Market Talk – July 30, 2019

ASIA:

President Trump criticized China, this time complaining that China has not been buying more US agricultural products as it promised to do. Today, the US and China have resumed talks although no outcome has been presented.

The Bank of Japan kept its ultra-low interest rates unchanged, maintaining its short-term interest rate target at -0.1%. The Federal Reserve’s two-day policy meeting is also starting today, with the Fed anticipated to cut interest rates for the first time since 2008.

US Secretary of State Mike Pompeo will travel around the Asia-Pacific region meeting with heads of states as the US tries to maintain diplomatic ties. Mr. Pompeo will chair a U.S.-Asia meeting on Thursday as well as a gathering of foreign ministers from countries involved in the Lower Mekong Initiative, an American-led development program.

The major Asian stock markets had a mixed day today:

• Shanghai increased 11.33 points or 0.39% to 2,952.34
• Kospi increased 9.20 points or 0.45% to 2,038.68
• ASX 200 increased 19.30 points or 0.28% to 6,845.10
• NIKKEI 225 increased 92.51 points or 0.43% to 21,709.31
• Hang Seng increased 40.09 points or 0.14% to 28,146.50
• SENSEX decreased 289.13 points or -0.77% to 37,397.24

The major Asian currency markets had a negative day today:

• AUDUSD decreased 0.0026 or 0.37% to 0.6876
• NZDUSD decreased 0.0013 or 0.20% to 0.6617
• USDJPY decreased 0.2090 or 0.19% to 108.5610
• USDCNY decreased 0.0010 or 0.01% to 6.8900

Precious Metals:

• Gold increased 4.91 USD/t oz. or 0.34% to 1,431.57
• Silver increased 0.125 USD/t. oz or 0.76% to 16.5797

Some economic news from last night:

Australia:

• Building Approvals (MoM) (Jun) decreased from 0.3% to -1.2%
• Private House Approvals (Jun) increased from -0.3% to 0.4%

South Korea:

• Manufacturing BSI Index (Aug) decreased from 76 to 74

New Zealand:

• Building Consents (MoM) (Jun) decreased from 13.5% to -3.9%

Japan:

• Jobs/applications ratio (Jun) decreased from 1.62 to 1.61
• Unemployment Rate (Jun) decreased from 2.4% to 2.3%
• Industrial Production (MoM) (Jun) decreased from 2.0% to -3.6%
• Industrial Production forecast 1m ahead (MoM) (Jul) increased from -1.2% to 2.7%
• Industrial Production forecast 2m ahead (MoM) (Aug) increased from 0.3% to 0.6%
• BoJ Interest Rate Decision remain the same at -0.10%

Indonesia:

• Foreign Direct Investment (YoY) (Q2) increased from -0.90% to 9.60%

EUROPE/EMEA:

The UK Prime Minister Boris Johnson has said it is “up to the EU, this is their call” if they leave the EU without a deal. In a recent phone call with the Irish prime minister, Boris Johnson discussed the prospect of the backstop agreement, which is designed to ensure that there is no hard border on the island of Ireland. The Irish PM made comments that there was pressure mounting due to the issue – although the Irish authorities have public reports suggesting that a no-deal Brexit could lead to 55k fewer jobs and a 3% drop in growth. Meanwhile, controversial Cambridge Analytica apparently did work for Leave.EU campaign on the EU referendum, according to emails published by a House of Commons committee, even though the company never received payment for it.

Regarding the migrant crisis, Italy has engaged in another agreement with the European Union over migrants in the Mediterranean by refusing to allow 115 Africans to embark on Sicily. The European Union has subsequently asked if there are any other countries which would be willing to take on board the refugees.

In what is a push back to the US pressure, Iran and Russia are said to be planning a joint military drill in the Persian Gulf and the Strait of Hormuz, the Commander of the Iranian Navy, Rear Admiral Hossein Khanzadi, told state news agency IRNA. “A joint Russian-Iranian exercise is expected to be held shortly in the Indian Ocean. The exercise may also be held in the northern part of the Indian Ocean, including in the Strait of Hormuz,” Khanzadi said.

The major Europe stock markets had a negative day today:

• CAC 40 decreased 90.03 points or -1.61% to 5,511.07
• FTSE 100 decreased 39.84 points or -0.52% to 7,646.77
• DAX decreased 270.23 points or -2.18% to 12,147.24.

