Market Talk – September 13, 2019

ASIA:

Hong Kong’s $37 billion bid to takeover the London Stock Exchange (LSE) was rejected this Friday. The LSE board unanimously rejected the bid due to “fundamental flaws.” Hong Kong Exchanges and Clearing (HKEX) had hoped the deal would “create a truly global market infrastructure group connecting the East and West.”

Recent reports suggest that Russia is displeased with China for stealing an unlicensed design of one of their military jets. Instead of purchasing Russia’s Su-33 carrier jet, China attempted to design their own carrier called the J-15. Yet, the design of the J-15 is fundamentally flawed and has failed numerous test flights. Russia and China have a strong alliance and often hold joint military exercises. It is to be seen whether the stolen design will cause friction between the two countries.

The Shanghai and Kospi indexes were closed this Friday to honor the Mid-Autumn Festival.

The major Asian stock markets had a green day today:

• Shanghai closed (public holiday)
• Kospi closed (public holiday)
• ASX 200 increased 14.30 points or 0.21% to 6,669.20
• NIKKEI 225 increased 228.68 points or 1.05% to 21,988.29
• Hang Seng increased 265.06 points or 0.98% to 27,352.69
• SENSEX increased 280.71 points or 0.76% to 37,384.99

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.0024 or 0.35% to 0.6890
• NZDUSD decreased 0.0011 or 0.18% to 0.6392
• USDJPY decreased 0.0060 or 0.01% to 108.0840
• USDCNY decreased 0.0350 or 0.50% to 7.0322

Precious Metals:

• Gold decreased 5.16 USD/t oz. or -0.34% to 1,493.15
• Silver decreased 0.353 USD/t. oz or -1.95%% to 17.7672

Some economic news from last night:

New Zealand:

• Business NZ PMI (Aug) increased from 48.2 to 48.4

Japan:

• Thomson Reuters IPSOS PCSI (Sep) increased from 39.44 to 40.25

China:

• China Thomson Reuters IPSOS PCSI (Sep) decreased from 71.26 to 68.54

Some economic news from today:

India:

• Bank Loan Growth decreased from 11.6% to 10.2%
• Deposit Growth decreased from 10.2% to 9.7%
• FX Reserves, USD increased from 428.60B to 429.61B

Japan:

• Capacity Utilization (MoM) (Jul) increased from -2.6% to 1.1%
• Industrial Production (MoM) (Jul) increased from -3.3% to 1.3%

EUROPE/EMEA:

Speaker of the UK House of Commons John Bercow is warning Boris Johnson that he will use the full extent of Parliament to fight against a no-deal Brexit. “One should no more refuse to request an extension of Article 50 because of what one might regard as the noble end of departing from the EU as soon as possible, than one could excuse robbing a bank on the basis that the cash stolen would be donated to a charitable cause immediately afterwards,” the speaker stated. After losing his majority standing in Parliament, Bercow’s statements should be more alarming to Johnson’s administration.

Germany currently holds the largest account surplus of any country in the world, according to new data released by the IFO this Friday. During the 2019 fiscal year, Germany’s surplus reached $276 billion. However, the same thinktank stated that Germany is at risk of sinking into a recession due to a decrease in manufacturing. “Like an oil slick, the weakness in industry is gradually spreading to other sectors of the economy,” Timo Wollmershaeuser, head of the IFO.

The major Europe stock markets had a green day today:

• CAC 40 increased 12.60 points or 0.22% to 5,655.46
• FTSE 100 increased 22.79 points, or 0.31% to 7,367.46
• DAX increased 58.28 points or 0.47% to 12,468.53

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0015 or 0.13% to 1.1076
• GBPUSD increased 0.01233 or 1.00% to 1.24553
• USDCHF decreased 0.00072 or -0.07% to 0.98948

Some economic news from Europe today:

Germany:

• German WPI (YoY) (Aug) decreased from -0.1% to -1.1%
• German WPI (MoM) (Aug) decreased from -0.3% to -0.8%

Spain:

• Spanish CPI (YoY) (Aug) decreased from 0.5% to 0.3%
• Spanish CPI (MoM) (Aug) increased from -0.6% to -0.1%
• Spanish HICP (YoY) (Aug) decreased from 0.6% to 0.4%
• Spanish HICP (MoM) (Aug) increased from -1.1% to -0.1%

Eurozone:

• Wages in euro zone (YoY) (Q2) remain the same at 2.70%
• Labor Cost Index (YoY) (Q2) increased from 2.50% to 2.70%
• Trade Balance (Jul) increased from 20.6B to 24.8B

US/AMERICAS:

The annual US deficit hit a seven-year high in August after topping $1 trillion. According to a report issued by the Treasury Department, the US deficit came in at $1.07 trillion for the current fiscal year, which brings the total national debt to an astounding $22.5 trillion.

More promising news on the US-China trade front this Friday. China announced that they will exempt certain agricultural products, including soy beans and pork, from the next round of tariffs. Yesterday, a private Chinese firm purchased ten boatloads, weighing 600 tonnes, of American soybeans. Additionally, the U.S. Department of Agriculture (USDA) reported that China purchased over 10,000 tonnes of pork from the US during the first week of the month. Increasing purchases of US agriculture was one of the main trade stipulations made earlier in the year. These recent purchases and tariff delays signal easing tensions ahead of the face to face meeting set for early October.

Economic advisor Larry Kudlow announced that the White House is planning “Tax Cuts 2.0” for 2020. Without providing any direct information, Kudlow stated that the plan will primarily benefit the middle-class. Without coincidence, the plan will be implemented before the 2020 US presidential election where President Trump will compete with a Democratic Party who repeatedly dismissed his current tax cuts for only benefitting the wealthiest of Americans. “We will gather together the best ideas from the Hill (Congress), the administration and outside folks to provide a significant new round of middle class tax relief,” Kudlow stated this Friday.

US Market Closings:

• Dow advanced 37.07 points or 0.14% to 27,219.52
• S&P 500 declined 2.18 points or -0.07% to 3,007.39
• Nasdaq declined 17.75 points or -0.22% to 8,176.71
• Russell 2000 advanced 3.07 points or 0.20% to 1,578.14

Canada Market Closings:

• TSX Composite advanced 39.14 points or 0.24% to 16,682.42
• TSX 60 advanced 2.40 points or 0.24% to 998.54

Brazil Market Closing:

• Bovespa declined 869.73 points or -0.83% to 103,501.18

ENERGY:

Russian Energy Minister Alexander Novak stated that his country has maintained its desired production quota for the year. When asked by a reporter with CNBC if Russia’s pricing was influenced by outside factors, namely US President Trump’s accusations of OPEC price manipulation, Novak maintained that Russia only looked to “the balance between supply and demand.”

The oil markets had a mixed day today:

• Crude Oil decreased 0.07 USD/BBL or -0.13% to 55.1056
• Brent decreased 0.05 USD/BBL or -0.08% to 60.4158
• Natural gas decreased 0.004 USD/MMBtu or -0.16% to 2.5692
• Gasoline increased 0.0007 USD/GAL or 0.05% to 1.5526
• Heating oil increased 0.0012 USD/GAL or 0.06% to 1.8825
• Top commodity gainers: Lean Hogs (3.72%), Coal (1.80%), Sugar(1.30%), and Copper (2.02 %)
• Top commodity losers: Oat (-8.61 %), Lumber (-7.89%), Silver (-1.95%), and Coffee (-1.79%)

The above data was collected around 12:45 pm   EST on Friday.

BONDS:

Japan -0.15%(+6bp), US 2’s 1.77% (+4bps), US 10’s 1.89%(+9bps), US 30’s 2.28%(+1bps), Bunds -0.44% (+10bp), France -0.17% (+9bp), Italy 0.89% (+5bp), Turkey 14.59% (-12bp), Greece 1.57% (+7bp), Portugal 0.32% (+8bp), Spain 0.33% (+1bp) and UK Gilts 0.75% (+8bp).