Market Talk – August 15, 2019

ASIA:

US President Donald Trump has urged his Chinese counterpart President Xi to meet with protesters in Hong Kong. In a series of tweets, firstly highlighting the qualities of President Xi by calling him a good man in a tough business, and later tweeting, “If President Xi would meet directly and personally with the protesters, there would be a happy and enlightened ending to the Hong Kong problem. I have no doubt!” There is still little progress from either side since the protests began 10 weeks ago. Meanwhile, the Chinese ambassador to the UK has warned UK politicians not to get involved in Hong Kong’s affairs, “refrain from saying or doing anything that interferes or undermines the rule of law in Hong Kong” were the words he used.

The US-Chinese trade war is taking another turn today, with China releasing a statement that China “has no choice but to take necessary measures to retaliate,” but it did not go into much details of the proposed plans.

India is reorganizing their military positions after they appointed a Chief of Defense staff member who will act as a mouth piece to the government. Meanwhile, the Pakistani government has ordered an Indian envoy over the alleged ceasefire violation in Kashmir.

The major Asian stock markets had a mixed day today:

• Shanghai increased 6.88 points or 0.25% to 2,815.80
• Kospi closed (public holiday)
• ASX 200 decreased 187.80 points or -2.85% to 6,408.10
• NIKKEI 225 decreased 249.48 points or -1.21% to 20,405.65
• Hang Seng increased 193.18 points or 0.76% to 25,495.46
• SENSEX closed (public holiday)

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.0035 or 0.51% to 0.6782
• NZDUSD increased 0.0012 or 0.19% to 0.6446
• USDJPY increased 0.2010 or 0.19% to 106.0910
• USDCNY decreased 0.0058 or 0.08% to 7.0469

Precious Metals:

• Gold increased 5.12 USD/t oz. or 0.34% to 1,524.16
• Silver increased 0.055 USD/t. oz or 0.32% to 17.2939

Some economic news from last night:

Australia:

• MI Inflation Expectations increased from 3.2% to 3.5%
• Employment Change (Jul) increased from 0.5K to 41.1K
• Full Employment Change (Jul) increased from 21.1K to 34.5K
• Participation Rate (Jul) increased from 66.0% to 66.1%
• Unemployment Rate (Jul) remain the same at 5.2%

China:

• House Prices (YoY) (Jul) decreased from 10.3% to 9.7%

Some economic news from today:

Indonesia:

• Export Growth (YoY) (Jul) increased from -8.98% to -5.12%
• Import Growth (YoY) (Jul) decreased from 2.80% to -15.21%
• Trade Balance (Jul) decreased from 0.20B to -0.06B

Japan:

• Capacity Utilization (MoM) (Jun) decreased from 1.7% to -2.6%
• Industrial Production (MoM) (Jun) increased from -3.6% to -3.3%

EUROPE/EMEA:

Senior Tory MP Tom Tugendhat has said that the UK could withdraw much earlier than the 31st of October and as early as next week, but downing street officials have denied such rumors and said it is not under consideration.

Six European countries agreed to take in asylum seekers who were waiting to disembark a rescue vessel that has been off the coast of Italy for two weeks. Those countries are France, Germany, Romania, Portugal, Spain and Luxembourg. The far-right interior minister refused to allow them to disembark into Italian land. However, PM Conte explained in a written letter that those 6 countries are willing to take them in.

Authorities in Gibraltar released a Iranian oil tanker, despite a last gasp attempt from the US to seize the vessel according to the British overseas territory. The judge stated that the Iranian government gave written assurances that the tanker would not be heading for a destination with EU sanctions.

The major Europe stock markets had a negative day today:

• CAC 40 decreased 14.37 points or -0.27% to 5,236.93
• FTSE 100 decreased 80.87 points, or -1.13% to 7,067.01
• DAX decreased 79.99 points or -0.70% to 11,412.67

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.0026 or 0.23% to 1.1112
• GBPUSD increased 0.0056 or 0.46% to 1.2115
• USDCHF increased 0.0022 or 0.22% to 0.9754

Some economic news from Europe today:

Norway:

• Consumer Confidence (Q3) increased from 13.90 to 17.10
• Trade Balance (Jul) increased from 5.2B to 6.5B
• Interest Rate Decision remain the same at 1.25%

Swiss:

