Market Talk – June 18, 2019

ASIA / AUSTRALIA:

There was upbeat news regarding the U.S.-China trade deal today. Trump stated that he and President Xi spoke and that they will have an extended meeting next week at the G20 event.

A 6.7 magnitude earthquake hit the north east of Japan today, with expectations of perhaps multiple tsunamis to hit the coastal regions in follow up. As of this writing, there has been no damage reported from the initial earthquake.

The International Energy Agency (IEA) stated that foreign energy investments in India grew to $85 billion under Modi’s leadership, a record 12% increase, which reflects the highest growth of energy investments anywhere in the world.

The major Asian stock markets had a mixed day today. Shanghai increased 2.54 points or 0.09% to 2,890.16; KOSPI increased 7.98 points or 0.38% to 2,098.71; ASX 200 increased 39.10 points or 0.60% to 6,570.00; NIKKEI 225 decreased 151.29 points or -0.72% to 20,972.71; Hang Seng increased 271.61 points or 1.00% to 27,498.77; and SENSEX increased 85.55 points or 0.22% to 39,046.34.

The major Asian currency markets had a mixed day today. AUDUSD increased 0.0023 or 0.34% to 0.68750; NZDUSD increased 0.0033 or 0.51% to 0.6526; USDJPY decreased 0.1240 or 0.11% to 108.4260; and USDCNY decreased 0.0282 or 0.41% to 6.9020.

Gold increased 7.26 USD/t oz. or 0.54% to 1,346.68 and silver increased 0.175 USD/t. oz or 1.18% to 15.0132.

Some economic news:

Singapore:

  • Trade Balance increased from 2.780B to 3.960B

New Zealand:

  • Westpac Consumer Sentiment (Q2) decreased from 103.8 to 103.5
  • GlobalDairyTrade Price Index decreased from -3.4% to -3.8%

Japan:

  • Reuters Tankan Index (Jun) decreased from 12 to 6

Australia:

  • House Price Index (QoQ) (Q1) decreased from -2.4% to -3.0%

China:

  • House Prices (YoY) (May) remain the same at 10.7%

EUROPE / EMEA:

Mario Draghi, ECB head, signaled today that Europe could go back to monetary stimulus in order to boost the economy if the signs do not improve. With rates already so low, rate cuts seem limited so the Quantitative Easing program could be reimplemented to create money to buy back bonds.

U.S. President Trump later tweet about Draghi’s announcement, stating “making it unfairly easier for them to compete against the USA.” He further mentioned that Europe has been getting away with it for years and that German DAX was up as a result.

The European Commission has criticized the UK for their plan to tackle climate change, calling the UK’s plan “unclear.” The report suggests that the UK lacked clarity on key details of how they intend reduce greenhouse gas emissions over the next 12 years. The UK has plans to reduce emissions by 40% by 2030.

The major European stock markets had a green day today. CAC 40 increased 118.79 points or 2.20% to 5,509.73, FTSE 100 increased 85.73 points, or 1.17% to 7,443.04, and DAX increased 245.93 points or 2.03% to 12,331.75.

The major European currency markets had a mixed day today. EURUSD decreased 0.0022 or 0.20% to 1.1195; GBPUSD increased 0.0025 or 0.20% to 1.2557; and USDCHF increased 0.0012 or 0.12% to 1.0001.

Some economic news:

Germany:

  • German ZEW Current Conditions (Jun) decreased from 8.2 to 7.8
  • German ZEW Economic Sentiment (Jun) decreased from -2.1 to -21.1

Eurozone:

  • Core CPI (MoM) (May) decreased from 0.9% to -0.1%
  • Core CPI (YoY) (May) decreased from 1.3% to 0.8%
  • CPI (YoY) (May) decreased from 1.7% to 1.2%
  • CPI (MoM) (May) decreased from 0.7% to 0.1%
  • CPI ex Tobacco (YoY) (May) decreased from 1.7% to 1.1%
  • CPI ex Tobacco (MoM) (May) decreased from 0.7% to 0.1%
  • Trade Balance (Apr) decreased from 23.2B to 15.7B
  • ZEW Economic Sentiment decreased from -1.6 to -20.2

