Market Talk – January 28, 2020

ASIA:

Global firms are stopping staff travel to China and urging their workers inside the country to stay out of the office as coronavirus has continued to spread from the central city of Wuhan to the rest of China and beyond. HSBC has banned all staff from traveling to Hong Kong for two weeks and to mainland China until further notice. Standard Chartered is also restricting travel to China and Hong Kong and asked their staff to work from home for 14 days after their return. Wall Street bank Goldman Sachs has told staff who have visited mainland China to work from home for the next fortnight. The virus has spooked stock markets over the past week amid the growing threat to the global economy. Airlines, hotel groups, and luxury goods firms have been among the worst hit.

Senior diplomat Taranjit Singh Sandhu will be the next Indian Ambassador to the United States. Mr. Sandhu, a 1988 batch officer of the Indian Foreign Service, is the current Indian envoy to Sri Lanka and will succeed Harsh Vardhan Shringla, who will take charge as the Foreign Secretary on Wednesday.

Qatar initially declined India’s request to delink the price of its imported gas from that of oil under long-term deals. India requested this negotiation in order to make supplies cheaper for price-sensitive customers after a sharp fall in spot prices of the cleaner fuel. “The current formula of benchmarking gas prices with crude oil is not correct,” India’s Oil Minister Dharmendra Pradhan, said after meeting industry officials including Qatar’s energy minister, Saad Sherida al-Kaabi, and Indian state-owned oil company officials. Kaabi said Qatar would not renegotiate pricing under the existing contracts and was ready to supply more gas to meet India’s growing demand for gas. Indian officials at the meeting said the negotiations had only started and will go on for some time. Qatar is the world’s largest supplier of liquefied natural gas (LNG) and wants to boost its production of LNG to 126 mtpa by 2027 and India is leading buyer of Qatari LNG.

The major Asian stock markets had a negative day today:

  • Shanghai closed
  • Kospi decreased from 69.41 points or -3.09% to 2,176.72
  • ASX 200 decreased 96.00 points or -1.35% to 6,994.50
  • NIKKEI 225 decreased 127.80 points or -0.55% to 23,215.71
  • Hang Seng closed
  • SENSEX decreased 188.26 points or -0.46% to 40,966.86

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.0003 or 0.04% to 0.6758
  • NZDUSD decreased 0.0009 or 0.14% to 0.6537
  • USDJPY increased 0.1970 or 0.18% to 109.1460
  • USDCNY decreased 0.01278 or -0.18% to 6.96762

Precious Metals:

  • Gold decreased 13.7 USD/t oz. or -0.87% to 1,571.11
  • Silver decreased 0.6227 USD/t. oz or -3.44%% to 17.4834

Some economic news from last night:

Japan:

Corporate Services Price Index (CSPI) (YoY) remain the same at 2.1%

Australia:

NAB Business Confidence (Dec) decreased from 0 to -2

NAB Business Survey (Dec) decreased from 4 to 3

Some economic news from today:

Japan:

BoJ Core CPI (YoY) increased from 0.2% to 0.3%

South Korea:

Consumer Confidence (Jan) increased from 100.5 to 104.2

Indonesia:

Car Sales (YoY) increased from -9.90% to -1.40%

EUROPE/EMEA:

EU’s chief Brexit negotiator said that the EU will never compromise the single market for anyone (referring to the UK Brexit talks). He mentioned the single market was the biggest strength the EU had.

The UK ministers attended the last EU meeting prior to Brexit on Friday. Foreign Office Minister Chris Pincher said the UK was “looking forward to the next chapter” in its relations with the EU.

US President Trump highlighted a proposed peace plan, with the creation of a Palestinian state with the capital securing a portion of Jerusalem. Trump called the deal a win-win for both sides. Israeli PM Netanyahu called the plan a “realistic path” for peace.

The Turkish Foreign Minister Mevlüt Çavuşoğlu wrote a letter to the EU urging them to consider expanding the EU to include Turkey and to be fair when assessing new member states, highlighting their own application.

A US military plane has crashed in Afghanistan, with two bodies being found amongst the wreckage. The cause of the crash is currently unknown. However, according to Iranian media (via Jerusalem Post) the CIA agent responsible for killing General Soleimani was on board.

