Market Talk – May 31, 2019

ASIA / AUSTRALIA:

Some positive news for US-Chinese relations as Tesla has started to take pre-orders on it cheaper Model 3 cars from its Gigafactory based in Shanghai. The construction of the factory only started at the beginning of January and is expected to open later this year.

The former governor of the People’s Bank of China expressed his concern about the trade war enlarging into a global financial crisis. “If the China-U.S. trade war continues to grow larger, it may cause the global economy to decline, and may cause a global financial crisis,”

News media outlets are claiming that China will soon reciprocate and ban US companies in China; currently they are setting up an “unreliable entities list” which are companies which could damage the interest of domestic companies.

A meeting in Singapore has taken place with US, Japanese and South Korean officials to discuss the threat of North Korea. Earlier this month, North Korea was said to test two types of short range ballistic missiles.

Looking to the markets, Gold increased 13.1 USD/t oz. or +1.02% to 1,299.58 and Silver increased 0.0785 USD/t. oz or +0.54% to 14.5906.

The major Asian stock markets had a mixed day today:

• Shanghai decreased 7.11 points, or -0.24% to 2,898.70
• Kospi increased 2.94 points, or +0.14% to 2,041.74;
• ASX 200 increased 4.80 points, or +0.08% to 6,396.90;
• NIKKEI 225 decreased 341.34 points, or -1.63% to 20,601.19;
• Hang Seng decreased 213.79 points, or -0.79% to 26,901.09.
• SENSEX decreased 117.77 points, or -0.30% to 39,714.20;

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.0022 or +0.32% to 0.6933
• NZDUSD increased 0.0019 or +0.28% to 0.6528
• USDJPY decreased 0.9760 or -0.89% to 108.6240
• USDCNY increased 0.0038 or +0.05% to 6.9320

Some economic news:

South Korea:

• Industrial Production (YoY) (Apr) increased from -2.3% to -0.1%
• Industrial Production (MoM) (Apr) decreased from 2.1% to 1.6%
• Retail Sales (MoM) decreased from 3.5% to -1.2%
• Interest Rate Decision (May) remain the same at 1.75%

Japan:

• Jobs/applications ratio (Apr) remain the same at 1.63
• Tokyo Core CPI (YoY) (May) decreased from 1.3% to 1.1%
• Tokyo CPI (YoY) (May) decreased from 1.4% to 1.1%
• Unemployment Rate (Apr) decreased from 2.5% to 2.4%
• Industrial Production (MoM) (Apr) increased from -0.6% to 0.6%
• Industrial Production forecast 1m ahead (MoM) (May) increased from 2.7% to 5.6%
• Industrial Production forecast 2m ahead (MoM) (Jun) decreased from 3.6% to -4.2%
• Retail Sales (YoY) (Apr) decreased from 1.0% to 0.5%
• Construction Orders (YoY) (Apr) decreased from 0.0% to -19.9%
• Household Confidence (May) decreased from 40.4 to 39.4
• Housing Starts (YoY) (Apr) decreased from 10.0% to -5.7%

Indonesia:

• Nikkei Manufacturing PMI (May) increased from 50.4 to 51.6

China:

• Manufacturing PMI (May) decreased from 50.1 to 49.4
• Non-Manufacturing PMI (May) remain the same at 54.3

Australia:

• Housing Credit (Apr) increased from 0.2% to 0.3%
• Private Sector Credit (MoM) (Apr) decreased from 0.3% to 0.2%

Singapore:

• Bank Lending (Apr) increased from 676.1B to 676.3B

HongKong:

• M3 Money Supply (Apr) decreased from 3.0% to -0.3%
• Retail Sales (YoY) (Apr) decreased from -0.2% to -4.5%

India:

• FX Reserves, USD increased from 418.00B to 419.99B
• Federal Fiscal Deficit (Mar) decreased from 8,514.99B to 1,570.48B
• GDP Annual decreased from 7.2% to 6.8%
• GDP Quarterly (YoY) (Q4) decreased from 6.6% to 5.8%
• Infrastructure Output (YoY) (Apr) decreased from 4.9% to 2.6%

EUROPE / EMEA:

US Secretary of State Mike Pompeo has flown to Germany today to meet with German Foreign Minister Heiko Maas and Chancellor Angela Merkel. They were due to meet earlier in the month, when Secretary of State cancelled the visit at the last moments. Topics of conversation will likely include the Chines trade deal and the issue of Iran.  He is expect to visit Switzerland and Netherlands before teaming up with Trump.

Trump meanwhile will be visiting the UK for a 3 day trip, whom was invited by the Queen of England. His trip is expected to cost more than 18 million pounds due to security measures which will take place.

In the UK, Telecoms company EE has turned on their 5G signal today; users were experiencing downloading speeds of up to 1000 Mbps. There is a backlash over the health concerns 5G brings; as there have been little or no scientific test prior to roll out.

Hungary has announced plans to construct a 1 billion Euro greenhouse city which is powered by renewable energy. The city is expected to be carbon neutral and provide year round cultivation. It is unknown when the project is going to take place.

