased 115.02 points (-0.53%) to 21,687.57.

The major Asian currency markets had a mixed day today: The AUDUSD increased 0.0047 or 0.66% to 0.7169 and the NZDUSD increased 0.0020 or 0.29% to 0.6763. However, the USDJPY and the USDCNY took the opposite route and decreased 0.1700 or 0.15% to 110.9500 and 0.0005 or 0.01% to 6.7176.

Both Gold and Silver had a green day today: Gold increased 4.17 USD/t oz. or 0.32% to 1,310.45 and Silver increased 0.025 USD/t. oz or 0.16% to 15.2420.

Some economic news from late evening yesterday:

  • South Korea: Unemployment Rate (Mar) increased from 3.7% to 3.8%
  • Australia: Westpac Consumer Sentiment (Apr) increased from -4.8% to 1.9%

Japan:

  • Bank Lending (YoY) (Mar) increased from 2.3% to 2.4%
  • Core Machinery Orders (YoY) (Feb) decreased from -2.9% to -5.5%
  • Core Machinery Orders (MoM) (Feb) increased from -5.4% to 1.8%
  • PPI (YoY) (Mar) increased from 0.9% to 1.3%
  • PPI (MoM) (Mar) remain at 0.3%

Some economic news from Wednesday:

  • Japan Machine Tool Orders (YoY) increased from -29.3% to -28.5%
  • Indian M3 Money Supply remain the same at 10.6%

Europe:

It seems like fun and games in Europe with the EU summit kicking off today. PM Theresa May joined poised to request an extension for a Brexit deal to the 30th of June. The BBC is reporting that President Macron of France is softening his tune from a hardline UK deadline to possibly accepting the extension. The EU chief negotiator told reporters that the extension must serve a useful purpose. “Our common purpose is to get the ratification of the withdrawal agreement,” he said. “Let me recall that this withdrawal agreement is the only way to ensure an orderly withdrawal of the UK, which is our common interest.” Further adding, “So now it is for the leaders to decide tonight.”

Israeli elections were cast yesterday with Benjamin Netanyahu is likely to br re-elected as Prime Minister. Now it is up to him to form a coalition and present this to the president, which he is expected to do.

The major European stock markets had a mixed day today. CAC 40 increased 13.47 points or 0.25% to 5,449.88, and the DAX increased 55.34 points or 0.47% to 11,905.91. However, the FTSE 100 took the opposite route and decreased 3.66 points or -0.05% to 7,421.91.

The major European currency markets had a green day today: The EURUSD increased 0.0012 or 0.10% to 1.1273, the GBPUSD increased 0.0025 or 0.19% to 1.3085, and the USDCHF increased 0.0030 or 0.30% to 1.0027.

Some economic news from Europe:

Norway:

  • Core CPI YTD (Mar) increased from 2.6% to 2.7%
  • Core Inflation (MoM) (Mar) decreased from 1.2% to 0.3%
  • CPI (MoM) (Mar) decreased from 0.8% to 0.2%
  • CPI (YoY) (Mar) decreased from 3.0% yo 2.9%
  • PPI (YoY) (Mar) decreased from 8% to 5.2%

France:

  • French Industrial Production (MoM) (Feb) decreased from 1.2% to 0.4%
  • Italian Industrial Production (YoY) (Feb) increased from -0.8% to 0.9%
  • Italian Industrial Production (MoM) (Feb) decreased from 1.9% to 0.8%

Eurozone:

  • Deposit Facility Rate remain the same at -0.40%
  • ECB Marginal Lending Facility remain the same at 0.25%
  • ECB Interest Rate Decision (Apr) remain the same at 0.00%

UK:

  • BRC Retail Sales Monitor (YoY) (Mar)decreased from -0.1% to -1.1%
  • Construction Output (MoM) (Feb) decreased from 3.5% to 0.4%
  • K. Construction Output (YoY) (Feb) increased from 2.2% to 3.3%
  • GDP (MoM) decreased from 0.5% to 0.2%
  • GDP (YoY) increased from 1.5% to 2.0%
  • Index of Services decreased from 0.5% to 0.4%
  • Industrial Production (MoM) (Feb) decreased from 0.7% to 0.6%
  • Industrial Production (YoY) (Feb) increased from -0.3% to 0.1%
  • Manufacturing Production (YoY) (Feb) increased from -0.7% to 0.6%
  • Manufacturing Production (MoM) (Feb) decreased from 1.1% to 0.9%
  • Trade Balance (Feb) increased from -14.62B to -14.11B
  • Trade Balance Non-EU (Feb) increased from -6.56B to -5.84B
  • NIESR GDP Estimate increased from 0.3% to 0.4%
  • NIESR Monthly GDP Tracker increased from 0.1% to 0.4%

