Market Talk – July 10, 2019

ASIA:

Russia reported that China has announced plans to open six new free zones as an attempt to open up its economy (with external pressure to do so). China also announced that they will expand the existing Shanghai free zone. Spokesperson Gao Feng said, “China has been opening up more sectors of the economy as it is committed to providing better services and environment for foreign investors. Authorities have been easing market access in agriculture, mining, manufacturing industries and services.”

The U.S. declined to back down over the sale of arms to Taiwan, insisting that the deal will help peace and stability in the region. The U.S. stated that it is not changing its “one China” policy. The one China policy, which means that even though there are two states, there is only one China. Regarding the US-China trade deal, White House Chief Economic Advisor Kudlow, said that China and the U.S. may never reach an end to the trade discussions. Liking the situation to a football match, reaching the seven-yard line, it’s usually the toughest part to get past.

South Korea’s leader warned today that relations with Japan are at a state of “unprecedented emergency” as the spat over war time compensation reaches an all-time high. Last Sunday, President Abe said, “With regards to the war time laborers issues, it has become clear that South Korea does not abide by international commitments. It is natural to assume that it also fails to keep promises on export control.” Some analysts believe this could morph into a full-blown economic war.

The major Asian stock markets had a mixed day today:
• Shanghai decreased 12.93 points or -0.44% to 2,915.30
• Kospi increased 6.75 points or 0.33% to 2,058.78
• ASX 200 increased 24.10 points or 0.36% to 6,689.80
• NIKKEI 225 decreased 31.67 points or -0.15% to 21,533.48
• Hang Seng increased 88.41 points or 0.31% to 28,204.69
• SENSEX decreased 173.78 points or -0.45% to 38,557.04

The major Asian currency markets had a mixed day today:
• AUDUSD increased 0.0038 or 0.54% to 0.6965
• NZDUSD increased 0.0048 or 0.72% to 0.6651
• USDJPY decreased 0.4340 or 0.40% to 108.4060
• USDCNY decreased 0.0230 or 0.33% to 6.8717

Metals:
• Gold increased 15.7 USD/t oz. or 1.12% to 1,412.74
• Silver increased 0.13 USD/t. oz or 0.86% to 15.2442

Some economic news from last night:

New Zealand:
• FPI (MoM) (Jun) decreased from 0.7% to -0.7%

South Korea:
• Unemployment Rate (Jun) remain the same at 4.0%

Japan:
• PPI (YoY) (Jun) decreased from 0.6% to -0.1%
• PPI (MoM) (Jun) decreased from -0.1% to -0.5%

Australia:
• Westpac Consumer Sentiment (Jul) decreased from -0.6% to -4.1%

China:
• CPI (MoM) (Jun) decrease from 0.1% to -0.1%
• CPI (YoY) (Jun) remain the same at 2.7%
• PPI (YoY) (Jun) decreased from 0.6% to 0.0

EUROPE/EMEA:

As the U.S. is cracking down on immigrants from Latin America, Venezuelans are now the second highest nationality of immigrants applying for European citizenship. The Guardian reported that there has been a 4000% increase in the number of applicants in the past decade from Central America.

Old Turkish and Greek tensions are surfacing again, with the EU and Greece stating that it is illegal for Turkey to drill offshore near Cyprus. Turkey’s foreign ministry responded saying that it rejects statements by Greek and European Union officials. Turkey has now sent a second ship in the region to continue drilling.

The Meridan highway received clearance by the Russian government, according to the Russian State Media RIA Novosti. The road that will span almost 1,250 miles (2,000 km) long and will run westward from the country’s border with Kazakhstan, creating the shortest route to move goods between mainland Europe and China.

Yesterday in the UK, Boris Johnson and Jeremy Hunt both took time to debate issues for the vacant prime minister seat. Boris Johnson has been under scrutiny within the party lately due to him not backing the UK ambassador to the US after the ambassador’s emails were leaked.

The emails show that he labeled President Donald Trump’s administration as dysfunctional and incompetent, which ignited a spat. The ambassador resigned, stating that it was impossible for him to stay in office after what happened.

The U.S. is asking to form a coalition to help protect commercial shipping off the coast of Iran and Yemen.

The major Europe stock markets had a negative day today:
• CAC 40 decreased 4.51 points or -0.08% to 5,567.59
• FTSE 100 decreased 5.78 points, or -0.08% to 7,530.69
• DAX decreased 63.14 points or -0.51% to 12,373.41.

