Market Talk – July 25, 2019

ASIA:

More news emerged from a Chinese released whitepaper regarding the country’s military strategy on the South China Sea China. The release expressed that “China exercises its national sovereignty to build infrastructure and deploy necessary defensive capabilities on the islands and reefs in the South China Sea and to conduct patrols in the waters of the Diaoyu Islands in the East China Sea.” This refers to the disputed waters as well as islands that Japan calls the Senkaku Islands. The report also targeted Australia and its cooperation with the US. “Australia continues to strengthen its military alliance with the US and its military engagement in the Asia-Pacific, seeking a bigger role in security affairs.” The report went on to discuss how the US interferes in the region. “The US has adjusted its national security and defense strategies and adopted unilateral policies…It has provoked and intensified competition among countries, significantly increased its defense expenditure…and undermined global strategic stability.”

The South Korean committee expressed concern to the international community at the WTO meeting in Geneva yesterday. Their complaints were towards Japan regarding their handling of tightened export controls due to their spat. However, they failed to get support as no other country took to the floor in support. Japan told the WTO that the South Korean trade complaints were not acceptable. More to come for sure.

The major Asian stock markets had a mixed day today:

• Shanghai increased 14.08 points or 0.48% to 2,937.36
• Kospi decreased 7.82 points or -0.38% to 2,074.48
• ASX 200 increased 41.30 points or 0.61% to 6,818.00
• NIKKEI 225 increased 46.98 points or 0.22% to 21,756.55
• Hang Seng increased 70.26 points or 0.25% to 28,594.30
• SENSEX decreased 16.67 points or -0.04% to 37,830.98

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0027 or 0.39% to 0.6949
• NZDUSD decreased 0.0045 or 0.67% to 0.6659
• USDJPY increased 0.5110 or 0.47% to 108.6810
• USDCNY decreased 0.0022 or 0.03% to 6.8731

Precious Metals:

• Gold decreased 10.1 USD/t oz. or -0.71% to 1,415.96
• Silver decreased 0.178 USD/t. oz or -1.07% to 16.3805

Some economic news from last night:

South Korea:

• GDP (QoQ) (Q2) increased from -0.4% to 1.1%
• GDP (YoY) (Q2) increased from 1.7% to 2.1%

Japan:

• Corporate Services Price Index (CSPI) (YoY) decreased from 0.9% to 0.7%
• Foreign Bonds Buying increased from 949.6B to 1,027.8B
• Foreign Investments in Japanese Stocks decreased from -93.1B to -110.0B

Some economic news from today:

Hong Kong:

• Exports (MoM) (Jun) decreased from -2.4% to -9.0%
• Imports (MoM) (Jun) decreased from -4.3% to -7.5%
• Trade Balance decreased from -34.7B to -55.2B

EUROPE/EMEA:

Outgoing European Commission President Jean Claude Junker has told Boris Johnson that there is no way of reworking the Brexit withdrawal agreement. Juncker did, however, said the EU would analyze any ideas put forward by the UK, provided they were compatible with the withdrawal agreement. Meanwhile, Boris Johnson has promised the “beginning of a new golden age,” as he made his first Commons statement as PM. However, Campaigners for British citizens in Europe are already saying they are being treated as nonentities by Boris Johnson in his race to get Brexit over the line.

Regarding the immigration crises in Europe, up to 150 people may have drowned in a shipwreck off the coast of Libya as they tried to seek refuge in Europe, the UN refugee agency says.

With the tension still present in the Gulf, the UK government has said it will provide a Royal Navy escort for British-flagged ships passing through the Strait of Hormuz. The Department for Transport has advised the shipping industry to give sufficient notice of their travel plans in the area. Meanwhile, Iran is still hinting at a swap deal for the two seized ships, one by the UK and other by Iran.

Much of Western Europe is facing record-breaking temperatures again, with the second heatwave in a month set to reach its peak on Thursday.

The major Europe stock markets had a negative day today:

• CAC 40 decreased 27.82 points or -0.50% to 5,578.05
• FTSE 100 decreased 12.41 points or -0.17% to 7,489.05
• DAX decreased 160.79 points or -1.28% to 12,362.10

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00072 or 0.06% to 1.11462
• GBPUSD decreased 0.0025 or 0.20% to 1.2457
• USDCHF increased 0.0060 or 0.61% to 0.9907

Some economic news from Europe:

Norway:

• Unemployment Rate (May) increased from 3,3% to 3.4%

Spain:

• Spanish PPI (YoY) decreased from 1.1% to -0.6%
• Spanish Unemployment Rate (Q2) decreased from 14.70% to 14.02%

Italy:

