Market Talk – August 14, 2019

ASIA:

China has described the Hong Kong protests as “terrorism” as clashes with police broke out after a few days of peaceful protests. All eyes are on the Chinese government on how they are going to deal with the ongoing situation in Hong Kong. US President Trump commented, “We’ll see what happens. But I’m sure it’ll work out. I hope it works out for everybody, including China, by the way. I hope it works out for everybody.” He did get some backlash from the Democratic party who are in full support of the Hong Kong nationals.

A series of economic data were released from China today, showing the jobless rate rising and industrial production only rising 4.8% down from 6.3% for June. The numbers certainly show a cooling of the Chinese economic machine with the Industrial production numbers at a lower rate than that throughout the financial crisis of 2008.

Things are heating up in Kashmir, after Pakistani Prime Minister Imran Khan has vowed to push back against any Indian violations in the region. Imran Khan said, “The Pakistani army has solid information that they are planning to do something in Pakistani Kashmir, and they are ready and will give a solid response.” Further adding, “We have decided that if India commits any type of violation we will fight until the end… The time has arrived to teach you a lesson.” Chinese major media weighed in on the situation stating that India were being reckless and would find it difficult to control the population of the region.

The major Asian stock markets had a green day today:

• Shanghai increased 11.65 points or 0.42% to 2,808.91
• Kospi increased 12.54 points or 0.65% to 1,938.37
• ASX 200 increased 27.40 points or 0.42% to 6,595.90
• NIKKEI 225 increased 199.69 points or 0.98% to 20,655.13
• Hang Seng increased 20.98 points or 0.08% to 25,302.28
• SENSEX increased 353.37 points or 0.96% to 37,311.53

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0050 or 0.73% to 0.6750
• NZDUSD decreased 0.0027 or 0.42% to 0.6429
• USDJPY decreased 0.7530 or 0.71% to 105.9770
• USDCNY increased 0.0396 or 0.57% to 7.0486

Precious Metals:

• Gold increased 14.76 USD/t oz. or 0.98% to 1,518.34
• Silver increased 0.275 USD/t. oz or 1.62% to 17.2710

Some economic news from last night:

South Korea:

• Export Price Index (YoY) (Jul) decreased from -2.7% to -5.3%
• Import Price Index (YoY) (Jul) decreased from -0.6% to -1.3%
• Unemployment Rate (Jul) remain the same at 4.0%

Japan:

• Core Machinery Orders (MoM) (Jun) increased from -7.8% to 13.9%
• Core Machinery Orders (YoY) (Jun) increased from -3.7% to 12.5%

Australia:

• Westpac Consumer Sentiment (Aug) increased from -4.1% to 3.6%
• Wage Price Index (QoQ) (Q2) increased from 0.5% to 0.6%
• Wage Price Index (YoY) (Q2) remain the same at 2.3%

China:

• Fixed Asset Investment (YoY) (Jul) decreased from 5.8% to 5.7%
• Industrial Production (YoY) (Jul) decreased from 6.3% to 4.8%
• Chinese Industrial Production YTD (YoY) (Jul) decreased from 6.0% to 5.8%
• Retail Sales (YoY) (Jul) decreased from 9.8% to 7.6%
• Chinese Retail Sales YTD (YoY) (Jul) decreased from 8.44% to 8.32%
• Chinese Unemployment Rate increased from 5.1% to 5.3%

Some economic news from today:

India:

• WPI Food (YoY) (Jul) decreased from 6.98% to 6.15%
• WPI Fuel (YoY) (Jul) decreased from -2.20% to -3.64%
• WPI Inflation (YoY) (Jul) decreased from 2.02% to 1.08%
• WPI Manufacturing Inflation (YoY) (Jul) decreased from 0.94% to 0.34%
• M3 Money Supply decreased from 10.6% to 10.1%
• Trade Balance (Jul) decreased from 15.28B to 13.43B

EUROPE/EMEA:

Regarding Brexit, US Congress will attempt to block a UK trade deal if Brexit harms the Good Friday agreement according to Democrat Nancy Pelosi. This is in stark contrast to John Bolton’s comments early in the week whereby he stated that the UK were “first in line” for a deal.  Prime minister Boris Johnson has accused the opposition party of collaborating the EU to block Brexit and this has increased the probability of a no deal Brexit as this is making the EU less willing to compromise on a new deal.

Germany’s economy slipped back into negative growth this last quarter, with the quarter dropping -0.1% the second time in a year. Some analysts believe that Germany is on the fringes of a full-blown recession. Fingers are pointing at the US-China trade deal for the the lackluster performance as they are huge export countries for German products. With the upcoming uncertainty around Brexit and now Europe’s largest economy is on the downturn, it could prove to be a gloomy foreseeable future for Europe.

The UAE criticized the recent visit of Yemeni rebels to Iran, as they state it demonstrates where the “houthis” allegiance lies. UAE foreign minister tweeted “Houthi relations with Iran, for long in search for proper designation, is clearer following their leadership’s meeting with Ayatollah Khamenei. Stated in black & white in their statement of fealty the Houthis are a proxy and that is the correct terminology.”

