Market Talk – July 2, 2019

ASIA / AUSTRALIA:

The government of China has told Hong Kong the actions of the protesters who stormed and vandalized Hong Kong’s legislature was “totally intolerable.” Meanwhile, the UK has warned China that serious consequences will occur if it breaches an agreement guaranteeing freedoms in the city.

Regarding the US-China trade deal, Peter Navarro, a trade advisor to the White House, has told CNBC that the deal in itself is really complicated. The drafted agreement is over 150 pages, and it will take time to process it all. Last week the Treasury Secretary Steven Mnuchin said they had previously gotten ~90% of the way to a done deal, but Navarro cautions that “this will take time, and we want to get it right.”

China has agreed to open up its economy one year earlier to 2020. “We will move up the lifting of foreign capital limits in securities, futures and life insurance, from 2021 to 2020,” Premier Li Keqiang, China’s second-ranking official, said on Tuesday at a meeting of the World Economic Forum.

The major Asian stock markets had a mixed day today. Shanghai decreased -0.96 points or -0.03% to 3,043.94; Kospi decreased 7.72 points or -0.36% to 2,122.02; ASX 200 increased 5.10 points or 0.08% to 6,653.20; NIKKEI 225 increased 24.30 points or 0.11% to 21,754.27; Hang Seng increased 332.94 points or 1.17% to 28,875.56; and SENSEX increased 129.98 points or 0.33% to 39,816.48.

The major Asian currency markets had a mixed day today. AUDUSD increased 0.00235 or 0.34% to 0.69885, NZDUSD increased 0.0003 or 0.04% to 0.6672, USDJPY decreased 0.5680 or 0.52% to 107.8620, and USDCNY increased 0.0311 or 0.45% to 6.8878.

Gold increased 28.19 USD/t oz. or 2.04% to 1,414.70 and silver increased 0.1175 USD/t. oz or 0.78% to 15.2686.

Some economic news:

South Korea:

• CPI (YoY) (Jun) remain the same at 0.7%
• CPI (MoM) (Jun) decreased from 0.2% to -0.2%

New Zealand:

• NZIER Business Confidence (Q2) decreased from -29% to -34%
• NZIER QSBO Capacity Utilization (Q2) increased from 92.8% to 93.7%
• Building Consents (MoM) (May) increased from -7.9% to 13.2%
• GlobalDairyTrade Price Index increased from -3.8% to -0.4%

Japan:

• Monetary Base (YoY) increased from 3.6% to 4.0%

Australia:

• HIA New Home Sales (MoM) (Oct) increased from -11.8% to 28.8%
• RBA Interest Rate Decision (Jul) decreased from 1.25% to 1.00%

Hong Kong:

• Retail Sales (YoY) (May) increased from -4.5% to -1.3%

EUROPE / EMEA:

The European Union announced that Germany’s Ursula von der Leyen will lead the European Central Commission, which marks the first woman to take the job. Ursula was the German defense minister who was promoting the idea of a European Army.

Christine Lagarde has also been nominated for the head of the ECB after Draghi. Today she has formally relinquished her responsibilities as the IMF managing director during the nomination period. With her and Powell at the Fed, the two largest world economies will have lawyers running the show.

France has accused Italy of being “hysterical” regarding the recent immigration crisis. Italy responded, “The French Government should stop with these insults and open its ports to migrants.”

The major European stock markets had a green day today. CAC 40 increased 8.91 points or 0.16% to 5,576.82, FTSE 100 increased 61.69 points or 0.82% to 7,559.19, and DAX increased 5.34 points or 0.04% to 12,526.72.

The major European currency markets had a mixed day today. EURUSD increased 0.0009 or 0.08% to 1.1294, GBPUSD decreased 0.0033 or 0.26% to 1.2605, and USDCHF decreased 0.0019 or 0.19% to 0.9855.