• PPI (YoY) (Jul) decreased from -1.4% to -1.7%
• PPI (MoM) (Jul) increased from -0.5% to -0.1%

UK:

• Core Retail Sales (YoY) (Jul) decreased from 3.6% to 2.9%
• Core Retail Sales (MoM) (Jul) decreased from 0.8% to 0.2%
• Retail Sales (YoY) (Jul) decreased from 3.8% to 3.3%
• Retail Sales (MoM) (Jul) decreased from 0.9% to 0.2%
• Thomson Reuters IPSOS PCSI (Aug) decreased from 49.0 to 48.3

Italy:

• Italy Thomson Reuters IPSOS PCSI (Aug) decreased from 44.92 to 42.97

Germany:

• Germany Thomson Reuters IPSOS PCSI (Aug) decreased from 55.17 to 54.17

France:

• France Thomson Reuters IPSOS PCSI (Aug) increased from 44.22 to 45.21

Euro zone:

• Reserve Assets Total (Jul) increased from 770.78B to 797.87B

U.S./AMERICAS:

The U.S. Commerce Department released their monthly retail report this Thursday, aiding a slight recovery in the Dow and S&P 500 after a less than stellar week. Retail sales in the U.S. rose by 0.7% in July, nearly doubling many analysts’ expectations.

Home mortgage debt in the U.S. spiked during the second quarter, surpassing the last peak in 2008 during the Great Recession. According to the Federal Reserve Bank of New York, mortgage debt reached $9.406 trillion during the second quarter of 2019, which is a rise of $162 billion from the first quarter of the year. The figure also surpasses the Q3 2008 high of $9.294 trillion. Mortgages remain the largest component of American household debt.

There has been a bit of a mortgage refinancing boom in the U.S. as mortgage rates continue to decline. The average 30-year fixed rate dropped below 4% this May and has continued to decline. According to Freddie Mac, borrowers who refinanced in Q2 pulled an estimated $17.5 billion in equity from their properties. Year-over-year, that is an increase of $2.1 billion. The peak in home refinances came during the second quarter of 2006 when borrowers pulled $84 billion in equity from their homes.

U.S. Market Closings:

• The Dow advanced 99.97 points or 0.39% to 25,579.39
• S&P 500 advanced 7 points or 0.25% to 2,847.60
• Nasdaq declined 7.32 points or -0.09% to 7,766.62
• Russell 2000 declined 5.87 points or -0.40% to 1,461.65

Canadian Market Closings:

• TSX Composite declined 33.41 points or -0.21% to 16,012.53
• TSX 60 declined 1.72 points or -0.18% to 955.84

Brazil Market Closing:

• Bovespa declined 1,201.10 or -1.20% to 99,056.91

ENERGY:

Crude oil looks to maintain its downtrend as there has been little positive global news as well as large US stockpiles printed in the EIA report this week.

The oil markets had a mixed day today:

• Crude Oil decreased 0.8 USD/BBL or -1.45% to 54.3912
• Brent decreased 1.14 USD/BBL or -1.92% to 58.2482
• Natural gas increased 0.1 USD/MMBtu or 4.67% to 2.2462
• Gasoline decreased 0.0345 USD/GAL or -2.06% to 1.6397
• Heating oil decreased 0.0295 USD/GAL or -1.60% to 1.8117
• Top commodity gainers: Baltic Dry (4.97%), Natural Gas (4.67%), Palladium(1.50%), and Ethanol (0.72%)
• Top commodity losers: Rubber (-4.13 %), Coal (-3.66%), Gasoline (-2.06%), and Palm Oil (-2.07%)

The above data was collected around 14:15 EST on Thursday.

BONDS:

Yields for 10-year government bonds in major Asian markets and around the world have been dropping sharply as recession fears send investors pouring into the assets.

Japan -0.22%(+1bp), US 2’s 1.51% (-7bps), US 10’s 1.52%(-7bps), US 30’s 2.00%(-3bps), Bunds -0.70% (-6bp), France -0.43% (-7bp), Italy 1.32% (-19bp), Turkey 15.03% (+39bp), Greece 2.06% (+2bp), Portugal 0.08% (-10bp), Spain 0.06% (-9bp) and UK Gilts 0.40% (-5bp).

• US 4-Week Bill Auction decreased from 2.065% to 2.040%
• US 8-Week Bill Auction decreased from 2.050% to 1.950%