The major Europe stock markets had a negative day today:

• CAC 40 decreased 111.76 points or -2.08% to 5,251.30
• FTSE 100 decreased 103.02 points, or -1.42% to 7,147.88
• DAX decreased 257.47 points or -2.19% to 11,492.66

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.0027 or 0.24% to 1.1142
• GBPUSD increased 0.0001 or 0.01% to 1.2059
• USDCHF decreased 0.0031 or 0.32% to 0.9733

Some economic news from Europe today:

France:

• French Unemployment Rate (Q2) decreased from 8.7% to 8.5%
• French CPI (MoM) (Jul) decreased from 0.2% to -0.2%
• French CPI (YoY) decreased from 1.2% to 1.1%
• French HICP (YoY) (Jul) decreased from 1.4% to 1.3%
• French HICP (MoM) (Jul) decreased from 0.3% to -0.2%

Germany:

• German GDP (YoY) (Q2) decreased from 0.6% to 0.0%
• German GDP (QoQ) (Q2) decreased from 0.4% to -0.1%

Euro zone:

• Employment Change (YoY) decreased from 1.3% to 1.1%
• Employment Change (QoQ) decreased from 0.3% to 0.2%
• Employment Overall (Q2) increased from 159,554.8K to 159,930.0K
• GDP (YoY) (Q2) remain the same at 1.1%
• GDP (QoQ) (Q2) remain the same at 0.2%
• Industrial Production (YoY) (Jun) decreased from -0.8% to -2.6%
• Industrial Production (MoM) (Jun) decreased from 0.8% to -1.6%

UK:

• Core CPI (MoM) (Jul) increased from 0.0% to 0.1%
• Core CPI (YoY) (Jul) increased from 1.8% to 1.9%
• Core PPI Output (YoY) (Jul) increased from 1.7% to 2.0%
• Core PPI Output (MoM) (Jul) increased from 0.1% to 0.4%
• Core RPI (YoY) (Jul) decreased from 2.8% to 2.7%
• Core RPI (MoM) (Jul) decreased from 0.2% to 0.0%
• CPI (MoM) (Jul) decreased from 0.3% to 0.0%
• CPI (YoY) (Jul) increased from 2.0% t0 2.1%
• CPI, n.s.a (Jul) decreased from 107.93 to 107.90
• CPIH (YoY) increased from 1.9% to 2.0%
• House Price Index (YoY) remain the same at 0.9%
• PPI Input (YoY) (Jul) increased from 0.3 to 1.3%
• PPI Input (MoM) (Jul) inreased from -0.8% to 0.9%
• PPI Output (YoY) (Jul) increased from 1.6% to 1.8%
• PPI Output (MoM) (Jul) increased from -0.1% to 0.3%
• RPI (MoM) (Jul) decreased from 0.1% to 0.0%
• RPI (YoY) (Jul) decreased from 2.9% to 2.8%

U.S./AMERICAS:

This Wednesday marked the weakest day of trading on U.S. indexes in 2019 due to the distressing inverted yield curve. The 2-year Treasury note rose beyond the 10-year Treasury note earlier in the day. Numerous analysts foresee this uncommon event as a strong indicator of a coming recession. Investors jumped to purchase long-term government paper, which resulted in the 30-year note reaching a new low. The president of the U.S. called the yield curve “crazy,” and unsurprisingly pointed his finger at the Federal Reserve. “China is not our problem, though Hong Kong is not helping,” the president comment. President Trump called Fed Chairman Powell “clueless” for raising rates too quickly and adopting a patient policy in lowering rates. “We should easily be reaping big Rewards & Gains, but the Fed is holding us back,” Trump tweeted.

Senator Doug Jones stated that Congress may become involved in the U.S.-China trade war. Jones, a Democrat from Alabama, said his state has been particularly disadvantaged by the trade war due to declines in agriculture and manufacturing. Jones told reporters that he has already begun collaborating with other senators to form new bills. “Congress is going to start stepping in more than they have in the past,” he stated.

This Wednesday, Commerce Secretary Wilbur Ross reiterated that the decision to delay select Chinese tariffs is a measure to protect the American consumer. Ross said that this decision “was not a quid pro quo” or favor granted to the Chinese. “Nobody wants to take any chance of disrupting the Christmas season,” Ross told reporters at CNBC.

U.S. Market Closings:

• The Dow declined 800.49 points or -3.05% to 25,479.42
• S&P 500 declined 85.72 points or -2.93% to 2,840.60
• Nasdaq declined 242.42 points or -3.02% to 7,773.94
• Russell 2000 declined 43.05 points or -2.85% to 1,467.52

Canada Market Closings:

• TSX Composite declined 304.90 points or -1.86% to 16,045.94
• TSX 60 declined 19.03 points or -1.95% to 957.56

Brazil Market Closing:

• Bovespa declined 3,036.07 points or -2.94% to 100,263.40

ENERGY:

The EIA reported a weekly rise of 1.6 million barrels of US oil. This data along with lackluster economic data from China and Europe helped push the price of crude back down around 5% at the time of writing which overwrites previous gains.

The oil markets had a negative day today:

• Crude Oil decreased 2.25 USD/BBL or -3.94% to 54.9242
• Brent decreased 2.37 USD/BBL or -3.87% to 58.8268
• Natural gas decreased 0.018 USD/MMBtu or -0.84% to 2.1247
• Gasoline decreased 0.077 USD/GAL or -4.43% to 1.6622
• Heating oil decreased 0.0487 USD/GAL or -2.59% to 1.8318
• Top commodity gainers: Baltic Dry (4.61%), Feeder Cattle (3.66%), Silver(1.62%), and Bitumen (1.21%)
• Top commodity losers: Ethanol (-2.87 %), Gasoline (-3.92%), Crude Oil (-3.50%), and Brent (-3.28%)

The above data was collected around 14:25 EST on Wednesday.

BONDS:

Japan -0.22%(+2bp), US 2’s 1.58% (-9bps), US 10’s 1.58%(-10bps), US 30’s 2.04%(-10bps), Bunds -0.65% (-4bp), France -0.37% (-5bp), Italy 1.51% (-11bp), Turkey 14.64% (+34bp), Greece 2.08% (-6bp), Portugal 0.18% (-5bp), Spain 0.16% (-5bp) and UK Gilts 0.44% (-5bp).

• US 52-Week Bill Auction decreased from 1.915% to 1.800%