Market Talk – July 12, 2019

ASIA:

White House trade advisor Peter Navarro said that investors should take the news regarding the trade deal with a pinch of salt. “My advice for investors is to be patient with the process and don’t believe anything you read in either the Chinese or the U.S. press about these negotiations unless it comes from the mouth of either the president or advisor Lighthizer,” he told CNN.

China, meanwhile, has vowed to impose sanctions on U.S. companies involved in the potential arms sale worth 2.2bn USD to Taiwan. The Foreign Minister Wang Yi has told the U.S. “not to play with fire.” The foreign minister also spoke with a similar tone signaling such a deal is in violation of international law and relations. “In order to safeguard national interests, China will impose sanctions on U.S. enterprises participating in this sale of weapons to Taiwan,” the foreign minister said.

Thirty-seven countries, including Russia and Saudi Arabia, have written to the UN in favor of China’s policies in its western region of Xinjiang, according to a copy of the letter seen by Reuters on Friday. This is in contrast to strong Western criticism of the way the Chinese have been dealing with the situation. “Faced with the grave challenge of terrorism and extremism, China has undertaken a series of counter-terrorism and deradicalization measures in Xinjiang, including setting up vocational education and training centers,” the letter said.

The major Asian stock markets had a mixed day today:
• Shanghai increased 12.79 points or 0.44% to 2,930.55
• Kospi increased 6.08 points or 0.29% to 2,086.66
• ASX 200 decreased 19.60 points or -0.29% to 6,696.50
• NIKKEI 225 increased 42.37 points or 0.20% to 21,685.90
• Hang Seng increased 39.82 points or 0.14% to 28,471.62
• SENSEX decreased 86.88 points or -0.22% to 38,736.23

The major Asian currency markets had a mixed day today:
• AUDUSD increased 0.0019 or 0.28% to 0.6992
• NZDUSD increased 0.0012 or 0.17% to 0.6671
• USDJPY decreased 0.3640 or 0.34% to 108.1160
• USDCNY increased 0.0078 or 0.11% to 6.8837

Precious Metals:
• Gold increased 2.1 USD/t oz. or 0.15% to 1,408.48
• Silver increased 0.005 USD/t. oz or 0.03% to 15.1385

Some economic news from last night:

South Korea:
• Export Price Index (YoY) (Jun) decreased from 0.4% to -2.5%
• Import Price Index (YoY) (Jun) decreased from 4.6% to -0.4%

New Zealand:
• Business NZ PMI (Jun) increased from 50.2 to 51.3

Singapore:
• GDP (YoY) (Q2) decreased from 1.1% to 0.1%
• GDP (QoQ) (Q2) decreased from 3.8% to -3.4%
Some economic news from today:

Japan:
• Capacity Utilization (MoM) (May) increased from 1.6% to 1.7%
• Industrial Production (MoM) (May) decreased from 2.3% to 2.0%

Singapore:
• Retail Sales (YoY) (May) decreased from -1.9% to -2.1%
• Retail Sales (MoM) (May) decreased from 0.4% to -2.2%

China:
• Exports (YoY) (Jun) decreased from 1.1% to -1.3%
• Imports (YoY) (Jun) increased from -8.5% to -7.3%
• Trade Balance (USD) (Jun) increased from 41.66B to 50.98B
• M2 Money Stock (YoY) remain the same at 8.5%
• New Loans increased from 1,180.0B to 1,660.0B
• Outstanding Loan Growth (YoY) decreased from 13.4% to 13.0%

India:
• FX Reserves, USD increased from 427.68B to 429.91B
• CPI (YoY) (Jun) increased from 3.05% to 3.18%
• Cumulative Industrial Production (May) increased from 3.60% to 3.70%
• Industrial Production (YoY) (May) decreased from 4.3% to 3.1%
• Manufacturing Output (MoM) (May) decreased from 4.0% to 2.5%

EUROPE/EMEA:

The UK raised the risk of attack on British shipping in Iranian Gulf waters to “critical,” which is the highest risk level. The threat level means British ships are advised not to enter Iranian waters. This comes about after a tanker was cornered off by an Iranian fleet only to be rescued by a British navy ship who was ready to shoot on sight. Meanwhile, the Pentagon has said that it is discussing the possibility of having military escorts for vessels in the Gulf of Hormuz to help navigate tankers against Iranian fleet.

The far-right Alternative for Germany (AfD) party is battling stagnant poll results and suspicions of illegal funding that have torn a deepening rift between its leadership and its most radical wing. The AfD have a plan to stop immigration, with over 134,000 immigrants in Germany. In the EU, 68% of illegal migrants present in the EU live in four EU countries: Germany, France, Greece, and Spain.

Yesterday the ECB declared that they will follow the Fed and offer fresh set of stimulus packages. Today, the ECB released the supervisory banking statistics, a summary is as follows:

• Capital ratios for significant institutions remain stable in the first quarter of 2019, with total capital ratio at 17.99% and CET1 at 14.34%.
• NPL ratio decreases further to 3.67%, lowest level since time series first published in 2015.
• Liquidity coverage ratio increases to 149.71%.