The major Europe stock markets had a green day today:

  • CAC 40 increased 62.80 points or 1.07% to 5,925.82
  • FTSE 100 increased 68.64 points, or 0.93% to 7,480.69
  • DAX 30 increased 118.92 points or 0.90% to 13,323.69

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00002 or 0.00% to 1.10202
  • GBPUSD decreased 0.00366 or -0.28% to 1.30224
  • USDCHF increased 0.0030 or 0.31% to 0.9729

Some economic news from Europe today:

Swiss:

Trade Balance (Dec) decreased from 3.950B to 1.964B

Spain:

Spanish Unemployment Rate (Q4) decreased from 13.92% to 13.78%

UK:

CBI Distributive Trades Survey (Jan) remain the same at 0

US/AMERICAS:

The Congressional Budget Office (CBO) forecast a 2.2% growth rate for the US economy in 2020, which is in line with other agencies’ growth forecasts. The CBO believes the federal deficit will stand at $1.3 trillion annually from 2021 until 2030, which is a figure that alarms many analysts. Furthermore, the agency expects inflation to increase at a notable rate until 2023 when it is expected to settle.

The Trump administration expressed dismay over the UK’s decision to allow Huawei access to 5G networks. “There is no safe option for untrusted vendors to control any part of a 5G network,” a senior White House staff member told officials this Tuesday. The US has reiterated concerns over intellectual security, worrying that Huawei may provide Beijing with a backdoor to sensitive information.

The second case of coronavirus was reported in Canada, this time affecting British Columbia. In a joint statement, provincial Health Officer Dr. Bonnie Henry and Health Minister Adrian Dix said, “All necessary precautions are being taken to prevent the spread of infection.”

The Public Health Agency of Canada denounced rumors that the coronavirus began at the National Microbiology Lab in Winnipeg. According to rumors, two Chinese spies were removed from the center last year and brought a strain of the virus back to China with them to be used in chemical warfare. The chief of media relations for Health Canada and the Public Health Agency of Canada, Eric Morrissette, called the rumors “misinformation” that have “no factual basis.”

US Market Closings:

  • Dow advanced 187.05 points or 0.66% to 28,722.85
  • S&P 500 advanced 32.61 points or 1.01% to 3,276.24
  • Nasdaq advanced 130.37 points or 1.43 points to 9,269.68
  • Russell 2000 advanced 14.18 points or 0.86% to 1,658.31

Canada Market Closings:

  • TSX Composite advanced 58.36 points or 0.33% to 17,500.88
  • TSX 60 advanced 3.95 points or 0.38% to 1,045.14

Brazil Market Closing:

  • Bovespa advanced 1,997.14 points or 1.74% to 116,478.98

ENERGY:

Oil prices moved up slightly today after a string of down days. Still, questions regarding the coronavirus and its potential impact to Chinese businesses are in question.

The UAE’s nuclear power plant’s first reactor is ready to start operations, Emirates Nuclear Energy Corporation (Enec) said on Tuesday. Nawah Energy Company, an operator and subsidiary of Enec, which is responsible for developing and managing nuclear energy in the UAE, said tests by an independent body concluded that unit 1 of Barakah in the Abu Dhabi desert is ready to generate energy. The UAE is the 33rd country in the world and the first in the Arab world to have an advanced peaceful nuclear energy program.

The oil markets had a green day today:

  • Crude Oil increased 0.59 USD/BBL or 1.11% to 53.7446
  • Brent increased 0.44 USD/BBL or 0.74% to 59.6409
  • Natural gas increased 0.0227 USD/MMBtu or 1.20% to 1.9090
  • Gasoline increased 0.0286USD/GAL or 1.92% to 1.5168
  • Heating oil increased 0.04 USD/GAL or 2.38% to 1.7146
  • Top commodity gainers: Heating Oil (2.38%), Sugar (2.18%),Oat (2.07%), and Gasoline (1.92%)
  • Top commodity losers: Palm Oil (-7.35%), Silver (-3.49%), Rubber (-2.14%), and Cocoa(-1.50%)

The above data was collected around 16.40 EST on Tuesday.

BONDS:

Japan -0.03%(+1bp), US 2’s 1.46% (+1bps), US 10’s 1.65%(+5bps); US 30’s 2.09%(+4bps), Bunds -0.38% (+4bp), France -0.09% (+4bp), Italy 1.04% (-0bp), Turkey 10.02% (-14bp), Greece 1.20% (-48bp), Portugal 0.32% (+5bp) Spain 0.32% (+3bp) and UK Gilts 0.55% (+4bp).

  • UK 10-Year Treasury Gilt Auction decreased from 0.794% to 0.500%
  • US 52-Week Bill Auction decreased from 1.550% to 1.490%
  • US 7-Year Note Auction decreased from 1.835% to 1.570%