Market Talk – August 22, 2019

ASIA:

More news emerging regarding a China retaliation of a possible US-Taiwan arms sales. A lot of the talks are subjective in nature, however, the deal for 66 aircrafts looks as if it will go through. China recently made an intention to stop purchasing US agriculture products, however, according to Reuters there have been some small purchases of soybeans over the past few weeks.

As we thought things were progressing well or better than before between Japan and South Korea, recent news shows that South Korea will now stop sharing military intelligence with Japan as the situation looks to turn worse.

Pakistani PM Khan stated today that there was “no point” in speaking with India over the Kashmir issue. India, meanwhile, is looking to re-evaluate a nuclear policy which is a “no first use of nuclear weapons” as the defense minister threatens Pakistan over the recent feud.

The major Asian stock markets had a mixed day today:

  • Shanghai increased 3.11 points or 0.11% to 2,883.44
  • Kospi decreased 13.64 points or -0.69% to 1,951.01
  • ASX 200 increased 18.50 points or 0.29% to 6,501.80
  • NIKKEI 225 increased 9.44 points or 0.05% to 20,628.01
  • Hang Seng decreased 221.32 points or -0.84% to 26,048.72
  • SENSEX decreased 587.44 points or -1.59% to 36,472.93

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.0022 or 0.32% to 0.6758
  • NZDUSD decreased 0.0035 or 0.55% to 0.6367
  • USDJPY decreased 0.1890 or 0.18% to 106.4210
  • USDCNY increased 0.0206 or 0.29% to 7.0869

Precious Metals:

  • Gold decreased 3.35 USD/t oz. or -0.22% to 1,499.95
  • Silver decreased 0.05 USD/t. oz or -0.29%% to 17.0876

Some economic news from last night:

Australia:

  • Manufacturing PMI  decreased from 51.6 to 51.3
  • Services PMI decreased from 52.3 to 49.2

Japan:

  • Foreign Bonds Buying increased from 175.8B to 499.7B
  • Foreign Investments in Japanese Stocks decreased from -187.1B to -359.6B
  • Manufacturing PMI (Aug) increased from 49.4 to 49.5
  • Services PMI increased from 51.8 to 53.4

Some economic news from today:

Japan:

  • All Industries Activity Index (MoM) decreased from 0.5% to -0.8%
  • Machine Tool Orders (YoY) remain the same at -33.0%

Indonesia:

  • Interest Rate Decision decreased from 5.75% to 5.50%
  • Deposit Facility Rate decreased from 5.00% to 4.75%
  • Lending Facility Rate decreased from 6.50% to 6.25%

EUROPE:

The EU is planning any attempts for Russia to rejoin the G7 to recreate the G8. The idea was apparently floated by President Trump. Russia was part of the G8 prior to being kicked out in 2014 over the annexing of Crimea.

As Boris Johnson concludes his European tour, he mentioned that the UK must complete Brexit on the 31st of October with a deal or no-deal.

The Turkish foreign minister has pushed for the EU and Turkey to amend ties and overcome difficulties together.

France is taking steps to bring Iran closer to the negotiating table as they present Iran with a proposal. The Iranian foreign minister said they clearly do not want war and will be willing to work according to the French principles.

The major Europe stock markets had a negative day today:

  • CAC 40 decreased 47.22 points or -0.87% to 5,388.25
  • FTSE 100 decreased 75.79 points, or -1.05% to 7,128.18
  • DAX decreased 55.81 points or -0.47% to 11,747.04

The major Europe currency markets had a green day today:

  • EURUSD increased 0.0001 or 0.01% to 1.1085
  • GBPUSD increased 0.01324 or 1.09% to 1.22584
  • USDCHF increased 0.0013 or 0.13% to 0.9836

Some economic news from Europe today:

Eurozone:

  • Manufacturing PMI (Aug) increased from 46.5 to 47.0
  • Markit Composite PMI (Aug) increased from 51.5 to 51.8
  • Services PMI (Aug) increased from 53.2 to 53.4
  • Consumer Confidence (Aug) decreased from -6.6 to -7.1

UK:

  • CBI Distributive Trades Survey (Aug) decreased from -16 to -49

France:

  • French Manufacturing PMI (Aug) increased from 49.7 to 51.0
  • French Markit Composite PMI (Aug)  increased from 51.9 to 52.7
  • French Services PMI (Aug)  increased from 52.6 to 53.3

Germany:

  • German Composite PMI (Aug) increased from 50.9 to 51.4
  • German Manufacturing PMI (Aug)  increased from 43.2 to 43.6
  • German Services PMI (Aug) decreased from 54.5 to 54.4

US/AMERICAS:

The Federal Reserve’s large balance sheet may be partly to blame for the inverted yield curve, according to Kansas City Fed President Esther George. George commented this Thursday that the hefty balance sheet may be adding downward pressure on long-term notes. “So we all know what the history is of inverted yield curves and the concern that they portend a recession coming. But in the context of a global economy that is weakening, I think that could be explaining part of it,” George commented in reference to the balance sheet. One of the least dovish voting members of the FOMC, George was one of two members to vote against lowering interest rates last month.

Dallas Fed President Robert Kaplan announced that he does not foresee a need for the Fed to cut rates again this September. Kaplan, however, in a non-voting member of the FOMC.

America’s labor growth is strong, but not as strong as previous data suggested. The Labor Department adjusted their original payroll data from April 2018 through March 2019. The original report stated that the US economy added about 2.5 million new jobs during that time, averaging about 200,000 new positions on a monthly basis. The revised report shows a monthly growth of about 170,000 new positions.

President Trump recently called out Germany for failing to meet NATO’s 2% spending requirement. Last night, the president questioned Denmark for only spending 1.35%. “We protect Europe and yet, only 8 of the 28 NATO countries are at the 2% mark,” he commented. The US currently contributes more to NATO spending (3.42%) than any of the other members.

US Market Closings:

  • Dow advanced 49.51 points or 0.19% to 26,252.24
  • S&P 500 declined 1.48 points or -0.05% to 2,922.95
  • Nasdaq declined 28.82 points or -0.36% to 7,991.39
  • Russell 2000 declined 3.85 points or -0.25% to 1,506.00

Canada Market Closings:

  • TSX Composite declined 55.77 points or -0.34% to 16,253.46
  • TSX 60 declined 2.86 points or -0.29% to 971.09

Brazil Market Closing:

  • Bovespa declined 1,190.62 points or -1.18% to 100,011.28

ENERGY:

Crude declined slightly today; no significant news. However, there were some reports of the US buying lots of reserves that could account for 61% of the world production over the next decade.

The oil markets had a negative day today:

  • Crude Oil decreased 0.3 USD/BBL or -0.54% to 55.3296
  • Brent decreased 0.35 USD/BBL or -0.58% to 59.8656
  • Natural gas decreased 0.015 USD/MMBtu or -0.69% to 2.1519
  • Gasoline decreased 0.0281 USD/GAL or -1.66% to 1.6624
  • Heating oil decreased 0.0189 USD/GAL or -1.02% to 1.8407
  • Top commodity gainers: Live Cattle (2.42%), Sugar (1.67%), Wheat(1.11%), and Palm Oil (1.11%)
  • Top commodity losers: Lumber (-2.84 %), Oat (-2.39%), Lean Hogs (-1.74%), and Rubber (-1.73%)

The above data was collected around 15:50 EST on Thursday.

BONDS:

Japan -0.24%(-0bp), US 2’s 1.61% (+4bps), US 10’s 1.61%(+4bps), US 30’s 2.11%(+5bps), Bunds -0.64% (+3bp), France -0.36% (+4bp), Italy 1.30% (-3bp), Turkey 16.20% (+28bp), Greece 1.97% (-3bp), Portugal 0.19% (+6bp), Spain 0.16% (+6bp) and UK Gilts 0.52% (+4bp).

  • US 4-Week Bill Auction increased from 2.040% to 2.060%
  • US 8-Week Bill Auction increased from 1.950% to 1.985%
  • US 30-Year TIPS Auction decreased from 1.093% to 0.501%