U.S. / AMERICAS:

Positive news regarding U.S.-China trade discussions helped spur Wall Street this Tuesday. President Trump announced he had spoke over the phone this morning with China’s President Xi and agreed to partake in an extended trade discussion during the G20 summit. The summit will take place at the end of the month from June 28-29 in Osaka, Japan. Trump had originally threatened to impose additional tariffs on China if President Xi did not attend, but it seems as if the situation is taking on a more diplomatic stance. “In recent times, China-U.S. relations have encountered some difficulties, which is not in the interest of either side. China and the U.S. will both gain by cooperating, and lose by fighting,” President Xi announced in a statement to Chinese CCTV.

President Trump’s reaction to Draghi’s plan to stimulate EU economy caused rumors to resurface that the White House is planning to remove Federal Reserve Chairman Jerome Powell, who has faced harsh criticism for refusing to artificially lower interest rates. However, top White House economic advisor Larry Kudlow told reporters today that these rumors are unfounded.

On corporate side, Facebook officially unveiled plans to partner with 28 other companies (such as MasterCard, PayPal and others) to form the Libra Association, which will govern a new cryptocurrency they plan to launch in 2020, dubbed the Libra. “Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people,” according to the company’s website. Facebook also announced they’ve created a new subsidiary called Calibra, which will offer digital wallets to use Libras in connection with Facebook Messenger and WhatsApp platforms. This is an ambitious plan that might be better received had Facebook not been involved in privacy concerns over recent months.

Wall Street finished the day strong. The Dow increased by 353.01 points (+1.35%) to 26,465.54, the S&P 500 rose 28.08 points (+0.97%) to 2,917.75, the Nasdaq climbed 108.86 points (+1.39%) to 7,953.88, and the Russell 2000 added 17.48 points (+1.14%) to 1,550.23.

In Canada, both the TSX Composite and TSX 60 rose by +0.92% this Tuesday, closing at 16,503.35 and 988.16 respectively.

Brazil’s Bovespa came close to reaching an all-time high today after soaring 1,781.14 points (+1.82%) to 99,404.39. The current high for the index — 99,993.90 – was achieved on March 18 of this year.

ENERGY:

Slightly upbeat news regarding U.S.-China relations have pushed the WTI and Crude prices up today. A report states that the OPEC would be happy with a price of oil above 60 dollars and that Saudi can handle their budget around that price level.

The oil markets had a mixed day today. Crude Oil increased 1.99 USD/BBL or 3.83% to 53.9445; Brent increased 1.21 USD/BBL or 1.99% to 62.2623; Natural gas decreased 0.064 USD/MMBtu or -2.68% to 2.3175; Gasoline increased 0.0337 USD/GAL or 1.99% to 1.7247; and Heating oil increased 0.0302 USD/GAL or 1.68% to 1.8331.

Top commodity gainers: Crude oil (3.85%), Lumber (3.59%), Palladium (2.24%), and Canola (3.37%). Top commodity losers: Bitumen (-7.94%), Orange Jiuce (-2.91%), Natural Gas (-2.72%), and Coffee (-1.61%)

The above data were collected around 15:01 EST on Tuesday.

BONDS:

Japan -0.13%(+1bp), US 2’s 1.85% (-2bps), US 10’s 2.06%(-3bps), US 30’s 2.55%(-6bps), Bunds -0.25% (+1bp), France 0.01% (-10bp), Italy 2.12% (-17bp), Turkey 17.10% (-33bp), Greece 2.56% (-15bp), Portugal 0.57% (-6bp), Spain 0.40% (-13bp) and UK Gilts 0.81% (-5bp).

  • US 52-Week Bill Auction decreased from 2.280% to 1.985%
  • UK 10-Year Treasury Gilt Auction decreased from 1.109% to 0.889%
  • Spanish 3-Year Letras Auction increased from -0.490% to -0476%