Market Talk – December 2, 2019

ASIA:

China has suspended a visit from the US Navy in Hong Kong after last week’s passing of the bill which requires the US to annually monitor Chinas compliance with human rights issues. China did manage to retaliate by placing sanctions on a few US human rights groups. “We urge the US to correct the mistakes and stop interfering in our internal affairs,” ministry spokeswoman Hua Chunying said today.

China has now implemented a law that a face scan must be taken when purchasing a phone sim card. China has been under scrutiny lately due to this use of video surveillance on their population.

Chinese manufacturing activity bounced at the fastest rate in the last three years. The Caixin/IHS Markit manufacturing PMI reading was 51.8.

Moody’s rating agency have upgraded Pakistan’s rating from negative to stable rating of B3. Last year Moody downgraded Pakistan to negative over their depleted foreign reserves.

The major Asian stock markets had a green day today:

• Shanghai increased 3.83 points or 0.13% to 2,875.81
• Kospi increased 3.96 points or 0.19% to 2,091.92
• ASX 200 increased 16.30 points or 0.24% to 6,862.30
• NIKKEI 225 increased 235.59 points or 1.01% to 23,529.50
• Hang Seng increased 98.23 points or 0.37% to 26,444.72
• SENSEX increased 8.36 points or 0.02% to 40,802.17

The major Asian currency markets had a green day today:

• AUDUSD increased 0.0031 or 0.45% to 0.6796
• NZDUSD increased 0.0066 or 1.03% to 0.6481
• USDJPY increased 0.0520 or 0.05% to 109.5410
• USDCNY increased 0.0068 or 0.10% to 7.0382

Precious Metals:

• Gold decreased 5.95 USD/t oz. or -0.41% to 1,459.81
• Silver decreased 0.131 USD/t. oz or -0.77%% to 16.8702

Some economic news from last night:

China:

Caixin Manufacturing PMI (Nov) increased from 51.7 to 51.8

Japan:

Manufacturing PMI (Nov) increased from 48.6 to 48.9

Capital Spending (YoY) (Q3) increased from 1.9% to 7.1%

South Korea:

CPI (YoY) (Nov) increased from 0.0% to 0.2%

CPI (MoM) (Nov) decreased from 0.2% to -0.6%

Nikkei Manufacturing PMI (Nov) increased from 48.4 to 49.4

Indonesia:

Nikkei Manufacturing PMI (Nov) increased from 47.7 to 48.2

Core Inflation (YoY) (Nov) decreased from 3.20% to 3.08%

Inflation (YoY) (Nov) decreased from 3.13% to 3.00%

Inflation (MoM) (Nov) increased from 0.02% to 0.14%

Australia:

AIG Manufacturing Index (Nov) decreased from 51.6 to 48.1

MI Inflation Gauge (MoM) decreased from 0.1% to 0.0%

ANZ Job Advertisements (MoM) decreased from -1.0% to -1.7%

Building Approvals (MoM) (Oct) decreased from 7.6% to -8.1%

Business inventories (MoM) (Q3) increased from -0.9% to -0.4%

Company Gross Operating Profits (QoQ) (Q3) decreased from 4.5% to -0.8%

Company Profits Pre-Tax (QoQ) (Q3) decreased from -0.3% to -0.7%

Private House Approvals (Oct) decreased from 2.8% to -7.0%

New Zealand:

Terms of Trade – Exports Prices (Q3) decreased from 3.4% to 1.9%

Terms of Trade – Exports Volume (QoQ) (Q3) decreased from -2.6% to -4.6%

Terms of Trade – Imports Prices (Q3) decreased from 1.8% to 0.0%

Terms of Trade Index (QoQ) (Q3) increased from 1.6% to 1,9%

Some economic news from today:

Hong Kong:

Retail Sales (YoY) (Oct) decreased from -18.3% to -24.3%

India:

Nikkei Markit Manufacturing PMI (Nov) increased from 50.6 to 51.2

EUROPE/EMEA:

UK leader of the Brexit Party Nigel Farage has urged voters to vote tactfully in order to give Brexit the best chance to pass through.

A report from the Guardian shows that UK factories are laying off staff at the quickest pace in seven years. Political uncertainty over Brexit is the primary cause of the job loss.

China and Russia have opened a large-scale pipeline with a length of 3000 km for supplying gas from Russia to China. They have called the pipeline the power of Siberia. “Today is remarkable, a truly historic event not only for the global energy market, but first of all for us and for you, for Russia and China,” Putin said.

A report by KPMG and as reported by DW suggests that US companies are now less willing to invest in Germany over fears of lack of growth.

