Market Talk – February 18, 2019

Asia:

Asian markets jumped today at the idea of progression with the US – China trade talks. The event on the weekend of course helping when both President Trump and President Xi expressing pleasure regarding the progress using words such as “win-win” and “productive.” The Nikkei and Hang Seng both rallied circa 1.8% today. But it was the Shanghai composite which was the real outperformer for the day launching 2.64% today.

The currencies surprisingly had little effect today with most FX gaining against the dollar but less than 10bps. USDJPY was at 9bps and the USDCNY was 6bps.

Gold moved up 39bps to 1,328.64 and silver increased 18bps to 15.81. The gold/silver ratio is currently 83.77, just under the previous 3 months high of 86.51 which is the largest it has been since 1993. The all-time high is 100.28 found back in 1991.

Some economic news out of Japan, with the core machinery orders YoY being 0.9% way off expectations of 4.8%. Singapore, non-oil exports was down 10% YoY! It is down 5.70% for the month of January itself, however with China having the new year some leeway should be expected but not at 5.70%. The actual forecast was for the month to increase by 2.60%. Important trade balance numbers for the region is 2.41 Bn.

Europe:

The UK and German share indices fell today by 29bps and 10bps respectively. However, it was a relatively successful day for the European region as a whole. The CAC grew by 23bps today, this brings it 30day rolling return to 6.11%, the best performing major European stock index. Only that of Sweden performed equal to the CAC. Apart from the Russian Moex, the best performing indices YoY has been the Swiss, showing investors are seeking the more stable investments in the region. There has been a large range between the returns of European indices with for example the DAX losing 8.81% and the Netherlands AEX gaining 2.06%. Something we will be monitoring to whether it will be the DAX or the AEX converging to either direction.

The currencies moved in favor of the European currencies, as the EURUSD rose 14bps to 1.1309 and the GBPUSD rose 30bps to 1.2928.

Within the UK, 7 members of parliament broke away from the labour party to form an independent group, over fears over Corbyn’s approach to Brexit. The UK house index rose 70bps today MoM.

US/Americas:

Equity markets were closed in the U.S. today for the President’s day holiday. The day marks George Washington’s birthday, but is extended to show appreciation for all U.S. Presidents. George Washington was in fact born on February 22^nd, but the date of the holiday changed due to the Uniform Federal Holidays Act.

As for Canada, markets were also closed in observation of Family day. The Dollar index decreased by 11bps today as well as the USDCAD decreased 9bps.

Meanwhile, Brazil was open for business but the Bovespa had a down day -1,016.02 (96,509.89 close, -1.04%).

Energy:

Oil prices moved to their highest for the year today, this was motivated by the Venezuela and Iranian sanctions as well as Russian and Saudi calls to create a more stable market. The Crude price rose 50bps to 55.76 and the Brent rose 33bps to 66.34

Bonds:

The French 12, 6 and 3-month BTF auction was announced today, with the yield set at -0.501%, -0.501% and -0.505% respectfully. Amazing the market are buying bonds at these levels of yields.

Japan -0.02%(-0bp), US 2’s 2.52% (–0bps), US 10’s 2.66%(-0bps), US 30’s 2.99%(-0bps), Bunds 0.11% (+1bp), France 0.55% (+1bp), Italy 2.77% (-3bp), Turkey 14.49% (+4bp), Greece 3.77% (-5bp), Portugal 1.52% (-5bp), Spain 1.24% (-1bp) and UK Gilts 1.17% (+0bp).