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00133 or 0.12% to 1.11573
• GBPUSD decreased 0.0055 or 0.45% to 1.2162
• USDCHF decreased 0.0014 or 0.14% to 0.9901

Some economic news from Europe:

Spain:

• Spanish Business Confidence increased from -3.7 to -2.8

France:

• French GDP (QoQ) (Q2) decreased from 0.3% to 0.2%
• French Consumer Spending (MoM) (Jun) decreased from 0.3% to -0.1%
• French Government Budget Balance (Jun) increased from -83.9B to -77.3B

Germany:

• GfK German Consumer Climate (Aug) decreased from 9.8 to 9.7
• German CPI (MoM) (Jul) increased from 0.3% to 0.5%
• German CPI (YoY) (Jul) increased from 1.6% to 1.7%
• German HICP (MoM) (Jul) increased from 0.3% to 0.4%
• German HICP (YoY) (Jul) decreased from 1.5% to 1.1%

Norway:

• Core Retail Sales (MoM) (Jun) increased from -1.4% to -0.4%

Swiss:

• KOF Leading Indicators (Jul) increased from 93.8 to 97.1

Eurozone:

• Business and Consumer Survey (Jul) decreased from 103.3 to 102.7
• Business Climate (Jul) decreased from 0.17 to -0.12
• Consumer Confidence (Jul) increased from -7.2 to -6.6
• Consumer Inflation Expectation (Jul) decreased from 21.9 to 20.6
• Selling Price Expectations (Jul) decreased from 3.2 to 1.7
• Services Sentiment (Jul) decreased from 11.0 to 10.6
• Industrial Sentiment (Jul) decreased from -5.6 to -7.4

U.S./AMERICAS:

U.S.-China trade talks resumed this Tuesday. However, Donald Trump is pessimistic that a deal will ensue. “China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through,” President Trump said on Twitter. “My team is negotiating with them now, but they always change the deal in the end to their benefit,” he continued.

According to the National Association of Realtors, average home prices reached a high in June of $285,700. On a YoY basis, home prices are up 4.3% ($273,800). Based on May’s reading, Las Vegas (6.4%), Phoenix (5.7%), and Tampa (5.1%) saw the largest YoY increases in the country.

“We expect that low mortgage rates, along with a thriving labor market, will help sustain the housing market for at least the next year and a half.” Freddie Mac released in a statement this Tuesday. Freddie Mac reiterated that mortgage rates dropped beneath 4% at the end of May and have remained low due to uncertainty regarding trade and interest rates. Moreover, Freddie Mac expects 30-year fixed mortgages to average at 4.1% in 2019 and drop to 4% in 2020. Freddie Mac presented a housing stat forecast of 1.26 million for 2019, and is anticipating an increase to 1.34 million in 2020. “Given the combination of increased homebuyer demand and a housing supply shortage, we expect home sales to be 6.00 million in 2019, before reaching its 2017 levels in 2020 at 6.12 million,” the report continued.

The FOMC meeting began today as the markets eagerly anticipate tomorrow’s interest rate policy announcement.

U.S. Market Closings:

• The Dow declined 23.33 points or -0.09% to 27,198.02
• S&P 500 declined 7.79 points or -0.26% to 3,013.18
• Nasdaq declined 19.72 points or -0.24% to 8,273.61
• Russell 2000 advanced 16.55 points or 1.05% to 1,585.57

Canadian Market Closings:

• TSX Composite decline 26.12 points or -0.16% to 16,466.05
• TSX 60 declined 2.53 points or -0.26% to 982.35

Brazil Market Closing:

• Bovespa declined 549.87 or -0.53% to 102,932.76

ENERGY:

Iranian oil is still expected to find buyers, as the vice president was quoted stating, “Even though we are aware that friendly countries such as China are facing some restrictions, we expect them to be more active in buying Iranian oil.”

The oil markets had a mixed day today:

• Crude Oil increased 1.24 USD/BBL or 2.18% to 57.9986
• Brent increased 1.11 USD/BBL or 1.74% to 64.7364
• Natural gas decreased 0.007 USD/MMBtu or -0.33% to 2.1383
• Gasoline increased 0.0303 USD/GAL or 1.63% to 1.8940
• Heating oil increased 0.0375 USD/GAL or 1.96% to 1.9478
• Top commodity gainers: Lumber (2.29%), Crude Oil (2.25%), Brent(1.90%), and Heating Oil (2.01%)
• Top commodity losers: Palladium (-2.72 %), Lean Hogs (-2.53%), Rice (-1.75%), and Coffee (-1.63%)

The above data was collected around 15:52 EST on Tuesday.

BONDS:

Japan -0.15%(-0bp), US 2’s 1.85% (-0bps), US 10’s 2.06%(+0bps), US 30’s 2.58%(-0bps), Bunds -0.40% (-1bp), France -0.14% (-4bp), Italy 1.58% (+6bp), Turkey 14.98% (+7bp), Greece 2.08% (+3bp), Portugal 0.41% (-2bp), Spain 0.38% (+1bp) and UK Gilts 0.64% (-2bp).

• Italian 5-Year BTP Auction decreased from 1.34% to 0.80%
• Italian 10-Year BTP Auction decreased from 2.09% to 1.56%
• German 2-Year Schatz Auction decreased from -0.740% to -0.760%