Market Talk – July 19, 2019

ASIA:

The latest news regarding the U.S.–China trade deal is that progress has stalled. China demands that the U.S. changes their stance and ease restrictions on Huawei. The U.S. and Chinese senior officials spoke by phone this week, this represents only the second call since the G20 meeting in June where the two countries agreed to a truce. Other news suggests that China is sending a warning to America over the supply of rare earth materials that are essential for technology to push the deal in their favor.

Taiwan’s president is currently in the Caribbean and is expected to transit in the U.S. for the second time this month in a move which is likely to anger the mainland. Vietnam meanwhile has asked China to withdraw a vessel which is currently in the South China Sea.

Some economic data regarding China’s total corporate, household, and government debt rising to over 300% this quarter has alerted some analysts over the upcoming debt issues. China now accounts for 15% of the worldwide debt. Blackrock’s investment chief said that a lot of CEO’s have told him they are moving out of China due to the tariffs.

The major Asian stock markets had a mixed day today:

• Shanghai increased 23.02 points or 0.79% to 2,924.20
• Kospi increased 27.81 points or 1.35% to 2,094.36
• ASX 200 increased 51.20 points or 0.77% to 6,700.30
• NIKKEI 225 increased 420.75 points or 2.00% to 21,466.99
• Hang Seng increased 303.74 points or 1.07% to 28,765.40
• SENSEX decreased 560.45 points or -1.44% to 38,337.01

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0032 or 0.45% to 0.7043
• NZDUSD decreased 0.0008 or 0.12% to 0.6773
• USDJPY increased 0.4950 or 0.46% to 107.7850
• USDCNY increased 0.0113 or 0.16% to 6.8831

Precious Metals:

• Gold decreased 22.65 USD/t oz. or -1.57% to 1,420.99
• Silver decreased 0.20 USD/t. oz or -1.19% to 16.1635

Some economic news from last night:

New Zealand:

• Credit Card Spending (YoY) decreased from 6.7% to 6.6%

South Korea:

• PPI (MoM) (Jun) decreased from 0.0% to -0.3%
• PPI (YoY) (Jun) decreased from 0.4% to 0.1%

Japan:

• National Core CPI (YoY) (Jun) decreased from 0.8% to 0.6%
• National CPI (MoM) remain the same at 0.0%
• National CPI (YoY) (Jun) remain the same at 0.7%
• Foreign Bonds Buying increased from 297.0B to 950.0B
• Foreign Investments in Japanese Stocks decreased from 192.2B to -93.1B

Some economic news from today:

India:

• Bank Loan Growth remain the same at 12.0%
• Deposit Growth increased from 10.0% to 10.3%
• FX Reserves, USD decreased from 429.91B to 428.80B

Japan:

• All Industries Activity Index (MoM) decreased from 0.8% to 0.3%

EUROPE/EMEA:

Chinese telecommunications giant Huawei said that 28 of 50 their commercial contracts for 5G signed globally are with operators in Europe. Perhaps this is why the U.S. may try to strong-arm Europe to break the contracts if the trade deal turns sour.

Europe has hit another U.S. company in a matter of a day, with the latest being Qualcomm with a €242 million ($271 million) fine. The European excuse for the fine what that the U.S. chipmaker used “predatory pricing” to drive a competitor out of the market for 3G hardware.

The number of electric car models available to consumers in Europe is expected to triple by 2021, says a European environmental lobby group.

More drama in the Gulf region today, as the U.S. stated that they have shot down an Iranian drone that was navigating close to a navy ship. However, later in the day, Iran denied President Trump’s claim that the U.S. shot down a drone. Foreign Minister Abbas Araghchi tweeted, “We have not lost any drone in the Strait of Hormuz nor anywhere else.” Further adding with a sarcastic tone, “I am worried that USS Boxer has shot down their own UAS [Unmanned Aerial System] by mistake!.”

The U.S. demanded that Iran immediately release a vessel it seized in the Gulf as a U.S. military commander said Washington would work “aggressively” to ensure free passage of vessels through the vital waterway. In the last hours of writing, Press TV announced that Iran has seized a British oil tanker for violating international maritime law.

The Iranian Ambassador to Ireland has called on the Irish Government to intervene in a diplomatic row between the United States and his country. He is asking for Ireland to be a mediator between the two countries.

Israeli PM Netanyahu boasted that the new F35 jets give them the upper hand if there were ever a conflict to happen, stating that Israel can reach Iran but Iran cannot reach Israel.

