Market Talk – January 31, 2019

Asia:

Yesterdays’ FOMC, although rates were unchanged, the surprisingly dovish tone from Fed Chair. What was to follow was the global markets reacting to this, with Asian markets all performing well namely the Japanese Nikkei 225 and the Hang Seng index rising by 1.1% and the Chinese Shanghai Composite rose 0.4%.

Huawei, with the recently imposed charges from the US, started to recover by climbing 1.81% today. There was also news of Huawei closed to become the second-best selling smartphone market after Samsung and overtaking Apple.

The EUR was the big loser in the room, with all major currencies outperforming the Euro. USDJPY declined by 20bps and EURJPY declined by 46bps.

The Chinese and Indian manufacturing figures were released, with both unsurprisingly declining MoM. Tomorrow (in China) we await the Caixin Manufacturing Index, which provides an overall view of the Chinese economy rather.

Europe:

European markets did well today albeit with a weaker Euro. The FTSE, DAX and CAC rose 31, 20 and 25bps respectively.

A plateau of European economics figures were released today, nothing too positive to mention and the Euro certainly expressed that today by weakening across the board.

The French CPI numbers were introduced MoM lost 0.5%, but gained YoY 1.6%. German Unemployment levels remains at 5% with retail sales in December slipping by 4.3%!

In contrast the Italian unemployment figure stands at 10.3%, slightly lower than expectations. Italian GDP for the 4th Quarter of 2018, reduced by -0.2% perhaps the blame pointing at UK companies already starting to shift away from European suppliers. YoY still has the Italian economy in positive territory albeit just at 0.1% growth! More optimistic figures can be found in Spain, with the GDP rising a decent 2.4% compared to the Eurozone as a whole of 0.2% growth. Eurozone Unemployment rate stands at modest 7.9%. Tomorrow we await the Core CPI numbers from the Eurozone and some manufacturing data from Germany and the UK.

USA:

With the first month of the year now in the books, U.S. equities and oil completed a strong start to 2019. This with plenty of ups, downs and noise in the middle since the start of the new year – continued U.S. and China trade talks, the Fed, government shutdown, Venezuela sanctions, corporate earnings, etc. The month has shown a strong comeback after a miserable end to 2018, but as we’ve talked about, February is of keen interest so stay tuned.

For the day, the Dow closed slightly down -15.19 (-0.06%), but closed the month up over 1,670 points. The broader S&P 500 closed the day up +23.05 (0.86%), and nearly 200 points up for the month (strongest month ~30 years). The NASDAQ Composite had the strongest day, closing up +98.66 (+1.37%), and up over 640 points for the month. The mid-cap Russell 2000 closed up +12.48 (+0.84%), and up over 150 points for the month.

1. New Home Sales (Nov)
   actual : 657k
   forecast: 560k
   previous:562k
2. New Home Sales (MoM) (Nov)
   actual : 16.9%
   forecast: 2.9%
   previous:-8.3%
3. Canada GDP(MOM)(NOV)
   actual : -0.1%
   forecast: -0.1%
   previous:0.3%
4. CANADA RMPI (MoM) (Dec)
   actual : 3.8%
   forecast: 3.9%
   previous:-11.8%

And of course tomorrow being the first Friday of the month we will get the non-farm payrolls, which are expected to coming in at ~165K.

Energy:

The Chinese and Indian manufacturing sentiment declined for the second month in a row, this offset positive lift of the Crude price from the sanctions on Venezuela and leaves the price relatively flat, but closing out an impressive month of January.

Bonds:

Slight steepening on the front end over the fed remarks, with the 2yrs. hitting 2.5%. The German bond auction fulfilled yesterday at a very low yield of 0.200%.

Japan 0.00%(-1bp), US 2’s 2.50(-3bps)%, US 10’s 2.67%(-2bps), US 30’s 3.05%(+1bps), Bunds 0.17% (-1bp), France 0.57% (-3bp), Italy 2.60% (-3bp), Turkey 13.84% (-15bp), Greece 3.88% (-6bp), Portugal 1.65% (-3bp), Spain 1.22% (-4bp) and UK Gilts 1.23% (-1bp).