Market Talk – February 26, 2020

ASIA:

Indian refiners of edible oils led by the Solvent Extractors of India President Atul Chaturvedi urged the Indian government not to issue palm olein import licenses as any further purchases could result in a sharp drop in rapeseed prices and cut farmers’ incomes. India, the world’s biggest importer of palm oil, in a surprise move last week issued import licences for 1.1 million tonnes of refined palm olein from Indonesia, weeks after curbing overseas purchases of the commodity.

India is unlikely to have any substantial coverage of 5G until at least the end of next year, with telecom operators in the country yet to participate in a spectrum auction. However, Chinese vendors Oppo, Vivo, and Xiaomi have all moved in tandem to unveil their 5G smartphones in the last week to the world’s second-largest handset market.

In a report published by Harvard Business Review, China has become a major global lender with outstanding claims now exceedingly more than 5% of global GDP. Almost all of this lending is official, coming from the government and state-controlled entities. The data published in the report says that China has extended many more loans to developing countries than previously known. This systematic underreporting of Chinese loans has created a “hidden debt” problem, meaning that debtor countries and international institutions alike have an incomplete picture of how many countries around the world owe to China and under what conditions.
KraneShares, a China-focused ETF (Exchange Traded Fund) issuer firm has said that global markets are “on sale” for long-term investors. The firm’s CEO Brendan Ahern told CNBC on Monday, “The markets were due for a correction” in China and the United States after a strong 2019.

The major Asian stock markets had a negative  day today:

  • NIKKEI 225 decreased 179.22 points or -0.79% to 22,426.19
  • Shanghai decreased 25.12 points or -0.83% to 2,987.93
  • Hang Seng decreased 196.74 points or -0.73% to 26,696.49
  • ASX 200 decreased 158.50 points or -2.31% to 6,708.10
  • Kospi decreased 26.84 points or -1.28% to 2,076.77
  • SENSEX decreased 392.24 points or -0.97% to 39,888.96

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00482 or -0.73% to 0.65538
  • NZDUSD decreased 0.0024 or -0.38% to 0.6295
  • USDJPY increased 0.03 or 0.02% to 110.29
  • USDCNY increased 0.00448 or 0.06% to 7.02948

Precious Metals:

  • Gold increased 10.42 USD/t oz. or 0.64% to 1,647.15
  • Silver decreased 0.1075 USD/t. oz or -0.60% to 17.9552

Some economic news from last night:

South Korea:

Manufacturing BSI Index (Mar) decreased from 79 to 66

Auatralia:

Construction Work Done (QoQ) (Q4) decreased from -0.4% to -3.0%

Some economic news from today:

Japan:

BoJ Core CPI (YoY) remain the same at 0.3%

Singapore:

Industrial Production (YoY) (Jan) increased from -3.7% to 3.4%

Industrial Production (MoM) (Jan) increased from 6.3% to 18.2%

HongKong:

GDP (QoQ) (Q4) increased from -0.4% to -0.3%

GDP (YoY) (Q4) remain the same at -2.9%

India:

M3 Money Supply decreased from 10.2% to 9.6%

Indonesia:

Loans (YoY) (Jan) increased from 6.08% to 6.10%

EUROPE/EMEA:

The EU head for trade deal negotiations with the US has sent out a positive message to the markets that a “mini” trade deal is now imminent with the US.

The EU chief negotiator Michel Barnier has said that there isn’t too much time to process a deal with the UK, but they are willing to offer the UK “super preferential” access to the EU markets.

For the first time since 2015, asylum applications rose in the EU 13% year over year. Around 714,000 applications were processed compared with 635,000 the year before.

EU ministers have told the UK that if they do not implement checks from Great Britain to the Northern Ireland border there will be complications in achieving a deal. Under the agreement, Northern Ireland will still maintain EU rules and regulations on agriculture and manufacturing whereas Great Britain will end by 2020.

