Market Talk – December 11, 2019

ASIA:

According to CNBC, Chinese negotiators would like all the upcoming US tariffs removed before the December 15th deadline if they are going to proceed with negotiations. It is expected that the 156 billion USD worth of tariffs will significantly escalate tensions between the two nations if applied.

The Indian Parliament approved the Citizenship Amendment Bill today, enabling citizenship rights to non-Muslim migrants from Pakistan, Afghanistan, and Bangladesh. The Parliament passed the bill with 125 votes in favor and 105 votes against.

The Indian government raised the import tax on Malaysian refined palm oil in September as an attempt to help grow its own palm oil. This resulted in a 60% drop of imports in October of palm oil.

The major Asian stock markets had a mixed day today:

  • Shanghai increased 7.10 points or 0.24% to 2,924.42
  • Kospi increased 7.62 points or 0.36% to 2,105.62
  • ASX 200 increased 45.70 points or 0.68% to 6,752.60
  • NIKKEI 225 decreased 18.33 points or -0.08% to 23,391.86
  • Hang Seng increased 208.81 points or 0.79% to 26,645.43
  • SENSEX increased 172.69 points or 0.43% to 40,412.57

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0073 or 1.07% to 0.6884
  • NZDUSD increased 0.0042 or 0.64% to 0.6587
  • USDJPY decreased 0.2510 or 0.23% to 108.5370
  • USDCNY decreased 0.0004 or 0.01% to 7.0278

Precious Metals:

  • Gold increased 11 USD/t oz. or 0.75% to 1,474.62
  • Silver increased 0.2111 USD/t. oz or 1.27%% to 16.9139

Some economic news from last night:

South Korea:

Unemployment Rate (Nov) increased from 3.5% to 3.6%

M2 Money supply (Oct) increased from 7.20% to 7.40%

Japan:

BSI Large Manufacturing Conditions (Q4) decreased from -0.2 to -7.8

PPI (MoM) (Nov) decreased from 1.1% to 0.2%

PPI (YoY) (Nov) increased from -0.4% to 0.1%

Australia:

Westpac Consumer Sentiment (Dec) decreased from 4.5% to -1.9%

New Zealand:

Electronic Card Retail Sales (MoM) (Nov) increased from -0.5% to 2.6%

Electronic Card Retail Sales (YoY) (Nov) increased from 1.6% to 5.1%

Budget Balance (Jul) decreased from -2.785B to -5.154B

Net Debt Forecast (Jul) decreased from 20.10% to 19.60%

Economic Forecast (Jul) decreased from 3.465B to -0.943B

EUROPE/EMEA:

Tomorrow the UK public will go to vote in the third general election in less than 5 years, with the Conservative party in a position to take the majority of the seats. However, there are some chances of a hung parliament. The results are expected to be posted on Friday morning.

Turkish Foreign Minister Mevlut Cavusoglu said that any US sanctions placed on Turkey over their deal with Russia to purchase the S-400 defense system would be retaliated and would harm US-Turkish ties. “We bought the S-400s because the most suitable offer on air defense systems came from Russia. Until we produce it ourselves, the alternative to the F-35 could be the Russian market, but we are open to other alternatives too,” Cavusoglu said.

The US has applied sanctions on Iran’s largest shipping company and airline. US Secretary of State Mike Pompeo stated that the company was aiding Iran with the alleged creation of weapons of mass destruction. Meanwhile, the UN has been unable to confirm that Iran was involved in the Saudi oil facility attacks that occurred in September.

According to the WSJ, the US is preparing to block a 10.5 billion USD pipeline that will provide natural gas from Russia under the Baltic Sea to Germany. The pipeline called “Nord Stream 2” would become one of Europe’s largest energy deals

The major Europe stock markets had a green day today:

  • CAC 40 increased 12.85 points or 0.22% to 5,860.88
  • FTSE 100 increased 2.49 points, or 0.03% to 7,216.25
  • DAX 30 increased 76.02 points or 0.58% to 13,146.74

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00416 or 0.37% to 1.11356
  • GBPUSD increased 0.0071 or 0.54% to 1.32000
  • USDCHF decreased 0.0020 or 0.21% to 0.9825

US/AMERICAS:

The Federal Open Market Committee (FOMC) unanimously voted to hold rates at 1.5% to 1.75%. “The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective,” according to the official FOMC statement. The FOMC had voted to lower rates on three separate occasions this year, however, they anticipate rates will remain steady into 2020. The Fed foresees conditions warranting a hike come 2021, followed by another increase in 2022. Future Fed forecasts do not always align with economic conditions. Therefore, the Fed will continue to “take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

The US workforce is strong and expanding, and unemployment remains near historic lows. However, the FOMC noted that exports and business fixed investments remained weak. Inflation remains beneath the 2% target, although it beginning to rise. As for future economic growth, the committee projects 2019 to end with a 2.2% increase to GDP, followed by an increase of 2% in 2020, 1.9% in 2021, and 1.8% in 2022.

The US Labor Department released a report this Wednesday showing a rise in consumer inflation. The 0.3% increase in the consumer price index last month is largely attributed to higher energy and food prices. The month prior, the index advanced 0.4%. The CPI climbed 2.1% on a year-on-year basis, exceeding analysts’ expectations of a 2% increase.

US Market Closings:

  • Dow advanced 29.58 points or 0.11% to 27,911.30
  • S&P 500 advanced 9.11 points or 0.29% to 3,141.63
  • Nasdaq advanced 37.87 points or 0.44% to 8,654.05
  • Russell 2000 advanced 0.21 of a point or 0.01% to 1,631.93

Canada Market Closings:

  • TSX Composite declined 11.09 points or -0.07% to 16,939.61
  • TSX 60 declined -0.03 of a point or 0% to 1,011.37

Brazil Market Closing:

  • Bovespa advanced 291.86 points or 0.26% to 110,963.87

ENERGY:

The EIA report showed an 800,000 barrel weekly rise in crude stockpiles, pushing the prices lower. The Fed decision to keep rates unchanged did not move the price of Crude too much.

The oil markets had a negative day today:

  • Crude Oil decreased 0.2688 USD/BBL or -0.45% to 58.7687
  • Brent decreased 0.2771 USD/BBL or -0.43% to 63.7202
  • Natural gas decreased 0.0177 USD/MMBtu or -0.78% to 2.2572
  • Gasoline decreased 0.0156USD/GAL or -0.95% to 1.6319
  • Heating oil decreased 0.0245 USD/GAL or -1.25% to 1.9360
  • Top commodity gainers: Platinum(2.36%),Steel(1.63%),Copper(1.40%), and Coffee(1.36%)
  • Top commodity losers: Corn(-1.53%), Heating Oil(-1.25%), Ethanol (-1.82%), and Wheat(-1.16%)

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

BONDS:

Japan 0.00%(+1bp), US 2’s 1.64% (-2bps), US 10’s 1.81%(-4bps);US 30’s 2.23%(-3bps), Bunds -0.30% (+1bp), France -0.01% (-3bp), Italy 1.33% (-3bp), Turkey 12.18% (-7bp), Greece 1.40% (-60bp), Portugal 0.36% (-3bp), Spain 0.43% (-4bp) and UK Gilts 0.78% (-3bp).

  • Italian 12-Month BOT Auction decreased from -0.135% to -0.191%