Market Talk – February 22, 2019

 

Asia:

The global markets reacted to the following news of President Trump expectations to meet with Chinese Vice Premier Liu later in the day to conclude US-China trade talks. Investors were really optimistic about the news, which pushed up most of the major Asian stock markets today. The Nikkei 225 was not to follow the same fate as it dropped 18 bps to 21426, as it was playing the role of flight to quality of late for the region. The Shanghai Composite reacted positively rising 1.91%, the Hang Seng was also spurred by the next rising 65 bps. Kospi and ASX200 also rose 8 bps and 46 bps respectfully. This marks a decent week for global equities as a whole with a very good week for Asian markets as they ended the week on a positive note up around 2-3%.

The Asian currencies were mixed today, with the JPY, HKD decreasing against the dollar, but the CNY, NZD and AUD all ended up in the green.

Hong Kong released its CPI YoY figures from Jan, standing at 2.4%, slight lower than previous at 2.5%.

Gold and silver increased 6.84 USD/t oz. or 0.52% to 1,332.16 and 0.12 USD/t. oz or 0.73% to 15.96. In turn narrowing the gold/silver Ratio.

Europe:

European stocks also gained from the recent news regarding the US-China trade deal. The majority of the European stock markets were positive today. The CAC hit a 19-week high today as it increased 45 bp to 5218, FTSE 100 and DAX also increased 26 bps and 37 bps respectfully.

European mining shares climbed to their highest point in 8 months, lower inventories and excitement around the US-China talks elevated copper prices higher. Swiss based Glencore and UK BHP were up greater than 2% today.

European regulation caused large spread betting companies such as plus 500 and CMC Markets to tank today, CMC markets was down over 20% today alone.

A slight worry for the European markets is the way it is falling behind the US markets this year. Foreign investments have clearly been down this year. Trump signaled a threat to impose duties against European car manufacturers importing into the US. The European Union retaliated slightly today but signaling that companies such as Xerox and Caterpillar would also be under import reviews from the EU.

European currencies also were positive today in relation to the dollar with all the major currencies increasing: The EURUSD increased 0.02% to 1.1337, GBPUSD increased 0.13% to 1.3066 and USDCHF decreased 0.10% to remain near parity level at 0.9998.

Some economic news coming from the Eurozone: Germany released its YoY GDP numbers from Q4, the actual rate met the forecast rate at 0.9%, which also matches the previous quarter.

The Eurozone average Core CPI YoY from Jan stood at 1.1%, which is the same as forecasted and slightly higher than the previous Quarter YoY (0.9%).

US/Americas:

Wall Street closed the week on a bullish note. The Dow rose by over 181 points, marking the ninth straight week of gains for the index (+0.70%, 26031.81 close). We will be watching the Dow closely over the coming weeks for important target points (detailed information is available to Socrates subscribers on the private blog). The S&P 500 rose by over seventeen points (+0.64%, 2792.67 close), while the Nasdaq gained more than sixty-seven points (+0.91%, 7527.54 close). The Russell 2K followed the large caps, closing in the green as well (+0.92%, 1590.06 close).

More news from the Fed today after the release of their semi-annual monetary policy report to Congress. The U.S. economy rose slightly under +3.0% last year. Despite weak retail reports for December, consumer spending remained solid during the second half of the prior year. The Fed’s balance sheet closed 2018 at around $4 trillion, a number that the central bank plans to decrease by the end of this year. Currently, the bank is holding $1.6 trillion in reserves and assessed a comfort level of no less than $800 billion. Chairman Jerome Powell will testify before the U.S. Senate and House of Representatives next week to elaborate on the Reserve’s plan.

Chinese Vice Premier Liu He met with President Trump at the White House today to discuss the current state of trade negotiations. Both Trump and He expressed confidence that a deal is “more likely” than no deal. Not sure this is really a surprise, but financial reporters conveyed this as some type of seminal moment. Time will tell.

The USD decreased 0.10% to 96.5099 on from 96.6050 in the previous trading session.

The USD/CAD decreased 0.33% to 1.3187 from 1.3230.

The Canadian markets had a rather uneventful day. The TSX 60 remained was just slightly red (-0.03%, 954.93 close), while the larger TSX Composite closed a tad more in the green (+0.08%, 16013.01 close).

Tourism in Canada is up for the fifth consecutive year according to a report released by Destination Canada (formerly the Canadian Tourism Commission), with International tourism reaching a high in 2018 – surpassing 21 million mark for the first time.

The National Energy Board came out in favor of the Trans Mountain pipeline expansion this Friday, stating that the benefits would outweigh the environmental hazards. The pipeline currently runs crude from Alberta to British Colombia. The expansion, if approved, will add an additional 980 km of new pipeline at the cost of $7.4 billion.

In South America, the Bovespa closed the week on a strong note (+0.98%, 97885.60 close).

Energy:

Crude oil finished the week on a high note increasing 70 bps to 57.33. Brent also increased today 19 bps ending on 67.32 dollars per barrel. It is no doubt the recent optimism of the US-China trade deal causing the bounce today. The Markets have now reached 2019 new highs.