The major Europe stock markets had a mixed day today:

  • CAC 40 increased 4.87 points or 0.09% to 5,684.55
  • FTSE 100 increased 24.59 points, or 0.35% to 7,042.47
  • DAX 30 decreased 15.61 points or -0.12% to 12,774.88

 

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00063 or 0.06% to 1.08843
  • GBPUSD decreased 0.0098 or 0.75% to 1.2904
  • USDCHF increased 0.0005 or 0.05% to 0.9766

 

Some economic news from Europe today:

UK:

BRC Shop Price Index (YoY) decreased from -0.3% to -0.6%

Norway:

Unemployment Rate (Dec) decreased from 4.0% to 3.9%

France:

French Consumer Confidence (Feb) remain the same at 104

France Jobseekers Total decreased from 3,292.9K to 3,264.8K

Italy:

Italian Trade Balance Non-EU (Jan) decreased from 5.77B to -0.28B

Swiss:

ZEW Expectations (Feb) decreased from 8.3 to 7.7

US/AMERICAS:

Auto sales are likely to decline in 2020 due to supply disruptions and reduced demand, Moody’s reported this Wednesday. Global vehicle sales are expected to decline -2.5% this year, well beneath the original forecast of a -0.9% drop. The new forecast projects overall sales to slip to 88 million worldwide compared to 90.3 million.

Bob Iger announced yesterday that he will be forfeiting his role as Disney’s CEO despite a successful run in which he oversaw the acquisition of Century Fox and assisted in launching Disney+. Iger is not leaving Disney entirely, as his aim is to take on a more creative role within the company as executive chairman. Bob Chapek will take over as the entertainment giant’s CEO.

Brazil’s Health Ministry reported the country’s first case of the coronavirus. The patient who is being treated at a Sao Paulo hospital reported recently traveling to Italy. The report comes at an unfortunate time for Brazilian tourism as it is currently the carnival holiday, which attracts millions of visitors.

Brazil’s central bank may become independent from government influence. Currently, the bank falls under the economics ministry branch and the decision makers are appointed by the nation’s president. Bank President Roberto Campos Neto has been lobbying for the bank’s independence, stating that the move will improve investor confidence in the Brazilian markets.

US Market Closings:

  • Dow declined 123.77 points or -0.46% to 26,957.59
  • S&P 500 declined -0.38% to 3,116.39
  • Nasdaq advanced 15.16 points or 0.17% to 8,980.78
  • Russell 2000 declined 19.14 points or -1.22% to 1,552.76

Canada Market Closings:

  • TSX Composite declined 135.45 points or -0.79% to 17,041.92
  • TSX 60 declined 7.55 points or -0.74% to 1,016.17

Brazil Market Closing:

  • Bovespa declined 7,963.13 points or -7% to 105,718.29

ENERGY:

The coronavirus is spreading around the world, causing fears over global growth and pushing down the price of oil. Goldman Sachs slashed their estimates for oil demand by half from 1.2 mbpd to 600k mbpd.

The oil markets had a negative day today:

  • Crude Oil decreased 1.36 USD/BBL or -2.73% to 48.5268
  • Brent decreased 1.67 USD/BBL or -3.04% to 53.3173
  • Natural gas decreased 0.0346 USD/MMBtu or -1.87% to 1.8104
  • Gasoline decreased 0.0814 1USD/GAL or -5.33% to 1.4452
  • Heating oil decreased 0.0819 USD/GAL or -5.21% to 1.4864
  • Top commodity gainers: Palm Oil (1.08%), Coffee (1.59%), Palladium (2.16%), and Lean Hogs (1.12%)
  • Top commodity losers: Cocoa (-3.08%), Gasoline (-5.33%), Heating Oil (-5.21%), and Brent (-3.04%)

The above data was collected around 14.16 am EST on Wednesday.

BONDS:

Japan -0.10%(-4bp), US 2’s 1.16% (-6bps), US 10’s 1.32%(-3bps); US 30’s 1.80%(-1bps), Bunds -0.51% (-3bp), France -0.24% (-4bp), Italy 1.00% (-1bp), Turkey 12.10 % (+6bp), Greece 1.17% (+10bp), Portugal 0.22% (+4bp); Spain 0.25% (+7bp) and UK Gilts 0.50% (-1bp).

 

  • US 5-Year Note Auction decreased from 1.448% to 1.150%
  • Italian 6-Month BOT Auction increased from -0.355% to -0.287%
  • German 5-Year Bobl Auction decreased from -0.590% to -0.690%