Market Talk – September 19, 2019

ASIA:

US President Trump has warned China that they will face a tough trade war. “It’ll be the toughest deal anybody’s ever had to make from the standpoint of China,” Trump said. His warning comes around if China waits to make a deal until after the US general election in November 2020. Today is the first day the vice ministers are meeting to create some headwind and lay the foundation for the trade talks which resume early October. This will be the first time the two countries are meeting in nearly two months as China would like to make the incoming tariffs on 250bn worth of goods disappear.

India has decided not to open their economic issue at the next UN general assembly, instead looking to focus more on the development, peace, and security fronts the Ministry of External affairs said today. An Indian union minister has told reporters that there is no financial crisis in India and that the central government was taking all necessary steps to strengthen the economy. “To make the economy stronger, the government has taken all measures and I want to say that the fundamentals of the country’s economy are strong. We are not in any crisis. Some reactions from non-banking financial companies (NBFCs) are there. But we are addressing all issues”

The major Asian stock markets had a mixed day today:

• Shanghai increased 13.62 points or 0.46% to 2,999.28
• Kospi increased 9.62 or 0.46% to 2080.35
• ASX 200 increased 35.90 points or 0.54% to 6,717.50
• NIKKEI 225 increased 83.74 points or 0.38% to 22,044.45
• Hang Seng decreased 285.17 points or -1.07% to 26,468.95
• SENSEX decreased 470.41 points or -1.29% to 36,093.47

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0021 or 0.30% to 0.6806
• NZDUSD decreased 0.0009 or 0.13% to 0.6312
• USDJPY decreased 0.5070 or 0.47% to 107.9330
• USDCNY increased 0.0163 or 0.23% to 7.0989

Precious Metals:

• Gold increased 5.95 USD/t oz. or 0.40% to 1,497.64
• Silver increased 0.081 USD/t. oz or 0.46%% to 17.7866

Some economic news from last night:

Australia:

• Employment Change (Aug) decreased from 41.1K to 34.7K
• Full Employment Change (Aug) decreased from 34.5K to -15.5K
• Participation Rate (Aug) increased from 66.1% to 66.2%
• Unemployment Rate (Aug) increased from 5.2% to 5.3%

New Zealand:

• GDP (QoQ) (Q2) decreased from 0.6% to 0.5%
• GDP (YoY) (Q2) decreased from 2.5% to 2.1%
• GDP Annual Average (Q2) decreased from 2.7% to 2.4%
• GDP Expenditure (QoQ) (Q2) decreased from 0.9% to 0.7%

Japan:

• BoJ Interest Rate Decision remain the same at -0.10%

South Korea:

• M2 Money supply (Jul) increased from 7.10% to 7.20%

Some economic news from today:

Indonesia：

• Interest Rate Decision decreased from 5.50% to 5.25%
• Deposit Facility Rate (Sep) decreased from 4.75% to 4.50%
• Lending Facility Rate (Sep) decreased from 6.25% to 6.00%

Japan:

• All Industries Activity Index (MoM) increased from -0.7% to 0.2%

EUROPE/EMEA:

The UK officially handed over some confidential documents that “reflect the ideas the UK has put forward” on the topic of Brexit for the review of the EU, the UK government said today according to the BBC. However, they said these are purely in the “idea” stage and “formal written solutions [will be presented] when we are ready.” This comes about after the Finnish PM told the media that the EU has told the UK they have only 12 days to set their Brexit plan. The French President Emmanuel Macron has agreed that the proposals in writing must come out before the end of the month, otherwise it “is over.”

Meanwhile, the BOE has decided to keep rates as they are, citing Brexit uncertainty was affecting the economy and any delay to Brexit would be a bad thing. The committee voted in favor of keeping rates steady at 0.75%.

France’s finance minister warned Germany that now is the time to act on its struggling economy. He sounded somewhat frustrated in their approach, outlining a three pillared strategy, according to Reuters. “Keep reducing public debt where it is necessary. And it is the case in France; keep pursuing structural reforms, as we are doing in France; have budget policies that can take up the baton from monetary policy,” he stated.

Germany along with France are adding in regulations to stop the likes of Facebook Libra. Their main concern is that the cryptocurrency will be economically competitive and potentially affect sovereign monetary policies.

Iranian foreign minister has warned of an “all out war” in the event of a US or Saudi military attack against Iran. In the meantime, having a dig at Saudi over whether they were willing to fight to the last American soldier. He denied any involvement on the part of the Iranians stating, “I know that we didn’t do it. I know that the Houthis made a statement that they did it.” Meanwhile US President Trump tweeted, “I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!”

The Israeli elections are going on as Netanyahu and Gantz compete over unity of government. This is the second election in a year where the results are deadlocked.

