Market Talk – May 15, 2019

ASIA / AUSTRALIA:

President Xi Jinping urged fairness and openness when he was presenting at a conference on Dialogue of Asian Civilizations in Beijing. “Thinking that one’s own race and culture are superior, and insisting on transforming or even replacing other civilizations, is stupid in its understanding and disastrous in practice.” He further added, “There is no clash between different civilizations, [we] just need to have the eye to appreciate the beauty in all civilizations.” Perhaps he is alluding to the US with their recent negotiations going south. There is no denying the fact that the world is preparing itself for the emergence of China as a superpower. How China will handle the inevitable responsibility remains to be seen.

Former Trump chief strategist Steven Bannon told CNBC that there is no way Trump will back down from the trade war. He agreed with Trump’s actions, reiterating that China has been running an economic war against the industrial democracies for 20 years.

Three of the largest Japanese banks have all reported lower annual profits today, this is another signal indicating the Japanese economy is struggling. Mizuho, Japan’s second-largest bank by assets, reported an 83% percent decline in net profit!

The major Asian stock markets had a mixed day today. NIKKEI 225 increased 121.33 points (0.58%) to 21,188.56; ASX 200 increased 44.30 points (0.71%) to 6,284.20; Hang Seng increased 146.69 points (0.52%) to 28,268.71; Shanghai increased 55.07 points (1.91%) to 2,938.68; and KOSPI increased 10.94 points (0.53%) to 2,092.78. SENSEX took the opposite route and decreased 203.65 points (-0.55%) to 37,114.88.

The major Asian currency markets had a mixed day today. AUDUSD decreased 0.0015 or 0.22% to 0.6926; NZDUSD decreased 0.0013 or 0.19% to 0.6561; and USDCNY decreased 0.0014 or 0.02% to 6.9017. USDJPY took the opposite route and increased 0.0010 or 0.00% to 109.5910.

Gold decreased 0.47USD/t oz. or -0.04% to 1,298.76 and silver increased 0.01 USD/t. oz or 0.04% to 14.7837.

Some economic news:

South Korea:

• Unemployment Rate (Apr) increased from 3.8% to 4.1%

Japan:

• M2 Money Stock (YoY) increased from 2.4% to 2.6%
• Construction Orders (YoY) (Mar) increased from -3.4% to 66.1%
• Machine Tool Orders (YoY) decreased from -28.5% to -33.4%

Australia:

• Westpac Consumer Sentiment (May) decreased from 1.9% to 0.6%
• Wage Price Index (YoY) (Q1) remain the same at 2.3%
• Wage Price Index (QoQ) (Q1) remain the same at 0.5%

China:

• Fixed Asset Investment (YoY) (Apr) decreased from 6.3% to 6.1%
• Industrial Production (YoY) (Apr) decreased from 8.5% to 5.4%
• Retail Sales (YoY) (Apr) decreased from 8.7% to 7.2%
• Chinese Unemployment Rate decreased from 5.2% to 5.0%

Indonesia:

• Export Growth (YoY) (Apr) decreased from -10.01% to -13.10%
• Import Growth (YoY) (Apr) increased from -6.76% to -6.58%
• Trade Balance (Apr) decreased from 0.54B to -2.50B

India:

• Trade Balance (Apr) decreased from -10.89B to -15.33B
• Exports (USD) (Apr) decreased from 32.55B to 26.07B
• Imports (USD) (Apr) decreased from 43.44B to 41.40B

EUROPE / EMEA:

The US Embassy staff in Iraq has been ordered to leave due to increasing tensions in the region. Iranian leader Khameni, who many in Iran see as a spiritual leader, has not ruled out a war with the US and mentioned it was not in Washington’s interest to go into a war.

Angel Merkel made a strong signal that Europe needs to be more independent and reposition itself to stand up to the challenges posed by its global rivals (US, Russia, and China). “There is no doubt that Europe needs to reposition itself in a changed world,” Merkel said in a conversation in her office in Berlin. “The old certainties of the post-war order no longer apply.” She mentioned that recent policies in Ukraine and Africa would have been aligned many years ago.

Regarding Brexit, the next date to pay attention to after the upcoming EU elections on May 23^rd will be the week of June 4^th when the Withdrawal Agreement Bill will be voted upon. Brexit Secretary Steven Barclay stated that UK PM Theresa May’s Brexit deal will be “dead” if the withdrawal bill does not pass in the Commons in June.

The major European stock markets had a green day today: CAC 40 increased 32.92 points or 0.62% to 5,374.26; FTSE 100 increased 55.35 points or 0.76% to 7,296.95; and DAX increased 107.95 points or 0.90% to 12,099.57.

The major European currency markets had a mixed day today. EURUSD decreased 0.0001 or 0.00% to 1.1203 and GBPUSD decreased 0.0061 or 0.48% to 1.2843. USDCHF took the opposite route and increased 0.0002 or 0.02% to 1.0087.

