Market Talk – January 2, 2019

ASIA:

China has suspended their proposal of allowing Chinese companies to be listed in London. The Shanghai-London connect project was put on hold without citing an official reason. Although many believe the reason to be the UK’s pro-stance on Hong Kong democracy movement. China would be an important player in their future success as they break away from the EU. A looming decision needs to be made by the UK on whether they will go ahead with Huawei as their 5G provider for hardware despite pressure from the US to stop doing business with Huawei.

Hong Kong started the new year with fresh protests with thousands rallying at the pro-democracy march. Leaders from 18 countries wrote a letter to Chief of the city Carrie Lam, urging her to find a way forward to aid the people of Hong Kong.

The US-Japanese trade agreement went into effect yesterday, with the agreement cutting tariffs on Japanese cars as well as American farm goods. Meanwhile, Indonesia was the latest country to reject China’s claim to the disputed South China Sea area, claiming they have no legal basis over it.

The Indian government has proposed waiving a tax on coal to help finance pollution curbing equipment. This move will make coal more competitive in price with solar and wind energy. Modi’s office has proposed waiving the carbon tax of $5.61 per tonne that was levied on the production and import of coal, according to the documents reviewed by Reuters.

India’s current account deficit declined to 0.9% of GDP in the second quarter of the fiscal year ending March 2020 from 2.9% in the same period a year ago, according to the data published by India’s Central Bank. “The contraction was primarily on account of a lower trade deficit at $38.1 billion as compared with $50.0 billion a year ago,” the Reserve Bank of India said in the release.

The major Asian stock markets had a mixed day today:

  • Shanghai increased 35.07 points or 1.15% to 3,085.20
  • Kospi decreased 22.50 points or -1.02% to 2,175.17
  • ASX 200 increased 6.50 points or 0.10% to 6,690.60
  • NIKKEI 225 closed
  • Hang Seng increased 353.77 points or 1.25% to 28,543.52
  • SENSEX increased 320.62 points or 0.78% to 41,626.64

The major Asian currency markets had a negative day today:

  • AUDUSD decreased 0.0031 or 0.45% to 0.6985
  • NZDUSD decreased 0.0039 or 0.57% to 0.6694
  • USDJPY decreased 0.1230 or 0.11% to 108.5260
  • USDCNY decreased 0.00186 or 0.03% to 6.96234

Precious Metals:

  • Gold increased 9.1 USD/t oz. or 0.60% to 1,529.80
  • Silver increased 0.179 USD/t. oz or 1.00%% to 17.9678

Some economic news from last night:

South Korea:

Nikkei Manufacturing PMI (Dec) increased from 49.4 to 50.1

China:

PBoC Reserve Requirement Ratio decreased from 13.00% to 12.50%

Caixin Manufacturing PMI (Dec) decreased from 51.8 to 51.5

Singapore:

GDP (YoY) (Q4) increased from 0.7% to 0.8%

GDP (QoQ) (Q4) decreased from 2.4% to 0.1%

URA Property Index (QoQ) (Q4) remain the same at 0.30%

Indonesia:

Nikkei Manufacturing PMI (Dec) increased from 48.2 to 49.5

Core Inflation (YoY) decreased from 3.08% to 3.02%

Australia:

Manufacturing PMI decreased from 49.9 to 49.2

India:

M3 Money Supply decreased from 10.7% to 10.4%

Some economic news from today:

Australia:

Commodity Prices (YoY) increased from -4.7% to -2.1%

India:

Nikkei Markit Manufacturing PMI (Dec) increased from 51,2 to 52.7

EUROPE/EMEA:

The UK’s factory output fell at the fastest rate in eight years as measured by the IHS Markit UK Purchasing Manager’s Index (PMI) as it fell from 49.1 to 45.6. In addition, the British Chambers of Commerce (BCC) quarterly report shows that the current economic climate is gloomy, after 6500 companies were polled. The reasons cited were the uncertain near future with Brexit.

The UK Labour party has asked for a two-year Brexit delay if the UK fails to get a trade deal with the EU by June. The PM has vowed that a full Brexit will happen by the end of 2020, giving an 11-month transition period.

The EU will further enlarge their membership in 2020, with many Balkan countries willing to sign up to the union. The latest member, Croatia, has recently voiced their support for the further enlargement.

The Turkish parliament has agreed upon sending troops to Libya, although President Erdogan has said that foreign interference can complicate the Libyan situation.

An argument between Russia and the EU has emerged over the causes of the World War II. President Putin said that the allies and Poland are distorting history after a Polish parliament speaker said both Hitler and Stalin were at fault for starting the war.

