Market Talk – March 21, 2019

Asia:

As for the U.S.–China trade deal, there seems to be a disparity (or at least perception of disparity) between the original and current U.S. approach to the deal. President Trump had initially focused on a reduction of U.S. trade deficit by requiring China to purchase more goods from the U.S., whereas now U.S. officials appear to be much more focused on a China trade deal that emphasizes changing long-term economy through more open markets beyond just leveling the import / export balance. Topics such as currency manipulation, intellectual property theft and forced technology transfer have been key points aired publicly over recent months.

Chinese President Xi is in Rome today on what could be a solid foundation between the two countries on the Silk Road/Belt. Reports state that Italy needs such a deal to help lift the debt burden that the country is currently facing.

Japanese and Indian markets were closed due to the public holidays. The rest of the major Asian markets had a mixed day: Shanghai increased 10.81 points (0.35%) to 3101.46; ASX 200 increased 1.90 points (0.03%) to 6167.20, and KOSPI increased 7.78 points (0.36%) to 2,184.88. However, Hang Seng took the opposite route, decreasing 249.41 points (-0.85%) to 29,071.56.

The Asian currency markets had a mixed day today: The AUD/USD decreased 0.0010 or 0.14% to 0.7105, and the NZD/USD decreased 0.0010 or 0.15% to 0.6872. The USD/JPY and the USD/CNY took the opposite route, increasing 0.1190 or 0.11% to 110.7990 and 0.0220 or 0.33% to 6.7080 respectfully.

Gold decreased 3.34 USD/t oz. or 0.25% to 1,311.25 and silver increased 0.03 USD/t. oz or 0.16% to 15.50.

Some economic data released late yesterday evening:

• New Zealand GDP (QoQ) (Q4) increased from 0.3& to 0.6%
• New Zealand  GDP Annual Average (Q4) decreased from 3.1% to 2.8%
• New Zealand  GDP Expenditure (QoQ) (Q4) increased from 0.4% to 0.5%
• New Zealand Credit Card Spending (YoY)decreased from 6.9% to 6.4%
• Australia’s Employment Change (Feb) decreased from 39.1K to 4.6K
• Australia’s Full Employment Change (Feb) decreased from 65.4K to -7.3K
• Australia’s Unemployment Rate (Feb) decreased from 5.0% to 4.9%
• Australia’s Participation Rate (Feb) decreased from 65.7% to 65.6%

Economic data released today:

• Indonesia’s Interest Rate Decision remain the same at 6.0%
• Indonesia’s Deposit Facility Rate (Mar) remain the same at 5.25%
• Indonesia’s Lending Facility Rate (Mar) remain the same at 6.75%
• Hong Kong’s CPI (YoY) (Feb) decreased from 2.4% to 2.1%

Europe:

PM Theresa May still “hopes” for the UK to leave with a deal as she continually tries to gather an agreement in Parliament. She expressed regret over her request to delay Brexit and hopes there will be no issues with delaying it beyond the 29^th of March deadline. EU has now offered an extension of the Brexit day deadline, provided U.K. needs to decide on a deal or no-deal by April 12.

Meanwhile in the UK, 1 million signatures were cast over the right to revoke article 50 and effectively “cancel” Brexit. The petition site received such a rapid amount of votes that it caused the site to crash.

A mixed day for major European stock markets: CAC 40 decreased 3.80 points or -0.07% to 5378.8 and DAX decreased 53.93 points or -0.46% to 11549.96. The FTSE 100 took the opposite route, increasing 64.30 points or 0.88% to 7,355.3.

The major European currency market had a mixed day: The EUR/USD decreased 0.0052 or 0.45% to 1.1360 and the GBP/USD decreased 0.01152 or 0.87% to 1.30808. The USD/CHF took the opposite route, increasing 0.0008 or 0.08% to 0.9933.

