Market Talk – June 28, 2019

ASIA / AUSTRALIA:

The G20 is set up to be interesting, as the US negotiators describe Chinese officials tone as negative. Tomorrow, the two heads of states are due to meet. President Trump was a bit more optimistic stating, “At a minimum, it will be productive,” referring to his meeting tomorrow with Chinese President Xi. Of course, the trade deal with China is the number one agenda. However, there are other global agendas that want to be noticed from the issue of Hong Kong as well as other less noted issues such as the treatment of the Chinese Uighur’s population.

In what seems to be opposite of the anticipated move by Apple Inc., Apple is in fact moving an assembly line of the Mac Pro from the US to China. Recently, there were reports that the US will be completely pulling out of China due to the tariff hikes and perhaps as a backlash to the Huawei issue. In the first month after the US ban on Huawei, Apple suffered a slowdown in domestic sales. So this news regarding Apple’s investment into China comes as a surprise, given the uncertainty of the two nations.

Russia, China, and India have all agreed that in order to bolster the ties between the nations, they must urge action against unilateralism. Putin was bold in what could be a stab at the US, stating that all the countries must rely on international law, respect national sovereignty, and refrain from interference in the affairs of other nations.

The major Asian stock markets had a negative day today. Shanghai decreased 17.91 points or -0.60% to 2,978.88; Kospi decreased 3.70 points or -0.17% to 2,130.62; ASX 200 decreased 47.50 points or -0.71% to 6,618.80; NIKKEI 225 decreased 62.25 points or -0.29% to 21,275.92; Hang Seng decreased 78.80 points or -0.28% to 28,542.62; and SENSEX decreased 191.77 points or -0.48% to 39,394.64.

The major Asian currency markets had a green day today. AUDUSD increased 0.0005 or 0.07% to 0.7013, NZDUSD increased 0.0015 or 0.23% to 0.6713, USDJPY increased 0.0540 or 0.05% to 107.8340, and USDCNY increased 0.0008 or 0.01% to 6.8710.

Gold increased 1.77 USD/t oz. or 0.13% to 1,410.20 and silver increased 0.065 USD/t. oz or 0.43% to 15.3480.

Some economic news:

South Korea:

  • Industrial Production (YoY) (May) decreased from 0.2% to -0.2%
  • Industrial Production (MoM) (May) decreased from 1.9% to -1.7%
  • Retail Sales (MoM) increased from -1.2% to 0.9%

Japan:

  • Jobs/applications ratio (May) decreased from 1.63 to 1.62
  • Tokyo Core CPI (YoY) (Jun) decreased from 1.1% to 0.9%
  • Tokyo CPI (YoY) (Jun) remain the same at 1.1%
  • Unemployment Rate (May) remain the same at 2.4%
  • Industrial Production (MoM) (May) increased from 0.6% to 2.3%
  • Industrial Production forecast 1m ahead (MoM) (Jun) decreased from 5.6% to -1.2%
  • Industrial Production forecast 2m ahead (MoM) (Jul) increased from -4.2% to 0.3%
  • Construction Orders (YoY) (May) increased from -19.9% to -16.9%
  • Housing Starts (YoY) (May) decreased from -5.7% to -8.7%

Australia:

  • Housing Credit (May) decreased from 0.3% to 0.2%
  • Private Sector Credit (MoM) (May) remain the same at 0.2%

Singapore:

  • Bank Lending (May) increased from 676.3B to 681.8B

Hong Kong:

  • M3 Money Supply (May) increased from -0.3% to 2.8%

India:

  • Federal Fiscal Deficit (May) increased from 1,570.48B to 3,661.57B
  • Balance of Payments (USD) (Q1) increased from -4.300B to 0.400B
  • Current Account % of GDP (QoQ) (Q1) increased from -2.50% to -0.70%
  • Current Account (USD) (Q1) increased from -16.90B to -4.60B
  • FX Reserves, USD increased from 422.20B to 426.42B
  • Trade Balance (USD) (Q1) increased from -49.500B to -35.200B
  • Foreign Debt (USD) (Q1) increased from 521.3B to 543.0B
  • Current Account % of GDP (YoY) increased from -1.90% to -0.70%
  • Current Account (USD) decreased from -48.700B to -57.100B

EUROPE / EMEA:

Reports are emerging that US officials are telling European representatives that they either do business with the US or Iran. With the tensions mounting with the two nations, the US is trying to destroy little of what is left of the Iranian economy by putting pressure on their trade partners. Europe’s response to the situation has been slightly neutral, however, there are reports that an alternative trading system is being developed called INSTEX, which is aimed at bypassing US sanctions against Iran. The EU is hoping to keep the nuclear deal alive with Iran.

Recent data from the German Chamber of Commerce has shown that trade between Germany and Iran is down 49% against the same period of 2018. Meanwhile, Angela Merkel seemed in better health today as she expressed her hopes for a conclusion to the US and Chinese trade deal. She mentioned that Germany is already feeling the impact of the current global slowdown.

UK Prime Minister Theresa May had a somewhat grumpy expression as she met with President Putin, perhaps in a bid to show some strength after she recently announced that she would be stepping down in July. The PM told Putin that Russia must end “irresponsible and destabilizing” activity if they wish to approve relations between the two nations. This statement was aimed at the recent poisoning of a Russian national in the UK.

The major European stock markets had a green day today. CAC 40 increased 45.36 points or 0.83% to 5,538.97, FTSE 100 increased 23.30 points, or 0.31% to 7,425.63, and DAX increased 127.77 points or 1.04% to 12,398.80.

The major European currency markets had a mixed day today. EURUSD decreased 0.0011 or 0.10% to 1.1357, GBPUSD increased 0.0014 or 0.11% to 1.2689, USDCHF increased 0.0008 or 0.08% to 0.9771.