Major Europe stock markets had a negative day today:

• CAC 40 decreased 41.28 points, or -0.79% to 5,207.63
• FTSE100 decreased 54.92 points, or -0.76% to 7,163.24
• DAX decreased 175.24 points, or -1.47% to 11,726.84

Major Europe currency markets had a mixed day today:

• EURUSD increased 0.0023 or +0.21% to 1.1153
• GBPUSD increased 0.0016 or +0.13% to 1.2622
• USDCHF decreased 0.0046 or -0.46% to 1.0030

Some economic news:

UK:

• Nationwide HPI (MoM) decreased from 0.3% to -0.2%
• Nationwide HPI (YoY) (May) decreased from 0.9% to 0.6%

Germany:

• German Retail Sales (MoM) (Apr) decreased from -0.2% to -2.0%
• German Retail Sales (YoY) (Apr) increased from -2.0% to 4.0%
• German CPI (MoM) (May) decreased from 1.0% to 0.2%
• German CPI (YoY) (May) decreased from 2.0% to 1.4%
• German HICP (YoY) (May) decreased from 2.1% to 1.3%
• German HICP (MoM) (May) decreased from 1.0% to 0.3%

Swiss:

• Retail Sales (YoY) (Apr) remain the same at -0.7%

Italy:

• Italian GDP (QoQ) (Q1) decreased from 0.2% to 0.1%
• Italian GDP (YoY) (Q1) decreased from 0.1% to -0.1%
• Italian CPI (MoM) (May) decreased from 0.2% to 0.1%
• Italian CPI (YoY) (May) decreased from 1.1% to 0.9%
• Italian HICP (MoM) (May) decreased from 0.5% to 0.1%
• Italian HICP (YoY) (May) decreased from 1.1% to 0.9%
• Italian PPI (MoM) (Apr) decreased from -0.1% to -1.1%
• Italian PPI (YoY) (Apr) decreased from 2.9% to 2.1%

Spain:

• Spanish Current account (Mar) increased from -2.77B to 0.03B

Norway:

• Central Bank Currency Purchase (Jun) remain the same at -600.0M
• Unemployment Change (May) increased from 76.66K to 77.79K
• Unemployment Rate n.s.a. (May) decreased from 2.30% to 2.10%

U.S. / AMERICAS:

Another day, another tariff dustup – this time, not due to trade conflict, but due to ongoing concern of illegal immigration. No, really. What seems like out of nowhere, President Trump sent a tweet last night stating “On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,.. at which time the Tariffs will be removed. Details from the White House to follow.” This, while the US, Canada and Mexico are making efforts to get the proposed North American trade agreement that will replace NAFTA (the USMCA) ratified and put into effect.

It is one thing to utilize tariffs in attempts to create economic pressures that motivate negotiations towards new trade agreements – but it is another thing entirely to use them for what seems like an otherwise inability to get immigration under control through bi-partisan efforts here, and with a very important trade partner you are trying to seal (an already agreed to) deal with. Illegal immigration is a real issue, and does need a real solution – just not sure this is the way to go about it. Most believe this will quickly turn around though, as this would likely hit US industry (autos in particular) pretty hard, something Trump would in theory want to avoid.

This, unsurprisingly, had a negative impact on markets today, driving the final nail on a down week (six straight down weeks for the Dow;  fourth straight down weeks for S&P 500 and Nasdaq Composite as well).

Major stock markets across the Americas were in the red today:

• Dow decreased 354.84 points, or -1.41% to 24,815.04
• S&P 500 decreased 36.80 points, or -1.32% to 2,752.06
• Nasdaq decreased 114.57 points, or -1.51% to 7,453.15
• Russell 2000 decreased 20.04 points, or -1.35% to 1,465.49
• Canadian TSX Composite decreased 51.75 points, or -0.32% to 16,037.49
• Canadian TSX 60 decreased 3.73 points, or -0.39% to 961.89
• Brazilian Bovespa decreased 427.04 points, or -0.44% to 97,030.32

ENERGY:

Crude oil is still moving down due to the ongoing fears of a global slowdown; OPEC are also expected to cut output despite Saudi producing 200,000 more barrels a day to cover the void left by the Iranian sanctions.

Elsewhere, Indian envoy to the US has told that they have not imported oil from Iran since the sanctions have been posed, this contradicts reports that business is still ongoing.

The oil markets had a negative day today:

• Crude Oil decreased 1.55 USD/BBL or -2.74% to 54.9731
• Brent decreased 2.18 USD/BBL or -3.26% to 64.5309
• Natural gas decreased 0.068 USD/MMBtu or -2.67% to 2.4747
• Gasoline decreased 0.0625 USD/GAL or -3.33% to 1.8125
• Heating oil decreased 0.0528 USD/GAL or -2.76% to 1.8651

Top commodity gainers: Orange Juice (3.59%), Sugar (1.19%), Gold (1.09%), and Palm Oil (0.50%). Top commodity losers: Brent (-3.39%), Crude Oil (-3.07%), Gasoline (-3.50%), and Heating Oil (-3.02%)

The above data were collected around 12:18PM EST on Friday.

BONDS:

Japan -0.09%(-1bp), US 2’s 2.03% (-5bps), US 10’s 2.37%(+15bps), US 30’s 2.63%(-3bps), Bunds -0.21% (-4bp), France 0.22% (-2bp), Italy 2.76% (+11bp), Turkey 18.62% (+0bp), Greece 3.06% (+0bp), Portugal 0.82% (-5bp), Spain 0.76% (-0bp) and UK Gilts 0.87% (-3bp).