Market Talk – March 27, 2019

Asia:

China Beige Book, the only large-scale independent data provider on the Chinese economy, released a report this Wednesday indicating a first-quarter recovery. After polling 3300 Chinese businesses, the firm found that private borrowing outweighed that of state-owned enterprises. However, the cost of borrowing has risen substantially. Bank loan rates currently average 6.9%, while the non-bank rate stands at around 11.42%.

Singapore plans to invest S$724 million in scientific and technological advances. At a briefing this Wednesday, Prime Minister Lee Hsien Loong emphasized the importance of scientific advancements for Singaporean society as a whole. The country is aiming to produce 30% of their food by 2030, and has set aside S$144 million for relative innovations such as urban agriculture and biotech-based protein production. Singapore’s biopharmaceutical sector contributed to 4% of GDP in 2018. The new investment strategy will allocate S$80 to encourage further growth in that sector through new cell therapies.

The major Asian stock markets had a mixed day today: Hang Seng increased 161.34 points (0.56%) to 28,728.25; Shanghai increased 25.62 points (0.85%) to 3,022.72, and ASX 200 increased 5.40 points (0.09%) to 6,136.00. NIKKEI 225 decreased 49.66 points (-0.23%) to 21,378.73; SENSEX decreased 100.53 points (-0.26%) to 38,132.88, and KOSPI decreased 3.18 points (-0.15%) to 2,145.62.

Most of the major Asian currency markets had a red day today: The AUDUSD decreased 0.0048 or 0.67% to 0.7086; the NZDUSD decreased 0.01021 or 1.48% to 0.68029, and the USDJPY decreased 0.2020 or 0.18% to 110.4180. However, the USDCNY took the opposite route after increasing 0.0145 or 0.22% to 6.7373

Both Gold and Silver had a negative day. Gold decreased 4.62 USD/t oz. or 0.35% to 1,310.15 and Silver decreased 0.13 USD/t. oz or 0.84% to 15.30.

Today, India released its M3 Money Supply figures, which increased from 10.5% to 10.6%.

Some news from New Zealand released late evening yesterday:

• NEW ZEALAND RBNZ Interest Rate Decision remain the same at 1.75%

Europe:

Theresa May vowed to step down from her position if a Brexit deal passes. “I am prepared to leave this job earlier than I intended in order to do what is right for our country and our party,” May announced on Wednesday. MPs are currently debating eight proposals on the future of Brexit.

European Central Bank President Mario Draghi announced on Wednesday that the ECB may delay rate hikes due to the global economic slowdown. Draghi noted that “a ‘soft patch’ does not necessarily foreshadow a serious slump.” Recent data suggests trouble may be brewing for the Eurozone as a whole. Germany, the EU’s largest economy, published disappointing manufacturing figures last week that shook investor confidence.

European markets responded in kind to the ominous reports as most major markets declined. The CAC 40 decreased 6.13 points or -0.12% to 5,301.24; the FTSE 100 decreased 2.10 points or -0.03% to 7,194.19, and DAX decreased 0.44 points or -0.01% to 11419.04.

The major European currency markets had a mixed day today: The GBPUSD increased 0.0029 or 0.22% to 1.3236 and The USDCHF increased 0.0007 or 0.07% to 0.9950; however the EURUSD took the opposite route decreased 0.0006 or 0.05% to 1.1258

Some economic news from Europe:

• France Jobseekers Total decreased from 3,414.0K to 3,366.0K
• French Consumer Confidence (Mar) increased from 95 to 96.
• French PPI (MoM) (Feb) increased from 0.1% to 0.4%
• UK’s CBI Distributive Trades Survey (Mar) decreased from 0 to -18.
• Norway’s Unemployment Rate (Jan) increased from 3.7% to 3.9%
• Swiss ZEW Expectations (Mar) decreased from -16.6 to -26.9
• Italian Trade Balance Non-EU (Feb) increased from -0.58B to 2.16B
• Italian Business Confidence (Mar) decreased from 101.6 to 100.8
• Italian Consumer Confidence (Mar) decreased from 112.4 to 111.2

U.S./Americas:

U.S. markets had an up-and-down day, ultimately closing in the red as the Dow slipped 32.14 points (-0.13%, closing at 25625.59). The S&P 500 had a stronger decline, -0.46% (2805.37 close). The Nasdaq lost 48.15 points (-0.63%, closing at 7643.38). The Russell 2000 declined -0.39% (1522.23 close).

On the economic front, the latest report from the Census Bureau show U.S. trade deficit sharply declining by 15%. Decreased trade with China is primarily to blame for the increased deficit. China recently saw a 14% trade deficit due to U.S. placed tariffs. The figures reiterate the importance of the two powerhouses reaching an agreement.

Corporations are still reluctant to bring offshore cash back to the U.S., as indicated in a report released by the Commerce Department today. President Trump aimed to bring a large amount of the $4 trillion in cash held by corporations offshore back to the U.S. through new tax initiatives. However, only $664.9 billion returned domestically during 2018, but relatively speaking corporate America returned more of their overseas profits last year than before the new tax structure was put into place. Prior to the 2017 tax reduction, U.S. corporations faced a 35% penalty on domestically-returned funds. The tax overhaul reduced this tax to 15.5% for cash profits and 8% for non-cash assets.

The USD Index increased 0.22% to 96.94. The USD/CAD remained nearly stagnant at 1.3405.

The major Canadian closed in the red as well, with the TSX Composite declined 0.14% to 16132.53, and the TSX 60 declined 0.10% to 960.90.

Brazil’s Bovespa lost another 3.57% during Wednesday’s session, closing at 91903.40.

Energy:

Crude oil moved lower as the EIA report states there is a build in Crude. Two weeks ago, reports came out that U.S. inventories were depleting. Today figures indicate that the number of barrels are on the rise after 2.8 million barrels were added during the last week.

Oil continued to decline this Wednesday. Crude Oil decreased 0.63 USD/BBL or 1.05% to 59.24; Brent decreased 0.24 USD/BBL or 0.35% to 67.69; Gasoline decreased 0.06 USD/GAL or 3.18% to 1.90; Heating oil decreased 0.01 USD/GAL or 0.60% to 1.98, and Natural Gas decreased 0.05 USD/MMBtu or 1.75% to 2.69.

Top commodity gainers were Lean Hogs (1.76%), Coal (0.59%), and Cocoa (0.27%). The biggest losers were Gasoline (-3.22%), Bitumen (-3.16%) ; Palladium (-5.81%) and Ethanol (-2.48%)

Bonds:

Japan -0.07%(-1bp), US 2’s 2.21% (+0bps), US 10’s 2.39%(-1bps), US 30’s 2.85%(-2bps), Bunds -0.04% (-3bp), France 0.30% (-6bp), Italy 2.49% (-3bp), Turkey 17.86% (+68bp), Greece 3.78% (-29bp), Portugal 1.27% (-3bp), Spain 1.06% (-0bp) and UK Gilts 0.99% (-2bp)

• German 10-Year Bund Auction decreased from 0.120% to -0.050%
• Italian 6-Month BOT Auction decreased from -0.007% to 0.062%
• US 5-Year Note Auction decreased from 2.489% to 2.172%