Some economic news from Europe:

Germany:

• German GDP (QoQ) (Q1) increased from 0.0% to 0.4%
• German GDP (YoY) (Q1) decreased from 0.9% to 0.6%

Norway:

• Trade Balance (Apr) increased from 13.9B to 17.6B

France:

• French CPI (YoY) increased from 1.1% to 1.3%
• French CPI (MoM) (Apr) increased from 0.2% to 0.3%
• French HICP (MoM) (Apr)decreased from 0.9% to 0.4%
• French HICP (YoY) (Apr) increased from 1.3% to 1.5%

Italy:

• Italian Industrial New Orders (MoM) (Mar) increased from -2.8% to 2.2%
• Italian Industrial New Orders (YoY) (Mar) decreased from -3.1% to -3.6%
• Italian Industrial Sales (MoM) (Mar) increased from 0.20% to 0.30%
• Italian Industrial Sales (YoY) (Mar) increased from 1.10% to 1.30%

Eurozone:

• Employment Change (QoQ) remain the same at 0.3%
• Employment Change (YoY) decreased from 1.3% to 0.3%
• GDP (QoQ) (Q1) remain the same at 0.4%
• GDP (YoY) (Q1) remain the same at 1.2%

U.S. / AMERICAS:

The U.S. markets continued their recovery for a second consecutive day. The Dow rose 116.24 points (+0.46%) to close at 25,648.29; the S&P 500 gained 16.58 points (+0.58%), closing at 2,850.99; the Nasdaq had the strongest day, up 87.65 points (+1.13%) to close at 7,822.15; while the Russell 2000 increased 5.21 points (+0.34%) to finish at 1,548.27.

Disney (+1.11%), Apple (+1.20%), Pfizer (+1.21%), Microsoft (+1.41%) and Visa (+1.61%) are among the winners in the Dow. Looking at the major sectors, Communication Services (+2.11%) was the leader among the group, while Financials (-0.48%) was the laggard.

In D.C., the White House now has three days to decide whether to officially implement new tariffs on auto parts. Legally, the decision can be drawn out over the next 180 days, so long as the negotiations are on-going. It is largely believed that the U.S. will delay an increase for at least six months in an effort to minimize global trade hostility in Europe while dealing with the China negotiation setback. The markets responded favorably on the news.

On an economic front, industrial output declined 0.5% in April, according to a report released by the Federal Reserve this Wednesday. Manufacturing output also fell by half a percentage point in April. The decline is primarily due to a decrease in motor vehicles and parts, which declined by 2.6% last month.

In a separate report, the Commerce Department noted that retail spending slowed 0.2% in April compared to the 1.7% increase in March. Excluding “core” retail sales – gasoline, building materials, food services, and automobiles – retail sales remained relatively unchanged. However, these “core” components most closely relate to overall consumer spending, which accounts for over 66% of GDP.

Elsewhere, two mineral mining leases were renewed today near the Boundary Waters Wilderness area in Minnesota. The efforts will focus primarily on copper and “strategic minerals.” Environmental groups have been protesting the prospect of mining the area since 2016 when the idea was presented to the Obama administration. “Mining strategic metals in the United States is beneficial to national security, national and local economies, and job creation,” stated Joe Balash, the U.S. Interior Department’s assistant secretary.

In Canada, annual inflation rose to 2% in April, according to a report released this Wednesday by Statistics Canada. The 0.1% increase from the prior month was driven by Trudeau’s imposed carbon tax that led to an increase in gas prices. This is the first time in 2019 that Canada has achieved the 2% inflation target set forth by the Bank of Canada.

The TSX Composite added 33.61 points (+0.21%), closing at 16,318.14; the TSX 60 gained 2.42 points (+0.25%) to finish the session at 977.28.

In Brazil, the Bovespa declined by 469 points (-0.51%), closing the day at 91,623.44.

ENERGY:

Crude oil took a tumble today after a disappointing global outlook took its toll and a surrounding backdrop of doom and gloom in the Middle East. In other news, a report was released by the International Energy Agency suggesting that Russia pipelines are impacting up to 250,000 bpd due to contamination.

The oil markets had a mixed day today: Crude Oil increased 0.32 USD/BBL or 0.52% to 62.1076; Brent increased 0.63 USD/BBL or 0.88% to 71.8153; Gasoline increased 0.0411 USD/GAL or 2.08% to 2.0176; and Heating oil increased 0.0308 USD/GAL or 1.50% to 2.0936. Natural gas took the opposite route decreased 0.054USD/MMBtu or -2.03% to 2.6015.

Top commodity gainers: Oat (6.57%), Orange Juice (5.11%), Corn (2.29%), and Gasoline (2.09%). Biggest commodity losers: Lumber (-4.12%), Natural Gas (-2.07%), Platinum (-1.14%), and Coal (-0.87%).

The above data were collected around 17:05 EST on Wednesday.

BONDS:

Japan -0.05%(+0bp), US 2’s 2.17% (-4bps), US 10’s 2.37%(-4bps), US 30’s 2.82%(-3bps), Bunds -0.10% (-3bp), France 0.30% (-3bp), Italy 2.75% (+1bp), Turkey 19.05% (+30bp), Greece 3.56% (-1bp), Portugal 1.14% (-1bp), Spain 0.96% (-2bp) and UK Gilts 1.06% (-5bp).

German 30-Year Bund Auction decreased from 0.680% to 0.530%