• Italian Trade Balance Non-EU (Jun) increased from 3.11B to 3.84B

Germany:

• German Business Expectations (Jul) decreased from 94.0 to 92.2
• German Current Assessment (Jul) decreased from 101.1 to 99.4
• German Ifo Business Climate Index (Jul) decreased from 97.5 to 95.7

UK:

• CBI Distributive Trades Survey (Jul) increased from -42 to -16

France:

• France Jobseekers Total increased from 3,376.5K to 3,382.6K

Eurozone:

• Deposit Facility Rate (Jul) remain the same at -0.40%
• ECB Marginal Lending Facility remain the same at 0.25%
• ECB Interest Rate Decision (Jul) remain the same at 0.00%

U.S./AMERICAS:

The Department of Justice (DOJ) is cracking down on big tech by launching a large-scale antitrust investigation. Amazon, Apple, Facebook, and Google are some of the companies who will undergo scrutiny. The DOJ’s antitrust division cited “widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online.” U.S. Treasury Secretary Steven Mnuchin came out in favor of the probe, claiming big online retailers like Amazon have “destroyed the retail industry across the United States.” Other countries have also launched their own antitrust investigations to determine whether these companies are violating monopoly laws.

Despite the pending investigations, a number of big tech companies reported strong earnings for the second quarter of 2019. Google’s parent company Alphabet reported strong second-quarter earnings this Thursday. The company generated $38.94 billion in revenue, beating the expectation of $38.15 billion. The company’s earnings per share (EPS) came in at an impressive $14.21 compared to the expected EPS of $11.30.

Amazon released a mixed earnings report for the second quarter of 2019. EPS came in at $5.22, yet analysts expected an EPS of $5.57. However, Amazon generated more revenue last quarter than anticipated ($62.34 billion vs. $62.5 billion).

Facebook also reported a strong second quarter. The company generated $16.9 billion in revenue compared to an expected $16.5 billion. EPS came in at $1.99 compared to the original forecast of $1.88 EPS. The company also reported that 1.59 billion users actively use their platform on a daily basis.

After mass protests and rising civil unrest, Governor Rosello of Puerto Rico resigned on Wednesday evening. This makes Rosello the first Puerto Rican governor to resign before fulfilling his term. Rosello was reluctant to resign, but certain reports state that he chose that option over an impending impeachment. Wanda Vazquez will replace Rosello as the new governor of Puerto Rico on August 2.

U.S. Market Closings:

• The Dow declined 128.99 points or -0.47% to 27,140.98
• S&P 500 declined 15.89 points or -0.53% to 3,003.67
• Nasdaq declined 82.96 points or 1% to 8,238.54
• Russell 2000 declined 18.97 points or -1.20% to 1,561.45

Canada Market Closings:

• TSX Composite declined 123.64 points or -0.74% to 16,488.20
• TSX 60 declined 7.27 points or -0.73% to 85

Brazil Market Closing:

• Bovespa declined 1,464.96 points or -1.41 to 102,654.58

ENERGY:

There was a large draw of 11 million barrels this week from the US stockpiles. US oil exports reached its highest point in the month of May. Analysts believe that the sanctions imposed on Iran is leading to the larger exports.

The oil markets had a mixed day today:

• Crude Oil increased 0.17 USD/BBL or 0.30% to 56.1474
• Brent increased 0.23 USD/BBL or 0.36% to 63.2874
• Natural gas increased 0.021 USD/MMBtu or 0.95% to 2.2454
• Gasoline increased 0.0244 USD/GAL or 1.32% to 1.8759
• Heating oil increased 0.0061 USD/GAL or 0.32% to 1.9133
• Top commodity gainers: Gasoline (1.25%), Natural Gas (1.13%), Rice(0.87%), and Steel (0.62%)
• Top commodity losers: Baltic Dry (-3.33 %), Ethanol (-1.42%), Corn (-1.42%), and Lean Hogs (-1.10%)

The above data was collected around 14:40 EST on Thursday.

BONDS:

Japan -0.14%(+1bp), US 2’s 1.86% (+3bps), US 10’s 2.08%(+3bps), US 30’s 2.61%(+3bps), Bunds -0.36% (+6bp), France -0.10% (+1bp), Italy 1.51% (+2bp), Turkey 15.49% (-23bp), Greece 2.03% (+2bp), Portugal 0.43% (+1bp), Spain 0.38% (+3bp) and UK Gilts 0.70% (+2bp).

• US 4-Week Bill Auction increased from 2.090% to 2.110%
• US 8-Week Bill Auction increased from 2.120% to 2.140%
• US 7-Year Note Auction increased from 1.889% to 1.967%