Some economic data released from the UK:

• UK’s Core Retail Sales (YoY) (Feb) decreased from 4.0% to 3.8%
• UK’s Core Retail Sales (MoM) (Feb) decreased from 1.1% to 0.2%
• UK’s Retail Sales (YoY) (Feb) decreased from 4.1% to 4.0%
• UK’s Retail Sales (MoM) (Feb) decreased from 0.9% to 0.4%
• UK’s BoE MPC vote cut (Mar) remain the same at 0
• UK’s BoE MPC vote hike (Mar)remain the same at 0
• UK’s BoE MPC vote unchanged (Mar) remain the same at 9
• UK’s BoE QE Total (Mar) remain the same at 435B
• UK’s BoE Interest Rate Decision (Mar) remain the same at 0.75%

Some economic data released from the rest of Europe:

• Swiss-SNB Interest Rate Decision remain the same at -0.75%
• Norway’s Interest Rate Decision increased from 0.75% to 1.00%
• Spanish Trade Balance decreased from -3.25B to -4.48B

U.S./Americas:

Stocks rallied today, with the Dow advancing 216.84 points, a 0.84% increase, before closing at 25962.51. The S&P 500 had a fairly strong day, closing 2854.99 (+1.09%), but not as strong as the Nasdaq (+1.42%, 7838.96 close). The Russell 2000 was also well into the green today, closing at 1562.41 (+1.25%).

On the corporate side, Apple shares increased another 3.68% after Needham upgraded the stock’s rating from “buy” to “strong buy.” The stock has been heading north all week as it has announced updates to certain products in advance of its anticipated announcement of new video and news services on the 25th. A number of other technology stocks combined to help drive markets higher, including Western Digital (+9.77%), AMD (+8.52%), Micron Technology (+9.77%), NVIDIA (5.48%), and Seagate Technology (+5.99%), among others.

Boeing, down almost another full percentage point today, was in the news again with information revealing both 737 MAX planes that had crashed in recent months lacked advanced safety features that Boeing made available only for an extra charge. This is not a good expose for the company. Boeing announced they would begin to include this crucial safety feature in all new 737 jets going forward, but the nearly worldwide ban on the aircraft is still in place.

The USD Index recovered this Thursday after advancing 0.61% (last reading 96.35). The USD/CAD increased slightly by 0.07% (last reading 1.3368).

Thursday was a bullish day for the Canadian markets. The TSX Composite rose 0.48% (16244.59 close) and the TSX 60 rose 0.41% (967.26 close).

What began as an investigation into the misdealing of oil company Petrobras has turned into what many are calling the biggest corruption scandal in recent Latin American history. On Thursday, former Brazilian President Michel Temer, who left office three months ago, was arrested for his involvement in the scandal. Temer is currently denying all allegations.

Not surprisingly, Brazil’s Bovespa had another notable down day -1.34% (96729.08 close).

Energy:

A red day for the oil markets: Crude Oil decreased 0.01 USD/BBL or 0.02% to 59.6992; Brent decreased 0.83 USD/BBL or 1.21% to 67.55; Natural gas decreased 0 USD/MMBtu or 0.04% to 2.81; Gasoline decreased 0 USD/GAL or 0.06% to 1.92 and Heating oil decreased 0.02 USD/GAL or 1.22% to 1.99.

Top commodity gainers were Lean Hogs (6.03%), Oat (1.55%) and Rice (1.43%). The biggest losers were Tea (-12.02%), Rubber (-2.48%); Sugar (-2.12%)and Coal (-1.79%).

Bonds:

Japan -0.04%(+1bp), US 2’s 2.40% (-0bps), US 10’s 2.52%(-1bps), US 30’s 2.98%(-5bps), Bunds 0.05% (-2bp), France 0.41% (-5bp), Italy 2.45% (+2bp), Turkey 15.55% (-18bp), Greece 3.74% (-29bp), Portugal 1.28% (-4bp), Spain 1.11% (-6bp) and UK Gilts 1.08% (-3bp).

• US 4 -week Bill Auction increased from 2.420% to 2.470%
• US 8-week Bill Auction increased from 2.400% to 2.420%
• US 10- year TIPS Auction decreased from 0.919% to 0.578%
• French 3-year BTAN Auction decreased from -0.34% to -0.38%
• French 5-year BTAN Auction decreased from -0.09% to -0.17%
• Spanish 3-year Bonos Auction decreased from -0.124% to -0.182%
• Spanish 10-year Obligacion Auction decreased from 1.222% to 1.100%