Market Talk – September 18, 2019

ASIA:

The US and China will resume talks tomorrow in Washington, and China’s Vice Minister of Finance Liao Min will lead the “vice – ministerial” delegation to discuss trade and economic issues. The aim is to remove the upcoming tariffs which are expected to come into play on October 15^th on over 250 billion USD worth of Chinese goods.

South Korea followed Japan’s lead and dropped Japan from a list of countries who receive fast-track approvals in trade. This downgrade comes after the South Koreans complained to the WTO about Japan’s move to tighten exports of key chemicals used for semiconductors and displays. These items are of course core to the likes of Samsung which is South Korea’s largest company.

Pakistan today denied India the right to use their airspace as President Modi of India prepares his flight to Germany. Foreign Minister Shah Mahmood Qureshi said that the decision has been made “keeping in view the situation in occupied Kashmir.” “Keeping in view the situation in occupied Kashmir and India’s attitude witnessed in the tyranny and oppression [suffered by Kashmiris] and the violations of rights in the region, we have decided not to grant this request,” he said.

The major Asian stock markets had a mixed day today:

• Shanghai increased 7.54 points or 0.25% to 2,985.66
• Kospi increased 8.40 or 0.41% to 2070.73
• ASX 200 decreased 13.70 points or -0.20% to 6,681.60
• NIKKEI 225 decreased 40.61 points or -0.18% to 21,960.71
• Hang Seng decreased 36.12 points or -0.13% to 26,754.12
• SENSEX increased 82.79 points or 0.23% to 36,563.88

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0045 or 0.65% to 0.6820
• NZDUSD decreased 0.0046 or 0.73% to 0.6310
• USDJPY increased 0.3270 or 0.30% to 108.4470
• USDCNY increased 0.0027 or 0.04% to 7.0869

Precious Metals:

• Gold decreased 14.23 USD/t oz. or -0.95% to 1,490.08
• Silver decreased 0.405 USD/t. oz or -2.25%% to 17.6300

Some economic news from last night:

Australia:

• MI Leading Index (MoM) decreased from 0.1% to -0.3%

New Zealand:

• Current Account (YoY) (Q2) increased from -10.62B to -10.23B
• Current Account (QoQ) (Q2) decreased from 0.68B to -1.11B
• Current Account % of GDP (Q2) increased from -3.60% to -3.40%

Japan:

• Exports (YoY) (Aug) decreased from -1.5% to -8.2%
• Imports (YoY) (Aug) decreased from -1.2% to -12%
• Trade Balance (Aug) increased from -250.7B to -136.3B

South Korea:

• Export Price Index (YoY) (Aug) increased from -5.4% to -3.9%
• Import Price Index (YoY) (Aug) increased from -1.1% to 0.0%

EUROPE/EMEA:

According to the BBC, the Supreme Court ruled against the Scottish legal ruling that the dismissal of Parliament was against the law. The court stated that Boris Johnson’s decision to suspend Parliament was carried out “in bad faith” and was not of “high politics,” but rather “low, dishonest, dirty tricks.” “I am not sure we can assume this of this government,” the court noted.

French President Emmanuel Macron announced yesterday that France has gathered a total of five billion euros of capital from institutional investors to invest in tech companies over the next three years, as the country tries to grow more billion-euro start-ups.

Saudi Arabia told the world that the remains of the weapons used to strike them, causing the massive oil supply shortage, is evidence the perpetrators were Iran. The Saudi defense minister showed the wreckage of drones and cruise missiles, and ruled out Yemen due to the direction the missiles were fired from. Yemeni Houthi rebels have already declared that they are the group behind the attacks and Iran has denied any involvement.

Mike Pompeo visited Saudi today and told them that this was an “act of war.” The defense minister of Saudi Arabia, Col Turki al-Malki, said the attacked were “unquestionably sponsored by Iran.” “Data recovered from the computers [on the UAV] shows it’s Iranian,” he stated, referring to UAV or an unmanned aerial vehicle (i.e. drone).  He further added that those “responsible should be held for their actions.” It will be interesting to see how the international community responds to these latest findings.

The major Europe stock markets had a mixed day today:

• CAC 40 increased 5.14 points or 0.09% to 5,620.65
• FTSE 100 decreased 6.35 points, or -0.09% to 7,314.05
• DAX increased 17.01 points or 0.14% to 12,389.62

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.0050 or -0.45% to 1.1021
• GBPUSD decreased 0.00181 or -0.14% to 1.24819
• USDCHF increased 0.0051 or 0.51% to 0.9981

Some economic news from Europe today:

Germany:

• German Car Registration (YoY) (Jul) increased from -4.7% to -0.8%
• German Car Registration (MoM) (Jul) decreased from -2.3% to -5.7%

Eurozone:

• Construction Output (MoM) (Jul) decreased from 0.64% to -0.73%
• Core CPI (MoM) (Aug) remain the same at 0.2%
• Core CPI (YoY) (Aug) remain the same at 0.9%
• CPI (YoY) (Aug) remain the same at 1.0%
• CPI (MoM) (Aug) increased from -0.5% to 0.1%
• CPI ex Tobacco (YoY) (Aug) decreased from 1.0% to 0.9%
• CPI ex Tobacco (MoM) (Aug) increased from -0.5% to 0.1%
• HICP ex Energy & Food (YoY) (Aug) remain the same at 1.1%
• HICP ex Energy and Food (MoM) (Aug) increased from -0.5% to 0.2%

UK:

• Core CPI MoM (MoM) (Aug) increased from 0.1% to 0.4%
• Core CPI (YoY) (Aug) decreased from 1.9% to 1.5%
• Core PPI Output (YoY) (Aug) remain the same at 2.0%
• Core PPI Output (MoM) (Aug) decreased from 0.4% to 0.2%
• Core RPI (MoM) (Aug) increased from 0.0% to 0.8%
• Core RPI (YoY) (Aug) decreased from 2.7% to 2.6%
• CPI (MoM) (Aug) increased from 0.0% to 0.4%
• CPI (YoY) (Aug) decreased from 2.1% to 1.7%
• CPI, n.s.a (Aug) increased from 107.95 to 108.38
• House Price Index (YoY) decreased from 0.9% to 0.7%
• PPI Input (YoY) (Aug) decreased from 0.9% to -0.8%
• PPI Input (MoM) (Aug) decreased from 0.6% to -0.1%
• PPI Output (YoY) (Aug) decreased from 1.9% to 1.6%
• PPI Output (MoM) (Aug) decreased from 0.3% to -0.1%
• RPI (MoM) (Aug) increased from 0.0% to 0.8%
• RPI (YoY) (Aug) decreased from 2.8% to 2.6%

Italy:

• Italian Car Registration (YoY) (Jul) decreased from -2.1% to -3.1%
• Italian Car Registration (MoM) (Jul) decreased from -13.0% to -41.9%
• Italian Industrial New Orders (MoM) (Jul) decreased from -1.0% to -2.9%
• Italian Industrial New Orders (YoY) (Jul) increased from -4.9% to -1.0%
• Italian Industrial Sales (MoM) (Jul) increased from -0.70% to -0.50%
• Italian Industrial Sales (YoY) (Jul) increased from -0.80% to -0.60%
• Italian Trade Balance (Jul) increased from 5.701B to 7.631B
• Italian Trade Balance EU (Jul) increased from 1.85B to 3.58B

France:

• French Car Registration (YoY) (Jul) decreased from -8.4% to -14.1%
• French Car Registration (MoM) (Jul) decreased from 19.1% to -24.9%

US/AMERICAS:

The Federal Open Market Committee (FOMC) voted to lower interest rates by 25 basis points to a new target range of 1.75% to 2%. The Committee maintained that the US labor market is strong and the economy is growing at a “moderate rate.” Inflation remains beneath the 2% target and trade uncertainty remains a looming concern. “This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain,” the FOMC stated in their official statement. Future rate cuts are not off the table as seven of the 17 FOMC members voiced a potential need for an additional cut later in the year. The next FOMC meeting will be held on October 30.

“We’re not on a preset course,” Federal Reserve Chairman Jerome Powell stated during a press conference this Wednesday. Powell said that the FOMC is prepared to lowered rates later in the year in the event of an economic downturn. However, Powell does not foresee an economic decline in the near-term. “We made one decision today, and that decision was to lower the funds rate by a quarter percentage point. We believe that action is appropriate to promote our objectives,” the chairman stated.

Today’s rate decision was met with expected criticism. “Jay Powell and the Federal Reserve Fail Again. No ‘guts,’ no sense, no vision!  A terrible communicator!” President Trump tweeted after the Committee’s official statement. Trump has repeatedly pointed to other nation’s low or negative rate policies, claiming that the US is at a disadvantage. However, the data indicates that measures to artificially lower rates have not prevented economic declines.

US Market Closings:

• The Dow advanced 36.28 points or 0.13% to 27,147.08
• S&P 500 advanced 1.03 points or 0.03% to 3,006.73
• Nasdaq declined 8.62 points or -0.11% to 8,177.39
• Russell 2000 declined 9.95 points or -0.63% to 1,568.34

Canada Market Closings:

• TSX Composite declined 34.46 points or -0.20% to 16,800.29
• TSX 60 declined 1.08 points or -0.11% to 1,005.77

Brazil Market Closing:

• Bovespa declined 84.93 points or -0.08% to 104,531.93

ENERGY:

The American Petroleum Institute (API) has estimated a build of 592 thousand barrels for the week ending September 12, the official numbers from the EIA will be released tomorrow. The Crude price slipped around 2 percent today on the news that Saudi production is nearly back to normal after the few days of down time. However, the rising tensions in the area is keeping the price above 60 USD per barrel.

The oil markets had a negative day today:

• Crude Oil decreased 1.18 USD/BBL or -1.99% to 58.2345
• Brent decreased 1.02 USD/BBL or -1.58% to 63.6172
• Natural gas decreased 0.035 USD/MMBtu or -1.31% to 2.6373
• Gasoline decreased 0.0212 USD/GAL or -1.27% to 1.6558
• Heating oil decreased 0.0175 USD/GAL or -0.88% to 1.9724
• Top commodity gainers: Lumber (1.51%), Lean Hogs (1.29%), Wheat (1.19%), and Corn (1.02 %)
• Top commodity losers: Bitumen (-3.56 %), Crude Oil (-1.99%), Platinum (-1.74%), and Orange Juice (-1.74%)

The above data was collected around 15:45 EST on Wednesday.

BONDS:

Japan -0.19%(-4bp), US 2’s 1.71% (-3bps), US 10’s 1.78%(-4bps), US 30’s 2.22%(-6bps), Bunds -0.51% (-3bp), France -0.22% (-4bp), Italy 0.87% (-6bp), Turkey 14.37% (-29bp), Greece 1.39% (-11bp), Portugal 0.25% (-7bp), Spain 0.24% (-6bp) and UK Gilts 0.63% (-7bp).

• German 30-Year Bund Auction increased from -0.110% to 0.050%