Market Talk – April 1, 2019

Asia:

Japan’s emperor is going to step down at the end of the month, ushering in a new imperial era called “Reiwa,” which will focus on fortunate harmony and people coming together.

China is set to curb all types of fentanyl production following a plea from the U.S. The Chinese-based drug has had a huge impact on U.S. citizens facing drug addiction.

In the tech world, Apple cut prices of their iPhone today by around 6% in an attempt to bolster sales in China.

Diplomacy between China and Taiwan took a turn when two Chinese air force jets crossed a maritime border, causing the state of Taiwan to be under alert and subsequently naming China reckless.

The major Asian stock markets had a green day today: KOSPI increased 27.61 points (+1.29%) to 2,168.28; NIKKEI 225 increased 303.22 points (+1.43%) to 21,509.03, and Shanghai increased 79.60 points (+2.58%) to 3,170.36. Hang Seng increased 510.66 points (+1.76%) to 29,562.02; SENSEX increased 164.27 points (+0.42%) to 38,837.18, and ASX 200 increased 36.30 points (+0.59%) to 6,217.00.

The major Asian currency markets had a mixed day today: The AUDUSD increased 0.0027 or 0.37% to 0.7121; the NZDUSD increased 0.0017 or 0.25% to 0.6819, and the USDJPY increased 0.3680 or 0.33% to 111.2080. However, the USDCNY took the opposite route, decreasing 0.0058 or 0.09% to 6.7162

Both gold and silver markets had a green day today: Gold increased 0.83 USD/t oz. or 0.06% to 1,295.33 and Silver increased 0.04 USD/t. oz or 0.25% to 15.20.

Some economic news:

China:

• Manufacturing PMI (Mar) increased from 49.2 to 50.5
• Non-Manufacturing PMI (Mar) increased from 54.3 to 54.8
• Caixin Manufacturing PMI (Mar) increase from 49.9 to 50.8

Japan:

• Tankan All Big Industry CAPEX (Q1) decreased from 14.3% to 1.2%
• Tankan Big Manufacturing Outlook Index (Q1) decreased from 15 to 8
• Tankan Large Manufacturers Index (Q1) decreased from 19 to 12
• Tankan Large Non-Manufacturers Index (Q1) decreased from 24 to 21
• Manufacturing PMI (Mar) increased from 48.9 to 49.2

Hong Kong:

• Hong Kong’s Retail Sales (YoY) (Feb) decreased from 7.1% to -10.1%

South Korea

• South Korea’s Nikkei Manufacturing PMI (Mar) increased from 47.2 to 48.8

Indonesia:

• Indonesia ‘s Nikkei Manufacturing PMI (Mar) increased from 50.1 to 51.2

Australia:

• AIG Manufacturing Index (Mar) decreased from 54.0 to 51.0
• Manufacturing PMI decreased from 52.9 to 52.0
• NAB Business Confidence (Mar) decreased from 2 to 0
• HIA New Home Sales (MoM) (Oct) increased from -1.8% to 1.0%
• Australia’s Commodity Prices (YoY) increased from 9.7% to 11.0%

Indonesia:

• Core Inflation (YoY) (Mar) decreased from 3.06% to 3.03%
• Inflation (MoM) (Mar) increased from -0.08% to 0.11%

Europe:

Four Brexit proposals have been selected for debate. The 12th of April is positioned as a hard Brexit if no proposals are brought forward and accepted. A snap election does not seem possible with the time remaining.

Turkish election, in which Erdogan won, caused the lira to fluctuate again today. The Turkish Lira overnight market normalized as it came down to around 25%. Last week, rates hit as high as 1200%.

Political season is heating up in Europe as the European Parliamentary elections are only eight weeks away.

The major European stock markets had a green day today: CAC 40 increased 55.01 points or 1.03% to 5,405.53; The FTSE 100 increased 38.19 points, or 0.52% to 7,317.38 and DAX increased 155.95 points or 1.35% to 11681.99.

The Major European currency markets had a mixed day today: The GBPUSD increased 0.0101 or 0.78% to 1.3132 and the USDCHF increased 0.0030 or 0.30% to 0.9982. However, the EURUSD took the opposite route and decreased 0.0002 or 0.02% to 1.1215.