Some economic news:

Germany:

  • German Import Price Index (MoM) (May) decreased from 0.3% to -0.1%
  • German Import Price Index (YoY) (May) decreased from 1.4% to -0.2%

Norway:

  • Credit Indicator (YoY) (May) decreased from 5.7% to 5.6%
  • Central Bank Currency Purchase (Jul) remain the same at -600.0M
  • Unemployment Change (Jun) decreased from 77.79K to 77.02K
  • Unemployment Rate n.s.a. (Jun) remain the same at 2.10%

France:

  • French Consumer Spending (MoM) (May) increased from 0.3% to 0.4%
  • French CPI (MoM) decreased from 0.8% to 0.2%
  • French CPI (YoY) increased from 0.9% to 1.2%
  • French HICP (YoY) increased from 0.9% to 1.2%
  • French HICP (MoM) increased from 0.1% to 0.3%
  • French PPI (MoM) (May) increased from -0.6% to -0.4%

Swiss:

  • KOF Leading Indicators (Jun) decreased from 93.8 to 93.6

Spain:

  • Spanish GDP (YoY) (Q1) increased from 2.3% to 2.4%
  • Spanish GDP (QoQ) (Q1) increased from 0.6% to 0.7%
  • Spanish Retail Sales (YoY) (May) increased from 1.3% to 2.4%
  • Spanish Current account (Apr) decreased from 0.03B to -0.41B

UK:

  • Business Investment (YoY) (Q1) decreased from -1.4% to -1.5%
  • Business Investment (QoQ) (Q1) decreased from 0.5% to 0.4%
  • Current Account (Q1) decreased from -23.7B to -30.0B
  • GDP (QoQ) (Q1) remain the same at 0.5%
  • GDP (YoY) (Q1) remain the same at 1.8%

Italy:

  • Italian CPI (MoM) (Jun) remain the same at 0.2%
  • Italian CPI (YoY) (Jun) remain the same at 0.8%
  • Italian HICP (YoY) (Jun) decreased from 0.9% to 0.8%
  • Italian HICP (MoM) (Jun) remain the same at 0.1%
  • Italian PPI (YoY) (May) decreased from 2.1% to 1.5%
  • Italian PPI (MoM) (May) increased from -1.1% to 0.1%

Eurozone:

  • Core CPI (YoY) increased from 0.8% to 1.1%
  • CPI (YoY) (Jun)  remain the same at 1.2%

U.S. / AMERICAS:

The world is gearing up for the G20 summit this weekend in Japan. President Trump and President Xi had a separate meeting this afternoon to discuss trade negotiations. However, officials noted that the two sides seemed to remain in disagreement. “Just more of a negative tone from China,” the official vaguely alluded. The events that take course over the weekend are certain to shape global policies going forward.

The U.S. economy grew at a rate of 3.1% during the first quarter, according to the Commerce Department. The figure is a sign of strength in the economy, as it surpassed the fourth quarter’s rate of 2.2% and the Trump administration’s goal of 3%. However, some are concerned that the rate of growth will slow in the second quarter due to the geopolitical turmoil.

The White House is considering implementing capital gains tax cuts by indexing the tax to inflation. If passed, this measure could help investors save money by adjusting the original purchase price to remove additional taxes tied to appreciation on inflation. However, there is controversy over the tax cut as some Democrats feel it only applies to wealthier citizens. The Trump administration is hoping to pass the tax cut before the next presidential election.

Wall Street had a strong performance this month. The DJIA closed 7% higher in June, the S&P 500 advanced 6.9%, and the Nasdaq rose 7.4%. During today’s session, the Dow advanced 73.38 points (+0.28%) to 26,599.96, the S&P 500 advanced 16.84 points (+0.58%) to 2,941.76, the Nasdaq rose 38.49 points (+0.48%) to 8,006.24, and the Russell 2000 added 20.02 points (+1.29%) to 1,566.57.

The Canadian indexes also advanced on the last day of June trading. The TSX Composite advanced 74.47 points (+0.46%) to 16,382.20, and the TSX 60 rose 4.54 points (+0.47%) to 979.60.

Brazil’s Bovespa rose 243.23 points (+0.24%) to 100,967.29.

ENERGY:

Another key topic at the G20 is climate change. The U.S. is aiming to make the EU and other world leaders soften their stance on the issue. Today represented one of the hottest days on record for the month of June. Some parts of France reaching over 40 degrees. On Monday, the OPEC will gather to discuss events and whether to increase or decrease supply. Therefore, we expect a volatile Monday morning.

The oil markets had a mixed day today. Crude Oil decreased 0.17 USD/BBL or -0.29% to 59.3014, Brent increased 0.15 USD/BBL or 0.23% to 66.5796, Natural gas decreased 0.006 USD/MMBtu or -0.26% to 2.3138, Gasoline decreased 0.0038 USD/GAL or -0.20% to 1.9464, and Heating oil increased 0.0004 USD/GAL or 0.02% to 1.9544.

Top commodity gainers: Platinum (3.30%), Bitumen (2.93%), Coffee (2.27%), and Soybeans (1.41%). Top commodity losers: Oat (-3.87%), Ethanol (-4.48%), Wheat (-3.15%), and Corn (-4.55%).

The above data was collected around 13:10 EST on Friday.

BONDS:

Japan -0.16%(-2bp), US 2’s 1.74% (+0bps), US 10’s 2.01%(+0bps), US 30’s 2.54%(+2bps), Bunds -0.33% (-1bp), France 0.00% (-0bp), Italy 2.11% (-3bp), Turkey 16.08% (+3bp), Greece 2.48% (-0bp), Portugal 0.48% (-1bp), Spain 0.40% (-0bp) and UK Gilts 0.83% (+1bp).