Market Talk – October 11, 2019

ASIA:

US President Donald Trump expressed an optimistic note at the end of the first day of trade talks in Washington DC. “We had a very, very good negotiation with China,” Trump told the media. Meanwhile, foreign firms in China have a clear road map for full ownership of financial services companies. By 2020, overseas institutions can apply for full control of onshore ventures. This will certainly help foreign investments into the country as China begins to open up.

Hong Kong activist Joshua Wong posted a photo with Thai opposition leader Thanathorn Juangroongruangkit. The Chinese embassy in Bangkok reacted to this by condemning Thai politicians for showing support to the Hong Kong activists amid mass anti-Beijing protests, saying that such a move could harm the relationship between the two countries.

India, the world’s biggest importer of edible oils, is considering restricting imports of some products from Malaysia, including palm oil, in reaction to the Southeast Asian country’s leader slamming New Delhi for its actions in Kashmir. India’s government was angered after Malaysian Prime Minister Mahathir Mohamad alleged last month at the United Nations that India had “invaded and occupied” Jammu and Kashmir and asked New Delhi to work with Pakistan to resolve the issue. India is looking for ways to limit palm oil imports and may place restrictions on other goods from the country. India is planning to substitute Malaysian palm oil with supplies of edible oils from countries like Indonesia, Argentina, and Ukraine. Palm oil accounts for nearly two-thirds of India’s total edible oil imports. India buys more than 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia. In the first nine months of 2019, India was the biggest buyer of Malaysian palm oil, taking 3.9 million tonnes, according to data compiled by the Malaysian Palm Oil Board.

The major Asian stock markets had a green day today:

• Shanghai increased 25.95 points or 0.88% to 2,973.66
• Kospi increased 16.46 points or 0.81% to 2,044.61
• ASX 200 increased 59.70 points or 0.91% to 6,606.80
• NIKKEI 225 increased 246.89 points or 1.15% to 21,798.87
• Hang Seng increased 600.51 points or 2.34% to 26,308.44
• SENSEX increased 246.68 points or 0.65% to 38,127.08

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.0041 or 0.60% to 0.6802
• NZDUSD increased 0.0026 or 0.40% to 0.6344
• USDJPY increased 0.4740 or 0.44% to 108.4340
• USDCNY decreased 0.0199 or 0.28% to 7.0826

Precious Metals:

• Gold decreased 9.5 USD/t oz. or -0.64% to 1,487.21
• Silver increased 0.05 USD/t. oz or 0.29%% to 17.5131

Some economic news from last night:

New Zealand:

• Business NZ PMI (Sep) remain the same at 48.4
• Electronic Card Retail Sales (MoM) (Sep) decreased from 1.2% to 0.4%
• Electronic Card Retail Sales (YoY) (Sep) decreased from 2.8% to 0.3%

Japan:

• M2 Money Stock (YoY) remain the same at 2.4%
• M3 Money Supply (Sep) increased from 1,808.3T to 1,812.5T

Some economic news from today:

Singapore:

• Retail Sales (MoM) (Aug) decreased from 2.6% to -1.3%
• Retail Sales (YoY) (Aug) decreased from -1.8% to -4.1%

India:

• Bank Loan Growth decreased from 10.3% to 8.8%
• Deposit Growth decreased from 10.0% to 9.4%
• FX Reserves, USD increased from 433.59B to 437.83B
• Cumulative Industrial Production (Aug) decreased from 3.30% to 2.40%
• Industrial Production (YoY) (Aug) decreased from 4.6% to -1.1%
• Manufacturing Output (MoM) (Aug) decreased from 4.5% to -1.2%

EUROPE/EMEA:

UK Brexit Secretary Stephen Barclay met with the EU’s chief negotiator Michel Barnier today. The meeting came after a successful meeting between UK Prime Minister Boris Johnson and Irish PM, in which they agreed that there is a chance of a possible deal before the end of the month. The GBPUSD rallied over 3% in the last two days over the positive news. The EU’s chief negotiator, Michel Barnier, told the media that they he had “a constructive meeting with [Brexit secretary] Steve Barclay and the British team” this morning.

Yesterday, UK Home Office Minister Brandon Lewis told Die Welt, “If EU citizens have not registered by then and are not adequately justified, the applicable immigration rules will apply,” meaning if they have not applied for settled status in time (2021), they could be deported.

Britain is officially half-way into a recession, having contracted by 0.2% in April-June. But to be an official recession, it needs to also contract in July-September. That looks unlikely, given we now know GDP rose by 0.3% in June-August. Large businesses are wary about the future Brexit, with the head of Nissan Europe saying a possible no-deal Brexit could make its European business model unsustainable. Nissan’s European head, Mr. Ficchy said if an export tariff such as 10% was introduced after a no-deal, it would put its operations “in jeopardy.”

An explosion has caused a fire on an Iranian tanker near the coast of Saudi Arabia. The oil tanker, from Iran’s national oil company, was 60 miles from the Saudi port city of Jeddah when the incident took place, according to Al Jazeera and Iranian state media.

The US has set down red lines for the Turkish offensive into Syria that would trigger sanctions against Ankara, including “ethnic cleansing” and indiscriminate fire directed at civilians. There were protests today outside the White House to force the US to pressure Turkey to stop. US Secretary of State Mike Pompeo told media that they are contemplating putting sanctions on Turkey. The Turkish Prime Minister has warned that he is willing to “open the gates” for Syrian refugees in his country to migrate to Europe if the continent’s leaders label Turkey’s military campaign in north-eastern Syria an “occupation.”