The major Europe currency markets had a mixed day today:
• EURUSD increased 0.0050 or 0.44% to 1.1256
• GBPUSD increased 0.0048 or 0.38% to 1.2513
• USDCHF decreased 0.0042 or 0.43% to 0.9892

Some economic news from Europe:

Norway:
• Core CPI YTD (Jun) remain the same at 2.3%
• Core Inflation (MoM) (Jun) increased from -0.2% to 0.4%
• CPI (MoM) (Jun) increased from -0.3% to 0.1%
• CPI (YoY) (Jun) decreased from 2.5% to 1.9%
• PPI (YoY) (Jun) decreased from 0.4% to -6.5%

France:
• French Industrial Production (MoM) (May) increased from 0.5% to 2.1%

Italy:
• Italian Industrial Production (YoY) (May) increased from -1.5% to -0.7%
• Italian Industrial Production (MoM) (May) increased from -0.8% to 0.9%

UK:
• Construction Output (MoM) (May) increased from -0.5% to 0.6%
• U.K. Construction Output (YoY) (May) decreased from 3.1% to 1.7%
• GDP (MoM) increased from -0.4% to 0.3%
• Index of Services remain the same at 0.3%
• Industrial Production (YoY) (May) increased from -1.1% to 0.9%
• Industrial Production (MoM) (May) increased from -2.9% to 1.4%
• Manufacturing Production (MoM) (May) increased from -4.2% to 1.4%
• Manufacturing Production (YoY) (May) increased from -1..0% to 0.0%
• Monthly GDP 3M/3M Change decreased from 0.4% to 0.3%
• Trade Balance (May) increased from -12.76B to -11.52B
• Trade Balance Non-EU (May) increased from -5.26B to -4.91B

U.S./AMERICAS:

The global marketplace listened as Federal Reserve Chairman Jerome Powell spoke on Capitol Hill this Wednesday, and it appears they liked what they heard. Powell hinted that the Federal Reserve may lower interest rates due to two prevalent factors: 1) the global economic slowdown, and 2) ongoing trade wars. When the Fed last announced their rate policy in June, they opted to maintain rates but noted they were carefully monitoring ongoing geopolitical and economic variables. Powell will provide further details during tomorrow’s announcement.

Iran-U.S. tensions are beginning to boil. Yesterday, the U.S. placed sanctions on Lebanese leaders, in part, for their illegal dealings with Iran. Today, President Trump announced that he plans to increase sanctions on Iran. In an online statement, the president announced that “Iran has long been secretly ‘enriching,’ in total violation of the terrible 150 Billion Dollar deal made by John Kerry and the Obama Administration.” He noted that the uranium deal has an expiration date, and depending on who is in charge at that time it may or may not be renewed.

The Dow Jones, S&P 500, and Nasdaq rallied after Powell’s announcement to all-time highs midday. The Dow Jones soared to 26,983.45 midday. Chevron led the spike in the Dow after increasing by 1.69%, followed by Pfizer whose stock increased 1.57%. Tech stocks aided the Dow’s bullish performance after Microsoft, Apple, and Intel all increased by around 1%. For the first time in history, the S&P 500 hit 3,000. Western Digital led the rally in the S&P 500 after increasing by 4.97%. Medical technology also fueled the index upward with Align Technology rising by 4.08% and DaVita rising by 3.99%. The Nasdaq also hit a new midday high after reaching 8,228.60. Western Digital’s impressive performance led the way for the Nasdaq as well, followed by T-Mobile (4.63%), Align Technology (4.08%), and Tesla (3.85%).

U.S. market closings:
• The Dow increased 76.71 points or 0.29% to 26,860.20
• S&P 500 advanced 13.44 points or 0.45% to 2,993.07
• Nasdaq advanced 60.80 points or 0.75% to 8,202.53
• Russell 2000 advanced 2.46 points or 0.16% to 1,565.05

Canada market closings:
• TSX Composite advanced 18.08 points or 0.11% to 16,563.29
• TSX 60 declined 0.51 points or -0.05% to 990.76

Brazil market closings:
• BOVESPA advanced 1,286.84 points or 1.23% to 105,817.06

ENERGY:

The oil markets had a green day today:
• Crude Oil increased 2.52 USD/BBL or 4.36% to 60.3821
• Brent increased 2.76 USD/BBL or 4.30% to 66.9073
• Natural gas increased 0.011 USD/MMBtu or 0.45% to 2.4373
• Gasoline increased 0.0817 USD/GAL or 4.24% to 2.0124
• Heating oil increased 0.0805 USD/GAL or 4.21% to 1.9915
• Top commodity gainers: Crude Oil (4.36%), Brent (4.24%), Cotton (5.61%), and Gasoline (4.11%).
• Top commodity losers: Cocoa (-2.87%), Bitumen (-2.43%), Coffee (-1.42%), and Steel (-1.80%)

The above data was collected around 14:13 EST on Wednesday.

BONDS:

Japan -0.12%(+3bp), US 2’s 1.85% (+3bps), US 10’s 2.06%(-1bps), US 30’s 2.54%(+2bps), Bunds -0.32% (+4bp), France -0.05% (+2bp), Italy 1.74% (+0bp), Turkey 16.41% (+0bp), Greece 2.30% (+8bp), Portugal 0.50% (+3bp), Spain 0.44% (+2bp) and UK Gilts 0.76% (+4bp).
• US 10-Year Note Auction decreased from 2.130% to 2.064%
• German 10-Year Bund Auction decreased from -0.240% to -0.260%
• Italian 12-Month BOT Auction increased from 0.069% to -0.061%