The major Europe stock markets had a green day today:

• CAC 40 increased 38.44 points or 0.68% to 5,659.08
• FTSE 100 increased 42.37 points, or 0.58% to 7,356.42
• DAX increased 68.08 points or 0.55% to 12,457.70

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0025 or 0.22% to 1.1054
• GBPUSD increased 0.0078 or 0.62% to 1.2546
• USDCHF decreased 0.0053 or 0.53% to 0.9920

Some economic news from Europe today:

Swiss:

• Trade Balance (Aug) decreased from 3.686B to 1.588B
• SNB Interest Rate Decision remain the same at -0.75%

Norway:

• Interest Rate Decision increased from 1.25% to 1.50%

Eurozone:

• Current Account (Jul) increased from 18.4B to 20.6B
• Current Account n.s.a. (Jul) increased from 23.1B to 29.8B

UK:

• BoE MPC vote cut (Sep) remain the same at 0
• BoE MPC vote hike (Sep) remain the same at 0
• BoE MPC vote unchanged (Sep) remain the same at 9
• BoE QE Total (Sep) remain the same at 435B
• BoE Interest Rate Decision (Sep) remain the same at 0.75%
• Core Retail Sales (MoM) (Aug) decreased from 0.4% to -0.3%
• Core Retail Sales (YoY) (Aug) decreased from 3.1% to 2.2%
• Retail Sales (MoM) (Aug) decreased from 0.4% to -0.2%
• Retail Sales (YoY) (Aug) decreased from 3.4% to 2.7%

US/AMERICAS:

The Federal Reserve carried out their large scale repurchase operation for the third consecutive day in an attempt to maintain their target rate. This Thursday, the Fed injected $75 billion into the markets. The central bank first pushed $53 billion into the marketplace on Tuesday followed by an additional $75 billion on Wednesday. The last time a repo operation of this scale took place was nearly a decade ago when the US was recovering from the Great Recession. Earlier in the week, Fed Chairman Jerome Powell insisted that these measures were not an indication of the current economic outlook, but rather a temporary measure to ensure rates do not move higher.

The US House of Representatives passed legislation this Thursday to continue funding the government, at least for another two months. Lawmakers now have until September 30 to agree on a funding bill to prevent another potential government shutdown. The last government shutdown, which greatly impacted the markets, lasted 35 days from December 2018 to January 2019.

Perhaps not coincidentally before the October 21 elections, pictures of Canadian Prime Minister Justin Trudeau dressed in culturally insensitive brownface and blackface outfits surfaced. The first pictures to surface were from Trudeau’s days as a professor at the prestigious West Point Grey Academy, depicting him in an “Arabian Nights” themed outfit. New images have surfaced of Trudeau dressed in blackface performing at a high school talent show. “I should have known better. It was something that I didn’t think was racist at the time, but now I recognize it was something racist to do and I am deeply sorry,” the PM told reporters.

Brazil’s central bank lowered their interest rate to a record low of 5.5% this week. The nine-member voting panel or Copom unanimously agreed to lower rates for the second time this year. There are talks that the central bank will vote to drop rates by another 50 basis points when they deliberate again in October.

US Market Closings:

• The Dow declined 52.29 points or -0.19% to 27,094.79
• S&P 500 advanced 0.06 of a point or 0% to 3,006.79
• Nasdaq advanced 5.49 points or 0.07% to 8,182.88
• Russell 2000 declined 6.87 points or -0.44% to 1,561.47

Canada Market Closings:

• TSX Composite advanced 58.06 points or 0.35% to 16,858.35
• TSX 60 advanced 3.59 points or 0.36% to 1,009.36

Brazil Market Closing:

• Bovespa declined 192.77 points or -0.18% to 104,339.16

ENERGY:

Recent reports show new sources of fuels are becoming more cost efficient; technologies such as wind and solar power are being more cost efficient then fuels. With the latest city Canberra in Australia switching over to 100% renewable energy. Brent and Crude crept up slightly today amid more tensions in the Middle East. This comes on the back of a surprise build in Crude yesterday of 1.1 million barrels, according to the EIA report.

The oil markets had a mixed day today:

• Crude Oil increased 0.01 USD/BBL or 0.02% to 58.0140
• Brent increased 0.77 USD/BBL or 1.21% to 64.3650
• Natural gas decreased 0.097 USD/MMBtu or -3.68% to 2.5433
• Gasoline increased 0.0413 USD/GAL or 2.49% to 1.6978
• Heating oil increased 0.0302 USD/GAL or 1.53% to 2.0018
• Top commodity gainers: Cocoa (2.67%), Gasoline (2.49%), Palladium(2.09%), and Coffee (2.01 %)
• Top commodity losers: Natural Gas (-3.68 %), Lean Hogs (-2.34%), Steel (-1.81%), and Ethanol (-1.37%)

The above data was collected around 14:30 EST on Thursday.

BONDS:

Japan -0.22%(-4bp), US 2’s 1.74% (-1bps), US 10’s 1.77%(-1bps), US 30’s 2.21%(-3bps), Bunds -0.50% (+1bp), France -0.21% (+2bp), Italy 0.88% (+1bp), Turkey 14.60% (+23bp), Greece 1.37% (-1bp), Portugal 0.28% (+3bp), Spain 0.27% (+3bp) and UK Gilts 0.63% (-1bp).

• US 4-Week Bill Auction increased from 1.940% to 1.950%
• US 8-Week Bill Auction increased from 1.920% to 1.950%
• US 10-Year TIPS Auction decreased from 0.282% to 0.174%
• French 3-Year BTAN Auction increased from -0.69% to -0.66%
• French 5-Year BTAN Auction decreased from -0.44% to -0.50%
• Spanish 3-Year Bonos Auction increased from -0.54% to -0.477%
• Spanish 10-Year Obligacion Auction increased from 0.180% to 0.210%