Market Talk – May 7, 2019

ASIA:

US trade representative Robert Lighthizer has accused China of backtracking on agreement within trade talks but has insisted a deal with China is still possible. Vice Premier Liu will be visiting Washington this week. More in US section below.

In other news, China will not take part in three-way nuclear talks with the US and Russia, potentially ruining plans by President Trump’s administration for a grand nuclear deal between the three nations.

US Secretary of state Pompeo warned China that their Arctic activity could cause a “new South China Sea” he further added “Just because the Arctic is a place of wilderness does not mean it should become a place of lawlessness.”

The major Asian stock markets had a mixed day today: Shanghai increased 0.69% to 2926.39; ASX 200 increased 0.19% to 6,295.70; Hang Seng increased 0.52% to 29,363.02; However KOSPI; NIKKEI 225 and SENSEX took the opposite route ;KOSPI decreased -0.88% to 2,176.99; NIKKEI 225 decreased -1.60% to 21,902.10; SENSEX decreased -0.84% to 38,276.63.

The major Asian currency markets had a mixed day today: The AUDUSD increased 0.0007 or 0.10% to 0.7018;  The NZDUSD increased 0.00001 or 0.00% to 0.66011;  however The USDJPY and The USDCNY took the  opposite route decreased 0.07 or -0.07% to 110.17 and 0.00455 or -0.07% to 6.78955 respectfully.

Gold increased 2USD/t oz. or 0.16% to 1,288.80 and Silver increased 0.0255 USD/t. oz or 0.17% to 14.9526.

Some economic data:

Japan

  • Manufacturing PMI (Apr) increased from 49.5 to 50.2
  • Indonesian: Retail Sales (YoY) (Mar) increased from 9.1% to 10.1%

Australia:

  • Exports (MoM) (Mar) decreased from 5% to -2%
  • Imports (MoM) (Mar) decreased from -1% to -2%
  • Retail Sales (MoM) (Mar) decreased from 0.9% to 0.3%
  • Retail Sales (QoQ) (Q1) decreased from 0.1% to -0.1%
  • Trade Balance (Mar) decreased from 5.140B to 4.949B

New Zealand:

  • Inflation Expectations (QoQ) remain the same at 2.0%
  • Some economic data from today:

Australia:

  • RBA Interest Rate Decision (May) remain the same at 1.5%
  • Hongkong:
  • Foreign Reserves (USD) decreased from 438.00B to 436.40B

New Zealand

  • GlobalDairyTrade Price Index decreased from 0.5% to 0.4%

Japan

  • Monetary Base (YoY) decreased from 3.8% to 3.1%

Singapore:

  • Foreign Reserves USD (MoM) (Apr) increased from 295.8B to 296.8B

EUROPE:

There is international outcry over Turkish President Erdogan’s decision to re-run the votes for Istanbul; an EU spokesperson asked for an explanation to the decision “without delay”.

In the UK tense talks between Labour and the Conservatives is causing any chance of an imminent Brexit obsolete. It is said that PM May is not willing to budge on her way of doing things.

The European Commission warns of a major shock to the Economy due to Brexit and the trade war between US and China. The EC cuts expected growth rates to 1.4% from 1.9%.

The major European stock markets had a negative day today: CAC 40 decreased 87.76 points or -1.60% to 5,395.75; The FTSE 100 decreased 120.17 points, or -1.63% to 7,260.47 and DAX decreased 194.14 points or -1.58% to 12,092.74.

The major European currency markets had a mixed day today: The EURUSD increased 0.0008 or 0.07% to 1.1198; The GBPUSD increased 0.00004 or 0.00% to 1.30744; however The USDCHF took the opposite route decreased 0.0003 or 0.03% to 1.0191.

Some economic news:

German

  • German Factory Orders (MoM) (Mar)

French

  • French Current Account (Mar) decreased from -0.80B to -1.30B
  • French Exports (Mar) increased from 42.9B to 43.2B
  • French Imports (Mar) increased from 46.9B to 48.5B
  • French Trade Balance (Mar) decreased from -4.0B to -5.3B

US / AMERICAS:

Trade war worries continued to plague the global marketplace. In the U.S., the Dow plummeted 473.39 points (-1.79%) to 25965.09. The Dow has not dropped to this level since the beginning of January. The S&P 500 lost 48.42 points (-1.65%), closing at 2884.05. The Nasdaq fell 159.53 points (-1.96%) and closed the day at 7963.76. The Russell 2000 declined over -2%, slipping 32.66 points and closing at 1582.31.

Markets have been struggling since President Trump tweeted over the weekend that Chinese tariffs may increase to 25% as soon as Friday. Yesterday, U.S. trade representative Robert Lighthizer stated that there was an “erosion in commitments by China” that lawmakers view as “unacceptable.” Allegedly, the two economic powerhouses were close to finalizing a deal but China tried to backtrack on previously agreed upon terms. President Trump reiterated his stance yet again by stating: “The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”

Chinese Foreign Ministry spokesman Geng Shuang rebutted that raising tariffs will not solve the problem. “Talks are by their nature a process of discussion. It’s normal for both sides to have differences. China won’t shun problems and is sincere about continuing talks,” Shuang claimed.

The current 10% tariff on $200 billion of Chinese goods will increase to 25% until an agreement is reached. Chinese Vice Premier Liu plans to visit the U.S., yet again, later this week in hopes of preventing the tariff hike. However, it seems the U.S. is losing its patience.

The USD Index slightly rose by 0.06% (last reading 97.58). The USD/CAD remained relatively unchanged (last reading 1.3466).

In Canada, the TSX Composite and the TSX 60 both declined by -0.82% this Tuesday, ending the day at 16357.75 and 983.30 respectively.

In Brazil, the Bovespa slipped -0.65% after losing 619.93 points and closing at 94388.73.

ENERGY:

Crude Oil fell due to the ongoing issues with US and China trade deal,  but rebounded after the news that the US will deploy four B-52 bombers in the Middle East in what Trump’s administration believes could be a Iranian threat to American troops in the region.

The oil markets had a green day today: Crude Oil increased 0.51 USD/BBL or 0.83% to 62.0219; Brent increased 0.39 USD/BBL or 0.56% to 70.4108; Natural gas increased 0.009USD/MMBtu or 0.35% to 2.5455; Gasoline increased 0.0075 USD/GAL or 0.38% to 1.9602 and Heating oil increased 0.0081 USD/GAL or 0.40% to 2.0497.

Top commodity gainers are Palm Oil (2.88%), Rice(2.26%) ,Canola(1.14%) and Crude Oil(0.83%),. Biggest losers are Coffee (-2.42%), Naphtha (-2.06%) ;Cocoa(-1.80%) and Lumber (-1.25%).

The above data were collected around 22:05 EST time on Tuesday.

BONDS:

Japan -0.04%(-1bp), US 2’s 2.34% (+0bps), US 10’s 2.52%(+0bps), US 30’s 2.92%(+0bps), Bunds -0.04% (-5bp), France 0.33% (-4bp), Italy 2.63% (+6bp), Turkey 18.95% (+0bp), Greece 3.35% (-48bp), Portugal 1.11% (-2bp), Spain 0.99% (+0bp) and UK Gilts 1.16% (-3bp).

US 3-Year Note Auction  decreased from 2.301% to 2.248%

Spanish 6-Month Letras Auction decreased from -0.384% to -0.397%

Spanish 12-Month Letras Auction decreased from -0.334% to -0.336%