Market Talk – February 19, 2019

Asia:

The Asian markets were mixed today. The Nikkei 225 rose by 10 bps and the Shanghai composite rose by 5 bps. The Kospi and Hang Seng slipped 24 bps and 42 bps respectively. A mixed day with the US-China trade deal still being a backdrop of the month. With the month end looming, we expect volatility will be applied as participants try and guess which direction the trade deal will go. Today, Beijing accused Washington of exaggerating cybersecurity issues by implying that Chinese companies abroad send intelligence back home back the foreign countries they are domiciled in.

China announced they wish to expand their agricultural reforms to improve their rural economy.

The Asian currencies were also mixed against the dollar. The AUD and NZD both increased by 21 and 15 bps. The JPY was largely flat decreasing 3 bps against the dollar to form a rate of 110.6300. The CNY strengthened 13 bps to 6.7631.

Gold and silver both increased today by 90 bps, marking a decent run of form of late. Gold is now at 1339.95 and silver is at 15.96.

Europe:

European markets mostly tumbled today, with pretty much only the CAC and the DAX returning positive yields. The CAC and DAX rose 4 and 25 bps respectfully. The FTSE 100 dove 37 bps today. The uncertainty of a Brexit remains at play here. As more economic news is announced you can see how the uncertainty of the country massively impacts future investments. Generally, YoY markets in Europe are still deeply in the red.

The currencies today had huge moves as the EUR and GBP rose against the dollar today. The GBP outshined the rest, rising 87 bps, and bringing the fx rate back over the 1.30 level to 1.3033. The EUR rose 19% today reaching 1.1329.

UK Average earnings index was slightly lower than expectations but growing 3.4%. UK unemployment claims rose by 14.2K in January slightly above expectations. The employment change grew to 167.0K up 15k from expectations. This leaves the unemployment rate as of December being 4%.

Some economic statistics arising from the Eurozone, with economic figures generally begin weaker than expected. An example of this would be the current account figures being 16.2B compared to 21.4B. New Italian industrial orders was down 1.8%; a U-turn compared to expectations of 0.5%. This seems to be a systemic slowdown in Europe for industrial goods. YoY Italian industrial sales are down 7.3% as of December. Swiss trade balance was higher than expectations 3.043 B vs 2.24 B.

U.S./Americas:

Markets in the U.S. reopened for a seemingly uneventful Tuesday after being closed on Monday for holiday. Tariff negotiations between the U.S. and China are still ongoing, yet everyone seemed to feel confidence was stabilized somewhat after President Trump announced on Tuesday that his March 1 deadline for a new trade deal was not “a magic date.” This of course comes as no real surprise.

As a whole, equities finished relatively flat. The Dow was down for much of the day, but closed ever-so-slightly (+0.03%, 25891.32 close) as did the S&P 500 (+0.15%, 2779.78 close). The Nasdaq rose +0.19% (7486.77 close) whereas the Russell 2K was the strongest of the major indices on a percentage basis, closing up +0.33% (1574.47 close).

Walmart’s (WMT) Q4 earnings were quite strong, and well received after a rather bad December retail number last week. Wall Street rewarded WMT, which helped the Dow close positive. The largest retail employer in North America announced holiday earnings that far outperformed expectations – with online sales up over 40% (a heavy focus for the company).

In less than positive retail news, Payless ShoeSource, Inc. filed for bankruptcy late Monday night and will begin to liquidate over 2,000 stores across the U.S., Canada, and Puerto Rico – resulting up to 16,000 workers losing their jobs.

This is a reflection of the changing commerce landscape. As more consumers turn to online shopping, brick and mortar retail businesses that haven’t prepared for a digital future are struggling to survive. This is a natural turnover that occurs. As older businesses shutter, new ones will open – many will have physical stores, but will be doing so to support a digital strategy.

At the time of this writing, the USD decreased 0.25% to 96.6603 from 96.9040 in the previous trading session. The USD/CAD increased 0.08% to 1.3249 from 1.3239.

Canadian indexes closed in the green today. The TSX 60 closed +0.58% (950.34 close) and the TSX Composite rose +0.63% (15937.44 close). In South America, the Bovespa rose 1.19% today (97659.15 close).

Energy:

Most of the energy sectors decreased today. Crude and Brent certainly did by 30 and 66 bps respectively, but still showed a healthy increase over the past five days. The recent collaboration between Saudi and Russia to stabilize the oil market is causing the U.S. to strategize legislations to stop them from doing so. This could be a key area of political sensitivity and we will certainly be monitoring it as it progresses.

Bonds:

Spain issued three-month Letras today which yielded -0.405%, a slightly higher yield than previously issued.

Japan -0.03%(-1bp), US 2’s 2.50% (–2bps), US 10’s 2.64%(-2bps), US 30’s 2.98%(-1bps), Bunds 0.10% (-1bp), France 0.53% (-1bp), Italy 2.81% (+4bp), Turkey 14.62% (+13bp), Greece 3.77% (-0bp), Portugal 1.51% (-0bp), Spain 1.23% (-1bp) and UK Gilts 1.17% (+0bp).