Market Talk – August 30, 2019

ASIA:

China today told Philippines President Duterte that the disputed area of the South China Sea was not up for negotiations as President Xi and Duterte met in Beijing. However, China was willing to work together to effectively manage the issue. With Duterte in his final term as presidency, critics back in his native country are saying he is just going through the motions and is not necessarily pushing for a solution.

US President Donald Trump has attacked US General Motors, asking why they have such large operation in China. It would be better to bring the operations back to the US.

In Hong Kong, National Party leader Andy Chan Ho-tin was arrested at the airport as he was about to board a flight to Japan. In addition, pro-democracy activist Joshua Wong was also arrested – he started the 2014 protests and was allegedly kidnapped from the subway, as it seems China is starting to come down on the protestors. There were also other reports which suggested that other protest leaders were attacked by “thugs” by being violently hit by baseball bats and metal poles.  The EU weighed in on the situation describing the events as extremely worrying, and has warned against any further escalation.

India’s government released statistics today showing that economic growth has hit a six-year low, growing only 5% in the three months to June. This is a 3% drop from the same period of last year. Indian auto manufacturing industry has been one area of concern, with a huge drop in demand this year. The reserve bank of India has dropped the interest rates four times this year, bringing the interest rates to the lowest level in 9 years.

The major Asian stock markets had a mixed day today:

  • Shanghai decreased 4.68 points or -0.16% to 2,886.24
  • Kospi increased 34.38 points or 1.78% to 1,967.79
  • ASX 200 increased 96.80 points or 1.49% to 6,604.20
  • NIKKEI 225 increased 243.44 points or 1.19% to 20,704.37
  • Hang Seng increased 21.23 points or 0.08% to 25,724.73
  • SENSEX increased 263.86 points or 0.71% to 37,332.79

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0005 or 0.08% to 0.6729
  • NZDUSD decreased 0.0012 or 0.18% to 0.6298
  • USDJPY decreased 0.1940 or 0.18% to 106.3060
  • USDCNY increased 0.0186 or 0.26% to 7.1607

Precious Metals:

  • Gold decreased 0.45 USD/t oz. or -0.03% to 1,523.97
  • Silver increased 0.1415 USD/t. oz or 0.78%% to 18.3942

Some economic news from last night:

Australia:

  • HIA New Home Sales (MoM) increased from -12.4% to -7.2%
  • Building Approvals (MoM) (Jul) decreased from -0.8% to -9.7%
  • Housing Credit (Jul) increased from 0.2% to 0.3%
  • Private House Approvals (Jul) decreased from 0.2% to -3.3%
  • Private Sector Credit (MoM) (Jul) increased from 0.1% to 0.2%

New Zealand:

  • Building Consents (MoM) (Jul) increased from -4.0% to -1.3%

Japan:

  • Jobs/applications ratio (Jul) decreased from 1.61 to 1.59
  • Tokyo Core CPI (YoY) (Aug) decreased from 0.9% to 0.7%
  • Tokyo CPI (YoY) (Aug) decreased from 0.9% to 0.6%
  • CPI Tokyo Ex Food and Energy (MoM) (Aug) increased from -0.1% to 0.6%
  • Unemployment Rate (Jul) decreased from 2.3% to 2.2%
  • Industrial Production (MoM) (Jul) increased from -3.3% to 1.3%
  • Industrial Production forecast 1m ahead (MoM) (Aug) decreased from 2.7% to 1.3%
  • Industrial Production forecast 2m ahead (MoM) (Sep) decreased from 0.6% to -1.6%
  • Retail Sales (YoY) (Jul) decreased from 0.5% to -2.0%

South Korea:

  • Interest Rate Decision (Aug) remain the same at 1.50%
  • Industrial Production (MoM) (Jul) increased from 0.2% to 2.6%
  • Industrial Production (YoY) (Jul) increased from -2.6% to 0.6%
  • Retail Sales (MoM) increased from -1.6% to -0.9%
  • Service Sector Output (MoM) (Jul) increased from -1.1% to 1.0%

Singapore:

  • Bank Lending (Jul) decreased from 687.1B to 680.7B

Some economic news from today:

Japan:

  • Construction Orders (YoY) (Jul) increased from -4.2% to 26.9%
  • Housing Starts (YoY) (Jul) decreased from 0.3% to -4.1%

Hong Kong:

  • M3 Money Supply (Jul) decreased from 3.5% to 3.3%
  • Retail Sales (YoY) (Jul) decreased from -6.7% to -11.4%

Indonesia:

  • M2 Money Supply (YoY) (Jul) increased from 6.80% to 7.80%

India:

  • Bank Loan Growth decreased from 12.2% to 11.6%
  • Deposit Growth increased from 10.1% to 10.2%
  • FX Reserves, USD decreased from 430.50B to 429.05B
  • GDP Quarterly (YoY) (Q1) decreased from 5.8% to 5.0%
  • Federal Fiscal Deficit (Jul) increased from 4,320.55B to 5,476.05B

EUROPE/EMEA:

UK PM Boris Johnson defended his actions of dismissing the parliament as he believes he will have a better chance to cut a better deal with the EU. Three courts in the UK, will consider the demands to halt Boris Johnsons dismissal of more than a month. Today, according to Reuters, an EU spokeswoman told them that their “doors remain open” with regards to finding a deal with the UK. Further adding, “Our position remains that we will need to first see concrete proposals from the UK government … whether digital or on paper.”

PM Boris Johnson later in the day told media “We are in the last stages now of negotiating with our friends about a way to get it done. If we can’t succeed in that negotiation we must come out anyway.” There is a slightly optimistic tone that a deal can be reached.

The EU has told potential joining country Serbia that it must dissolve any free trade deals it has with Russia if it wants to join the European Union. Finnish PM has told media today that there have been progressive talks for Macedonia and Albania to join the EU.

Israeli Prime Minister Netanyahu has ordered Macron of France not to open talks with Iran. He said Iran is increasing its regional aggression and now is “precisely not the time.”

The major Europe stock markets had a green day today:

  • CAC 40 increased 30.51 points or 0.56% to 5,480.48
  • FTSE 100 increased 22.86 points or 0.32% to 7,207.18
  • DAX increased 100.40 points or 0.85% to 11,939.28

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.0068 or 0.62% to 1.0987
  • GBPUSD decreased 0.0018 or 0.15% to 1.2170
  • USDCHF increased 0.0041 or 0.41% to 0.9906

Some economic news from Europe today:

UK:

  • Nationwide HPI (YoY) (Aug) increased from 0.3% to 0.6%
  • Nationwide HPI (MoM) (Aug) decreased from 0.3% to 0.0%
  • BoE Consumer Credit (Jul) decreased from 1.075B to 0.897B
  • M4 Money Supply (MoM) (Jul) increased from 0.1% to 0.7%
  • Mortgage Approvals (Jul) increased from 66.51K to 67.31K
  • Mortgage Lending (Jul) increased from 3.79B to 4.61B
  • Net Lending to Individuals increased from 4.8B to 5.5B

Germany:

  • German Retail Sales (YoY) (Jul) increased from -1.4% to 4.4%
  • German Retail Sales (MoM) (Jul) decreased from 3.0% to -2.1%

Norway:

  • Core Retail Sales (MoM) (Jul) increased from -0.3% to 0.8%
  • Central Bank Currency Purchase (Sep) decreased from -500.0M to -700.0M
  • Unemployment Change (Aug) decreased from 78.60K to 77.15K
  • Unemployment Rate n.s.a. (Aug) decreased from 2.40% to 2.30%

Italy:

  • Italian Monthly Unemployment Rate (Jul) increased from 9.8% to 9.9%
  • Italian CPI (YoY) (Aug) increased from 0.4% to 0.5%
  • Italian CPI (MoM) (Aug) increased from 0.0% to 0.5%
  • Italian HICP (YoY) (Aug) increased from 0.3% to 0.5%
  • Italian HICP (MoM) (Aug) increased from -1.8% to 0.0%
  • Italian GDP (QoQ) (Q2) decreased from 0.1% to 0.0%
  • Italian GDP (YoY) (Q2) remain the same at -0.1%

Swiss:

  • KOF Leading Indicators (Aug) remain the same at 97.0

Euro Zone:

  • Core CPI (YoY) remain the same at 0.9%
  • CPI (YoY) (Aug) remain the same at 1.0%
  • CPI, n.s.a (Aug) increased from 104.91 to 105.07
  • HICP ex Energy & Food (YoY) (Aug) remain the same at 1.1%
  • Unemployment Rate (Jul) remain the same at 7.5%

Spain:

  • Spanish Retail Sales (YoY) (Jul) increased from 2.5% to 3.2%
  • Spanish Current account (Jun) decreased from 2.70B to 2.05B

France:

  • French CPI (YoY)  remain the same at 1.1%
  • French CPI (MoM) increased from -0.2% to 0.5%
  • French Government Budget Balance (Jul) decreased from -77.3B to -109.7B
  • French HICP (YoY) decreased from 1.3% to 1.2%
  • French HICP (MoM) increased from -0.2% to 0.5%
  • French PPI (MoM) (Jul) increased from -0.5% to 0.4%

US/AMERICAS:

Yet again, trade talks are allegedly resuming between the US and China. On Thursday, President Trump stated talks had resumed “at a different level,” but warned that the public should reserve their judgements until a deal is finalized. Gao Feng, a spokesman for China’s Ministry of Commerce, stated that China’s new aim is to avoid the additional tariffs on $550 billion worth of Chinese goods. Gao stated that the additional tariffs will escalate the trade war, noting that China has “plenty of means for countermeasures.” The US and China are scheduled to have a direct in person meeting at the end of September.

President Trump and President Xi have a mutual enemy – The Wall Street Journal. Reporter Joshua Wong co-wrote an article last month which alleges that President Xi’s cousin was involved in a money laundering scheme in Australia. Wong is now banned from reporting in China, and

“We don’t have a tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem,” President Trump tweeted this Friday. The historically high dollar, according to the president, is harming US businesses exporting overseas. Noting the euro’s decline against the dollar, the president stated that the EU has an unfair manufacturing advantage against the US. “Badly run and weak companies,” according to Trump, are blaming the current administration’s tariffs instead of the Federal Reserve’s interest rate policy. The FOMC is set to reevaluate rates and monetary policies in the coming weeks.

US consumer sentiment fell beneath the initial reading for August, according to the University of Michigan’s analysis. Consumer sentiment reached 89.8 in August, which fell beneath the expected 92.1 reading and declined against July’s index score of 98.4.

Governor Ron DeSantis has declared a state of emergency for the state of Florida in advance of hurricane Dorian’s arrival. President Trump canceled his upcoming visit to Poland to remain in the states. The National Guard has sent 2,500 troops to Florida with another 1,500 on standby.

US Market Closings:

  • Dow advanced 41.03 points 0.16% to 26,403.23
  • S&P 500 advanced 1.88 points or 0.06% to 2,926.47
  • Nasdaq advanced 10.51 points or 0.13% to 7.962.88
  • Russell 2000 declined 1.88 points or -0.13% to 1,494.84

Canadian Market Closings:

  • TSX Composite advanced 57.58 points or 0.35% to 16,442.07
  • TSX 60 advanced 3.25 0.33% to 982.45

Brazil Market Closing:

  • Bovespa advanced 610.18 or 0.61% to 101,134.61

ENERGY:

More economic gloom as India’s official numbers showed a drop in economic growth, this has been a common pattern across the globe of late and the crude oil price dropped almost 3% at time of writing. It was meant to be a good finish for the week for oil. However, today’s decline pushed crude back down as it continues its sideways market since the beginning of this month.

The oil markets had a negative day today:

  • Crude Oil decreased 1.63 USD/BBL or -2.87% to 54.9776
  • Brent decreased 0.77 USD/BBL or -1.26% to 60.4284
  • Natural gas decreased 0.007 USD/MMBtu or -0.30% to 2.2894
  • Gasoline decreased 0.0709 USD/GAL or -4.21% to 1.6135
  • Heating oil decreased 0.0372 USD/GAL or -2.00% to 1.8259
  • Top commodity gainers: Palladium (4.48%), Rubber (2.51%), Platinum(1.86%), and Coffee (1.85%)
  • Top commodity losers: Feeder Cattle (-3.68 %), Oat (-9.90%), Gasoline (-4.29%), and Wheat (-3.62%)

The above data was collected around 12:40 pm EST on Friday.

BONDS:

Japan -0.27%(+2bp), US 2’s 1.52% (-1bps), US 10’s 1.51%(-0bps), US 30’s 1.98%(-0bps), Bunds -0.72% (-3bp), France -0.42% (-0bp), Italy 1.00% (+1bp), Turkey 15.69% (-15bp), Greece 1.62% (+6bp), Portugal 0.13% (-0bp), Spain 0.13% (+1bp) and UK Gilts 0.48% (+4bp).