The major Europe stock markets had a green day today:

• CAC 40 increased 1.80 points or 0.03% to 5,552.34
• FTSE 100 increased 15.61 points or 0.21% to 7,508.70
• DAX increased 32.22 points or 0.26% to 12,260.07

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.00586 or -0.52% to 1.12164
• GBPUSD decreased 0.0051 or -0.40% to 1.2495
• USDCHF increased 0.0006 or 0.06% to 0.9817

Some economic news from Europe:

UK:

• Public Sector Net Borrowing (Jun) increased from 3.82B to 6.50B
• Public Sector Net Cash Requirement (Jun) increased from 10.656B to 15.227B

Germany:

• German PPI (MoM) (Jun) decreased from -0.1% to -0.4%
• German PPI (YoY) (Jun) decreased from 1.9% to 1.2%

Eurozone:

• Current Account (May) increased from 22.4B to 29.7B
• Current Account n.s.a. (May) decreased from 20.7B to 13.3B

U.S./AMERICAS:

New York Fed President John Williams, who also happens to be the vice president of the Federal Open Market Committee (FOMC), released a confusing statement yesterday before the Central Bank Research Association in which he noted policymakers needed to “act quickly.” “It’s better to take preventative measures than to wait for disaster to unfold,” Williams stated. However, the NY Fed released a statement later in the day to clarify William’s words, stating that he was merely discussing academic research rather than short-term policy plans.

“I like New York Fed President John Williams first statement much better than his second,” President Donald Trump tweeted in response. “His first statement is 100% correct in that the Fed ‘raised’ far too fast & too early.” Further elaborating, the president urged the Fed to end Quantitative Tightening policies. In summation, he ended his tweet with a final message to the Federal Reserve – “Don’t blow it!”

The fifty point rate cut that analysts were anticipating at the end of July may fall short of expectations. The Wall Street Journal released a report this Friday entitled “ Fed Officials Signal Quarter-Point Rate Cut Likely at July Meeting” that has the marketplace buzzing. The publication shared the general sentiment that a rate cut will occur and that Fed Chairman Jerome Powell’s testimony last week provided supporting evidence for a cut. However, optimism over a half-point rate reduction diminished. “Officials aren’t prepared for bolder action by making a half-point cut, as analysts and traders have speculated in recent days, according to the officials’ recent public statements and interviews,” the article specified. All major U.S. indexes declined in trading today after the release of this publication.

U.S. Market Closings:

• The Dow declined 68.77 points or -0.25% to 27,154.20
• S&P 500 declined 18.50 points or -0.62% to 2,976.61
• Nasdaq declined 60.75 points or -0.74% to 8,146.49
• Russell 2000 declined 7.73 points or -0.50% to 1,547.90

Canada Market Closings:

• TSX Composite declined 8.29 points or -0.05% to 16,485.94
• TSX 60 declined -0.92 of a point or -0.09% to 984.15

Brazil Market Closing:

• Bovespa declined 1,264.66 points or -1.21% to 103,451.93

ENERGY:

The IEA stated today that they do not expect oil prices to increase much as the lackluster global growth and demand will cap the oil price.

Russia’s oil production in the past few days has recovered to the ceiling that Moscow has pledged in the OPEC+ deal, Russian Energy Minister Alexander Novak said.

The oil markets had a negative day today:

• Crude Oil increased 0.62 USD/BBL or 1.12% to 55.8303
• Brent increased 1.06 USD/BBL or 1.71% to 63.0524
• Natural gas decreased 0.03 USD/MMBtu or -1.31% to 2.2529
• Gasoline increased 0.0152 USD/GAL or 0.83% to 1.8458
• Heating oil increased 0.0389 USD/GAL or 2.09% to 1.9031
• Top commodity gainers: Orange Juice (3.58%), Cotton (2.50%), Soybeans(2.24%), and Heating Oil (2.07%)
• Top commodity losers: Coffee (-1.21 %), Gold (-1.39%), Silver (-1.02%), and Natural Gas (-1.18%)

The above data was collected around 15:18   EST on Friday.

BONDS:

Japan -0.13%(+0bp), US 2’s 1.80% (+3bps), US 10’s 2.04%(+0bps), US 30’s 2.58%(+1bps), Bunds -0.32% (+4bp), France -0.06% (-0bp), Italy 1.60% (+4bp), Turkey 15.61% (-48bp), Greece 2.16% (+1bp), Portugal 0.48% (+0bp), Spain 0.41% (-0bp) and UK Gilts 0.74% (-2bp).