The major Europe stock markets had a green day today:

  • CAC 40 increased 63.45 points or 1.06% to 6,041.50
  • FTSE 100 increased 61.86 points, or 0.82% to 7,604.30
  • DAX 30 increased 136.92 points or 1.03% to 13,385.93

The major Europe currency markets had a mixed day today:

  • EURUSD decreased 0.0047 or 0.42% to 1.1170
  • GBPUSD decreased 0.01049 or -0.79% to 1.31411
  • USDCHF increased 0.0038 or 0.39% to 0.9713

Some economic news from Europe today:

Norway:

Manufacturing PMI (Dec) increased from 53.8 to 55.5

Spain:

Spanish Manufacturing PMI (Dec) decreased from 47.5 to 47.4

Italy:

Italian Manufacturing PMI (Dec) decreased from 47.6 to 46.2

France:

French Manufacturing PMI (Dec) increased from 50.3 to 50.4

Germany:

German Manufacturing PMI (Dec) increased from 43.4 to 43.7

Euro Zone:

Manufacturing PMI (Dec) increased from 45.9 to 46.3

UK:

Manufacturing PMI (Dec) decreased from 48.9 to 47.5

US/AMERICAS:

Wall Street began the new year on a bullish note as all three major US indexes peaked to new highs. News of the US-Chinese trade deal reaching a conclusion this month encouraged pushed Chinese-sensitive stocks higher. Semiconductors pushed equities higher this Thursday as AMD (7.06%), Xilinx (3.97), and Micron Technology (2.99%) encouraged the rally in the S&P 500 and Nasdaq. The three leading stocks on the Nasdaq today were all Chinese-sensitive stocks: Baiducom (9.35%), Netease (7.19%), and JDcom (7.10%). Disney led the rally in the Dow this Thursday after increasing 2.47%, followed by Boeing (2.32%), and Apple (2.28%).

US manufacturing remained relatively consistent in December from the month prior. The seasonally adjusted IHS Markit U.S. Manufacturing Purchasing Managers’ Index (PMI) read 52.4 in December, which is only slightly down from November’s 52.6 reading. New orders are increasing as goods producers reported a third consecutive increase in new orders. Input price inflation rose notably due to an increase in product prices due to tariffs.

North Korean Leader Kim Jong Un warned the White House that denuclearization will never occur unless the US refrains from its “hostile policy towards the DPRK and lasting and durable peace-keeping mechanism is built.” The US military’s strong alliance with South Korea and Japan have worsened matters, despite President Trump maintaining that his personal relationship with Kim Jong Un will override the political friction.

Brazil’s manufacturing sector slowed in December. The manufacturing purchasing managers index (PMI) read 50.2 in December, which is a notable decrease from November’s 52.9 reading. Employment in that sector showed signs of contracting after falling to 49.3 from November’s 50.5 reading.

US Market Closings:

  • Dow advanced 330.36 points or 1.16% to 28,868.80
  • S&P 500 advanced 27.07 points or 0.84% to 3,257.85
  • Nasdaq advanced 119.58 points or 1.33% to 9,092.19
  • Russell 2000 declined 1.70 points or -0.10% to 1,666.77

Canada Market Closings:

  • TSX Composite advanced 36.52 points or 0.21% to 17,099.95
  • TSX 60 advanced 3.32 points or 0.33% to 1,018.24

Brazil Market Closing:

  • Bovespa advanced 2,927.76 points or 2.53% to 118,573.10

ENERGY:

Russian oil production has hit record highs despite the agreement amongst OPEC+ to curb production. According to Reuters, Russia pumped 11.25 mpd of crude in 2019.

India has cut import taxes on crude and refined palm oil from Southeast Asian (ASEAN) countries after a request from suppliers, a government notification said on Tuesday. The duty on crude palm oil was lowered to 37.5% from 40%, while a tax on the refined variety was cut to 45% from 50%. The reduction will lead to higher imports of palm oil by the world’s biggest edible oil buyer in the coming months as it would narrow the difference between the tropical vegetable oil and competitors such as soyoil and sunflower oil. Higher imports could support Malaysian palm oil prices FCPOc3, which have risen 44% in 2019.

The oil markets had a negative day today:

  • Crude Oil decreased 0.2925 USD/BBL or -0.48% to 60.8807
  • Brent decreased 0.1829 USD/BBL or -0.28% to 66.3229
  • Natural gas decreased 0.0463 USD/MMBtu or -2.16% to 2.1048
  • Gasoline decreased 0.0033USD/GAL or -0.19% to 1.7109
  • Heating oil decreased 0.0063 USD/GAL or -0.31% to 2.0190
  • Top commodity gainers: Palm Oil(2.28%),Oat(1.71%),Platinum(1.41%), and Bitumen(1.79%)
  • Top commodity losers: Milk(-11.80%), Cheese(-11.87%), Orange Juice (-2.42%), and Natural Gas(-2.16%)

The above data was collected around 15.51  EST on Thursday.

BONDS:

Japan -0.02%(-1bp), US 2’s 1.57% (+1bps), US 10’s 1.88%(-3bps); US 30’s 2.34%(-4bps), Bunds -0.22% (-3bp), France 0.08% (-4bp), Italy 1.43% (-0bp), Turkey 11.91% (-9bp), Greece 1.44% (-47bp), Portugal 0.42% (-2bp), Spain 0.47% (+1bp) and UK Gilts 0.81% (-1bp).

  • US 4-Week Bill Auction decreased from 1.555% to 1.500%
  • US 8-Week Bill Auction decreased from 1.565% to 1.515%