Some economic news from Europe:

• Swiss Retail Sales (YoY) (Feb) remain the same at -0.2%
• Swiss SVME PMI (Mar) decreased from 55.4 to 50.3
• UK’s Manufacturing PMI (Mar) increased from 52. t to 55.1
• Spanish Manufacturing PMI (Mar) increased from 49.9 to 50.9
• Italian Manufacturing PMI (Mar) decreased from 47.7 to 47.4
• Italian Monthly Unemployment Rate (Feb) increased from 10.5% to 10.7%
• French Manufacturing PMI (Mar) decreased from 49.8 to 49.7
• German Manufacturing PMI (Mar) decreased from 44.7 to 44.1

Euro zone:

• Manufacturing PMI (Mar) decreased from 47.6 to 47.5
• Core CPI (YoY) decreased from 1.0% to 0.8%
• CPI (YoY) (Mar) decreased from 1.5% to 1.4%
• Unemployment Rate (Feb) remain the same at 7.8%

U.S./Americas:

The U.S. markets began the month on a bullish note as all major indices gained over 1%. The Dow rose 329.72 points (+ 1.27), closing at 26258.42. The S&P 500 increased by 32.79 points(+1.16%), closing at 2867.19. The Nasdaq was up 99.59 points (+1.29%), closing at 7828.91. The Russell 2000 added 16.33 points (+1.06%), closing the day at 1556.06.

Manufacturing rose in March, according to a report released by the Institute for Supply Management (ISM). The ISM’s index in February came in at just 54.2, marking the lowest level of manufacturing activity since November 2016. The index rose to 55.3 in March, signifying a significant increase in manufacturing activity.

Production rose from 54.8 in February to 55.8 in March. New orders are also up from the prior month. March’s reading came in at 57.4 compared to 55.5 in February.

The employment index jumped significantly in March (57.5) from February (52.3), and exceeded analysts’ expectations of 52.4.

As mentioned, China’s manufacturing index rose in March to its highest level in eight months. The U.S., China’s top trade partner, took this news as a positive sign for future economic growth but some speculate if this gives China perceived leverage in trade negotiations as Chinese officials are currently planning to visit the U.S. this week to continue discussions.

On the corporate side, M&A activity continues as Italy’s Ferrero, maker of the popular brand Nutella among others (such as TicTac), is taking a bite out of the cookie and snack business with plans to purchase Keebler, Famous Amos, and other brands from Kellogg for $1.3 billion. Kellogg’s stock closed down -2.37% after the announcement, but is still above its low of the year. A sign of the times in consumer consumption, and long-time conglomerates trying to keep up with changing habits and expectations – Kellogg had purchased Keebler for $4.4 billion back in 2001.

The USD Index dropped 0.03% this Monday (last reading 97.26). The USD/CAD dropped 0.26% (last reading 1.3314).

Canadian markets also started the month off in positive territory. The TSX Composite rose 0.78% from Friday’s session (16228.06 close) and the TSX 60 grew 0.85% (967.69 close).

Finally, Brazil fared better than other South American markets as the Bovespa closed up +0.67% at 96054.45.

Energy:

Crude maintained its rally today after hitting a five-month high. This comes after the OPEC supply hit a four-year low as Saudi leads the way with cutting supplies.

The energy markets had a green day today: Crude Oil increased 0.94 USD/BBL or 1.56% to 60.96; Brent increased 0.13 USD/BBL or 0.19% to 68.52; Natural gas increased 0.05 USD/MMBtu or 2.03% to 2.71; Gasoline increased 0 USD/GAL or 0.09% to 1.90 and Heating oil increased 0.01 USD/GAL or 0.42% to 1.98.

Top commodity gainers were Orange Juice (3.84%), Oat (3.07%), Cocoa (2.15), and Palladium (2.15%). The biggest losers were Coffee (-1.43%), Coal (-1.04%) and Ethanol (-0.22%)

The above data was collected around noon 11:31 AM EST time on Monday

Bonds:

Japan -0.08%(+2bp), US 2’s 2.31% (+4bps), US 10’s 2.48%(+7bps), US 30’s 2.86%(+4bps), Bunds -0.07% (+0bp), France 0.38% (+6bp), Italy 2.51% (+2bp), Turkey 17.18% (-68bp), Greece 3.71% (-2bp), Portugal 1.28% (+2bp), Spain 1.15% (+4bp) and UK Gilts 1.04% (+4bp).