The major Europe stock markets had a mixed day today:
• CAC 40 increased 20.92 points or 0.38% to 5,572.86
• FTSE 100 decreased 3.85 points or -0.05% to 7,505.97
• DAX decreased 8.80 points or -0.07% to 12,323.32.

The major Europe currency markets had a mixed day today:
• EURUSD decreased 0.00021 or -0.02% to 1.12499
• GBPUSD increased 0.0028 or 0.22% to 1.2547
• USDCHF decreased 0.0039 or 0.39% to 0.9862

Some economic news from Europe:

Germany:
• German WPI (MoM) (Jun) decreased from 0.3% to -0.5%
• German WPI (YoY) (Jun) decreased from 1.6% to 0.3%

Norway:
• Trade Balance (Jun) decreased from 11.3B to 5.2B

Spain:
• Spanish CPI (YoY) (Jun) decreased from 0.8% to 0.4%
• Spanish CPI (MoM) (Jun) decreased from 0.2% to -0.1%
• Spanish HICP (YoY) (Jun) remain the same at 0.6%
• Spanish HICP (MoM) (Jun) decreased from 0.2% to -0.1%

Eurozone:
• Industrial Production (MoM) (May) increased from -0.4% to 0.9%
• Industrial Production (YoY) (May) decreased from -0.4% to -0.5%

U.S./AMERICAS:

Today marks the end of a historic week of trading on Wall Street after the Dow, S&P 500, and Nasdaq all climbed to record highs. Looking back, the Dow first broke the 26,000 level on January 17, 2018, and surpassed the 25,000 level a year prior on January 4, 2018. Today, for the first time in history, the Dow surpassed 27,000 and closed at 27,332.03 after adding 243.95 points (0.90%). The S&P 500 first surpassed the 2,000 level in August 2014. Five years later, the index closed above the 3,000 level for the first time today after posting a 3,013.77 close (13.86 points, 0.46%). The Nasdaq pushed through the 7,000 level in January 2018 and surpassed 8,000 in August of that year. The index closed at a new historic high this Friday after adding 48.10 points (0.59%) and reaching 8,244.14.

What’s driving the markets today? Caterpillar led the rally in the Dow after advancing 3.28%, followed by Intel (2.72%), 3M (2.54%), and Home Depot (1.96%). JB Hunt Transportation Services was the top gainer on the S&P 500 this Friday (5.9%), followed by L Brands (4.04%), Humana (3.95%), Capri (3.90%), and United Rentals (3.81%). JB Hunt Transportation Services also led the way for the Nasdaq today, followed by Lam Research (3.43%), Broadcom (3.38%), and Ross (3.03%).

The rally in equities may mask the larger scope of soundness in the American economy. The White House now expects the national budget deficit to exceed $1 trillion this year. In contrast, that is a $779 billion hike from the prior fiscal year (ending September 30). CNN reported that the deficit increased to $747.1 billion during the first nine months of the current fiscal year, which is a 23.1% YoY increase.

U.S. market closings:
• The Dow advanced 243.95 points or 0.90% to 27,332.03
• S&P 500 advanced 13.86 points or 0.46% to 3,013.77
• Nasdaq advanced 48.10 points or 0.59% to 8,244.14
• Russell 2000 advanced 12.08 points or 0.78% to 1,570.00

Canada market closings:
• TSX Composite declined 35.79 points or -0.24% to 16,488.12
• TSX 60 declined 3.46 points or -0.35% to 986.02

Brazil market closings:
• BOVESPA declined 1,240.45 points or -1.18% to 103,905.99

ENERGY:

Crude rose to a seven-week high on the news of the U.S. draw in Crude as well as the storm in the Gulf of Mexico, which has led to many producers evacuating rigs.

Non-OPEC crude oil supply will rise by 2.4 million bpd next year, OPEC said in its latest Monthly Oil Market Report. The U.S., Norway, Brazil, and Australia will contribute to the increase in non-OPEC supply.

The oil markets had a green day today:
• Crude Oil increased 0.08 USD/BBL or 0.13% to 60.1882
• Brent increased 0.22 USD/BBL or 0.33% to 66.6662
• Natural gas increased 0.051 USD/MMBtu or 2.11% to 2.4621
• Gasoline decreased 0.0043 USD/GAL or -0.22% to 1.9811
• Heating oil increased 0.0006 USD/GAL or 0.03% to 1.9822

• Top commodity gainers: Steel (7.60%), Orange Juice (3.59%), Bitumen(2.46%), and Natural Gas (1.99%)
• Top commodity losers: Oat (-4.80 %), Feeder Cattle (-1.40%), Coal (-0.89%), and Palladium (-1.47%)

The above data was collected around 10:58 am EST on Friday.

BONDS:

Japan -0.14%(+3bp), US 2’s 1.85% (-1bps), US 10’s 2.12%(-1bps), US 30’s 2.65%(+1bps), Bunds -0.26% (+4bp), France 0.03% (+2bp), Italy 1.74% (+3bp), Turkey 16.70% (+24bp), Greece 2.36% (-66bp), Portugal 0.65% (+8bp), Spain 0.57% (+9bp) and UK Gilts 0.83% (+8bp).