The major Europe stock markets had a negative day today:

• CAC 40 decreased 118.42 points or -2.01% to 5,786.74
• FTSE 100 decreased 60.59 points, or -0.82% to 7,285.94
• DAX 30 decreased 271.70 points or -2.05% to 12,964.68

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0019 or 0.17% to 1.1038
• GBPUSD increased 0.0017 or 0.13% to 1.2937
• USDCHF decreased 0.0034 or 0.34% to 0.9964

Some economic news from Europe today:

Swiss:

Retail Sales (YoY) (Oct) decreased from 1.6% to 0.7%

PMI (Nov) decreased from 49.4 to 48.8

Norway:

Manufacturing PMI (Nov) decreased from 55.3 to 53.7

Spain:

Spanish Manufacturing PMI (Nov) increased from 46.8 to 47.5

Italy:

Italian Manufacturing PMI (Nov) decreased from 47.7 to 47.6

France:

French Manufacturing PMI (Nov) increased from 51.6 to 51.7

Germany:

German Manufacturing PMI (Nov) increased from 43.8 to 44.1

Euro Zone:

Manufacturing PMI (Nov) increased from 46.6 to 46.9

UK:

Manufacturing PMI (Nov) increased from 48.3 to 48.9

US/AMERICAS:

The ISM Manufacturing Index signaled a contraction this November and caused US indexes to drop on the first trading day of December. November’s reading was 48.1, down from October’s reading of 48.3, and beneath analysts’ expectations of 49.4. Anything below 50 signals a contraction. This is the fourth consecutive month of manufacturing declines.

President Trump pointed a finger at the Federal Reserve for the weak manufacturing data. The president has repeatedly attacked the Fed for their policies while pushing for further rate cuts and a weaker dollar. “Manufacturers are being held back by the strong Dollar, which is being propped up by the ridiculous policies of the Federal Reserve – Which has called interest rates and quantitative tightening wrong from the first days of Jay Powell!” Trump tweeted this Monday.

In addition to blaming the Federal Reserve, President Trump accused other countries of deliberately cheapening their currencies to gain a competitive advantage over the USD. Today, the Trump administration reinstated tariffs on steel and aluminum for Brazil and Argentina. “Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers,” Trump stated before announcing an immediate tariff reinstatement. Moreover, both South American countries have increased agricultural trade with China. Brazil, in particular, has traded large quantities of soybeans and pork with China during this fiscal year. Brazilian President Bolsonaro maintains that he has a good relationship with US President Trump. “I have an open channel with him,” Bolsonaro told reporters in passing.

Trump’s re-election campaign announced that they will only issue press credentials to Bloomberg News reporters on a case-by-case basis. Former New York City mayor Michael Bloomberg, owner of Bloomberg News, is currently seeking the Democratic nomination for the 2020 presidential election. The news agency claims that any concerns of biased reporting is unfounded. “We have covered Donald Trump fairly and in an unbiased way since he became a candidate in 2015 and will continue to do so despite the restrictions imposed by the Trump campaign,” editor-in-chief John Micklethwait stated. However, the news agency also stated that they will neither investigate “Mike” nor his democratic rivals.

US Market Closings:

• Dow declined 268.37 points or -0.96% to 27,783.04
• S&P 500 declined 27.11 points or -0.86% to 3,113.87
• Nasdaq declined 97.48 points or -1.12% to 8,567.99
• Russell 2000 declined 16.92 points or -1.04% to 1,607.58

Canada Market Closings:

• TSX Composite declined 58.73 points or -0.34% to 16,981.47
• TSX 60 declined 3.48 points or -0.34% to 1,015.14

Brazil Market Closing:

• Bovespa advanced 694.55 points or 0.64% to 108,927.83

ENERGY:

Russia surprised the OPEC group two weeks before the OPEC meeting by seemingly going against the rhetoric of cutting production for the coming months. Russia failed to cull production and is operating above their quota. Chinese production data today helped push up the markets.

The oil markets had a green day today:

• Crude Oil increased 0.9028 USD/BBL or 1.63% to 56.3518
• Brent increased 1.0392 USD/BBL or 1.72% to 61.5522
• Natural gas increased 0.0056 USD/MMBtu or 0.24% to 2.3235
• Gasoline increased 0.0237USD/GAL or 1.49% to 1.6093
• Heating oil increased 0.0324 USD/GAL or 1.72% to 1.9121
• Top commodity gainers: Brent (1.72%),Heating Oil(1.72%),Crude Oil(1.63%), and Gasoline(1.49%)
• Top commodity losers: Steel(-6.63%), Soda Ash(-3.07%), Coal (-1.88%), and Orange Juice(-1.27%)

The above data was collected around 9:45 EST on Monday.

BONDS:

Japan -0.08%(+1bp), US 2’s 1.63% (+3bps), US 10’s 1.84%(+6bps), US 30’s 2.27%(+7bps), Bunds -0.35% (+1bp), France -0.04% (+1bp), Italy 1.45% (+11bp), Turkey 12.12% (-6bp), Greece 1.55% (-47bp), Portugal 0.46% (+5bp), Spain 0.49% (+6bp) and UK Gilts 0.75% (+5bp).

• French 3-Month BTF Auction decreased from -0.623% to -0.636%
• French 6-Month BTF Auction decreased from -0.619% to -0.627%
• French 12-Month BTF Auction remain the same at -0.576%