The 2019 Nobel Peace Prize has been awarded to Ethiopian Prime Minister Abiy Ahmed. He was awarded the prize for his efforts to “achieve peace and international cooperation.” Ethiopia reached a peace deal with Eritrea last year, ending a 20-year military stalemate which started in 1998.

The major Europe stock markets had a green day today:

• CAC 40 increased 96.43 points or 1.73% to 5,665.48
• FTSE 100 increased 60.72 points, or 0.84% to 7,247.08
• DAX 30 increased 347.45 points or 2.86% to 12,511.65

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0043 or 0.39% to 1.1047
• GBPUSD increased 0.0225 or 1.81% to 1.26650
• USDCHF decreased 0.0004 or 0.04% to 0.9965

Some economic news from Europe today:

Germany:

• German CPI (YoY) (Sep) remain the same at 1.2%
• German CPI (MoM) (Sep) increased from -0.2% to 0.0%
• German HICP (YoY) (Sep) remain the same at 0.9%
• German HICP (MoM) (Sep) remain the same at -0.1%

Spain:

• Spanish CPI (MoM) (Sep) increased from -0.1% to 0.0%
• Spanish CPI (YoY) (Sep) remain the same at 0.1%
• Spanish HICP (MoM) (Sep) remain the same at 0.4%
• Spanish HICP (YoY) (Sep) remain the same at 0.2%

US/AMERICAS:

US stocks rallied this Friday amid positive news regarding a trade deal with China. When asked how the negotiations were unfolding earlier in the day, Secretary Mnuchin hinted at progress by saying “the stock market is always right.” Toward the end of Friday’s session, both governments confirmed that a deal was finalized – ending the US-China trade war. President Trump said that the deal will occur in phases. Phase one involves China purchasing $40-$50 billion in US agriculture. Additionally, the US has agreed to further delay additional tariffs that would have been implemented on October 15. President Trump said phase two of the deal “will start almost immediately,” and will announce the details shortly.

Almost immediately after the US pulled troops out of Syria, Turkey invaded from the north and waged war against former US-Kurdish allies. The US anticipated a possible uprising once leaving the region, but chose to remove troops after military officials claimed ISIS (daesh) had been destabilized. Numerous protests have occurred in Washington this week, most notably from US veterans who felt that the US abandoned their former Kurdish allies. “We have one of three choices: Send in thousands of troops and win Militarily, hit Turkey very hard Financially and with Sanctions, or mediate a deal between Turkey and the Kurds!” Trump noted earlier in the week. Today, the White House declared that they will implement harsh primary and secondary sanctions on Turkey and any parties associated with their government. “We can shutdown the Turkish economy if we need to,” Secretary Steven Mnuchin noted during a press release this Friday.

Seemingly unable to leave the Middle East, the US announced plans to deploy 3,000 troops to Saudi Arabia. US Defense Secretary Mark Esper said that Saudi Arabia asked for US protection “from further Iranian aggression.” Both the US and Saudi Arabia blame Iran for the Saudi oil tanker attack that occurred last month, despite Iran’s government refuting any involvement.

In an attempt to prevent another wildfire outbreak, Pacific Gas & Electric (PG&E) shut off electricity for 1.5 million consumers in California. The two-day outage has forced schools and business to temporary close. The company cited high winds of 35-45 mph as their main concern. However, most are blaming years of mismanagement for the power company’s faulty safety grids that are prone to spark fires. So far, there is no word yet on when the company will turn the power back on.

US Market Closings:

• Dow advanced 319.92 points or 1.21% to 26,816.59
• S&P 500 advanced 32.14 points or 1.09% to 2,970.27
• Nasdaq advanced 106.27 points or 1.34% to 8,057.04
• Russell 2000 advanced 26.54 points or 1.79% to 1,511.90

Canada Market Closings:

• TSX Composite declined 7.52 points or -0.05% to 16,415.16
• TSX 60 advanced 0.16 of a point or 0.02% to 982.65

Brazil Market Closing:

• Bovespa advanced 2,014.79 points or 1.98% to 103,831.92

ENERGY:

Crude oil had another positive day today. There was an Iranian tanker blast in the Middle East. Also, an Ecuadorian state company seized all operations until the foreseeable future, which is putting pressure on supply. Positive US and Brexit talks are pushing the case for increasing demand in the future.

The oil markets had a green day today:

• Crude Oil increased 0.83 USD/BBL or 1.55% to 54.3200
• Brent increased 1.08 USD/BBL or 1.83% to 60.0881
• Natural gas increased 0.007 USD/MMBtu or 0.32% to 2.2229
• Gasoline increased 0.0159 USD/GAL or 0.98% to 1.6387
• Heating oil increased 0.0376 USD/GAL or 1.96% to 1.9545
• Top commodity gainers: G Wheat (3.85%), Cotton (3.81%),Corn(4.01%), and Heating Oil (1.96 %)
• Top commodity losers: Platinum (-0.97 %), Coal (-0.68%), Gold (-0.64%), and Feeder Cattle (-0.36%)

The above data was collected around 13:06 EST on Friday.

BONDS:

Japan -0.20%(+0bp), US 2’s 1.60% (+7bps), US 10’s 1.75%(+8bps), US 30’s 2.17%(+1bps), Bunds -0.49% (+7bp), France -0.27% (+3bp), Italy 1.06% (-0bp), Turkey 14.37% (+57bp), Greece 1.45% (-30bp), Portugal 0.21% (+2bp), Spain 0.25% (+2bp) and UK Gilts 0.71% (+16bp).

• Italian 3-Year BTP Auction increased from -0.01% to 0.05%
• Italian 7-Year BTP Auction increased from 0.56% to 0.60%
• Italian 30-Year BTP Auction decreased from 2.060% to 1.780%