Some economic news:

UK:

• Nationwide HPI (MoM) (Jun) increased from -0.2% to 0.1%
• Nationwide HPI (YoY) (Jun) decreased from 0.6% to 0.5%
• Construction PMI (Jun) decreased from 48.6 to 43.1

Germany:

• German Retail Sales (MoM) (May) increased from -2.0% to -0.6%
• German Retail Sales (YoY) (May) remain the same at 4.0%

France:

• French Government Budget Balance (May) decreased from -67.2B to -83.9B

Spain:

• Spanish Unemployment Change increased from -84.1K to -63.8K

Eurozone:

• PPI (MoM) (May) increased from -0.3% to -0.1%
• PPI (YoY) (May) decreased from 2.6% to 1.6%

U.S. / AMERICAS:

This month, the U.S. economy broke its record for the longest period of consistent growth after continually expanding since June 2009. The previous record lasted 120 months from March 1991 to March 2001.

Cleveland Federal Reserve President Loretta Mester hinted this Tuesday that the Fed is in no rush to raise interest rates. Mester said she’d like to keep rates “at current levels for a while to support a gradual rise in inflation.” Furthermore, she suggested “not overreacting to shocks” that may raise inflation above the current 2% level.

William R. Emmons of the St. Louis Federal Reserve stated that America’s housing market is declining. “Data on single-family home sales through May 2019 confirm that housing markets in all regions of the country are weakening,” Emmons reported. While he does not foresee the decline deepening into Great Recession territory, he did note that the outcome may be similar to the 1990-1991 and 2001 recessions.

The House Judiciary Committee and the House Intelligence Committee have called upon Special Counsel Robert Mueller to testify later this month. Despite releasing a lengthy report on his investigation and vowing not to testify again, Mueller must appear again to clarify his findings. Most believe the House is really calling him to banking on American public watching the hearing and learning details from a report through Mueller’s testimony that most are otherwise unlikely to read for themselves.

The U.S. stock market will have a half day on Wednesday and will close on Thursday in honor of the Fourth of July holiday.

The S&P 500 continued to make new highs this Tuesday, adding an additional 8.68 points (+0.29%) and closing at 2,973.01. The Dow rose 69.25 points (+0.26%) to 26,786.68. The Nasdaq gained 17.93 points (+0.22%) to 8,109.09. The Russell 2000 slipped 9.13 points (-0.58%) to 1,560.54.

The Canadian markets continued upward this Tuesday. The TSX Composite added 89.09 points (+0.54%) to 16,471.29, and the TSX 60 rose 5.85 points (+0.60%) to 985.45.

Brazil’s Bovespa slid 734.51 points (-0.72%) to 100,605.17.

ENERGY:

Russia and other non-OPEC members agreed to cut oil production. OPEC has agreed to cut production by 1.2 million barrels per day until the end of March 2020 as prices are refusing to go above the 60 USD a barrel range.

The oil markets had a negative day today. Crude Oil decreased 2.37 USD/BBL or -4.01% to 56.8354, Brent decreased 2.13 USD/BBL or -3.27% to 62.9676, Natural gas decreased 0.033 USD/MMBtu or -1.46% to 2.2296, Gasoline decreased 0.0507 USD/GAL or -2.63% to 1.8811, and Heating oil decreased 0.0546 USD/GAL or -2.79% to 1.8984.

Top commodity gainers: Lumber (6.78%), Gold (2.17%), Naphtha (7.20%), and Propane (7.39%). Top commodity losers: Crude Oil (-4.35%), Bitumen (-4.25%), Brent (-3.57%), and Heating Oil (-3.04%)

The above data were collected around 15:23 EST on Tuesday.

BONDS:

Japan -0.14%(+1bp), US 2’s 1.76% (-3bps), US 10’s 1.98%(-5bps), US 30’s 2.51%(-5bps), Bunds -0.37% (-1bp), France -0.05% (-0bp), Italy 1.84% (-11bp), Turkey 15.76% (-7bp), Greece 2.20% (-14bp), Portugal 0.38% (-4bp), Spain 0.29% (-4bp) and UK Gilts 0.72% (-9bp).

• Japan 10-Year JGB Auction decreased from -0.110% to -0.140%
• UK 5-Year Treasury Gilt Auction increased from 0.612% to 0.620%