U.S./Americas:

U.S. markets were fairly positive today, but the Dow was yet again held back by Boeing. The 30-stock Dow finished marginally up +0.03%, closing the day at 26,157.16. The S&P 500 had a slightly stronger day finishing up +0.35% (2,888.21 close), while the Nasdaq rose +0.69% (7,964.24 close), and the Russell 2000 increased +1.40% ( 1,581.55 close).

The Federal Reserve released their minutes from its March session, reiterating their plan to maintain current interest rate levels for the remainder of the year. “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” according to the minutes. This news comes after President Trump, and others in his administration, last week urged the central bank to lower rates. Policy makers noted however that inflation has not expanded past the 2% level despite a strong labor market and corresponding wage growth. The group also cited uncertainty in the geopolitical realm, citing the pending Brexit vote and on-going U.S.-China trade negotiations.

The Consumer Price Index (CPI) increased by 0.4% last month, which is the largest CPI increase in 14 months. While the report noted that the economic slowdown in Q4 of 2018 carried over to Q1 of 2019, the Fed is optimistic that the U.S. economy will continue to expand.

On a year-over-year basis, the cost of living in the U.S. increased by 1.9% in March. This YoY increase was higher than the 1.5% in February. The March increase is largely due to a rise in energy prices, primarily gasoline and electricity. Gas prices rose by nearly 10% in March after reaching $2.62 per gallon.

According to various reports, Uber, the popular rideshare app, is expected to make IPO documentation public sometime this week or next. The company is said to be eyeing a sale of $10 billion worth of stock through the IPO. Lyft, Uber’s main competitor in North America, had its IPO only a few weeks back on NYSE, but shares have struggled to stay around the $72 initial price. Today, Lyft declined 10.85%.

The USD Index decreased by -0.09% this Wednesday (last reading 96.92). The USDCAD decreased by -0.04% (last reading 1.3315).

The Canadian markets recovered some of the losses experienced yesterday after the IMF downgraded their economic growth forecast. The TSX Composite gained 0.37% (16,396.29 close), and the TSX 60 gained 0.31% (977.48 close).

Brazil’s Bovespa declined for the second consecutive day after dropping -0.35% (95,953.45 close).

Energy:

The EIA report was out today, suggesting a large build in crude oil. However, crude oil continued to rise today by 1.47%. Ongoing tensions in Libya and sanctions on Iran and Venezuela are causing some investors to be concerned about ongoing supply. Amazingly, orders for the Aramco bonds have passed through 100bn USD. The initial amount will be raised to 12bn, which shows there is certainly appetite for emerging market debt of this nature.

The energy markets had a green day today: Crude Oil increased 0.54 USD/BBL or 0.84% to 64.4302, Brent increased 1.06 USD/BBL or 1.50% to 71.5860, natural gas increased 0.002 USD/MMBtu or 0.07% to 2.6990, Gasoline increased 0.0625 USD/GAL or 3.13% to 2.0655, and Heating Oil increased 0.0371 USD/GAL or 1.81% to 2.0792.

Top commodity gainers were Bitumen (4.26%), Gasoline (3.04%), and Heating Oil (1.81%). The biggest losers were Orange Juice (-1.84%), Feeder Cattle (-0.79%) and Rice (-0.73%)

The above data was collected around noon EST on Wednesday.

Bonds:

Japan -0.06%(-1bp), US 2’s 2.33% (+0bps), US 10’s 2.49%(-1bps), US 30’s 2.91%(-1bps), Bunds -0.01% (-1bp), France 0.34% (-2bp), Italy 2.55% (-4bp), Turkey 16.92% (-28bp), Greece 3.46% (-1bp), Portugal 1.20% (-1bp), Spain 1.07% (-2bp) and UK Gilts 1.11% (+3bp)

  • Italian 12-month BOT Auction increased from 0.060% to 0.070%
  • German 5-year Bobl Auction decreased from -0.320% to -0.410%