Market Talk – January 7, 2020

ASIA:

Tesla’s CEO Elon Musk announced they will start exporting cars from China and will build unique cars from the Chinese gigafactory.”Something that would be super cool … So we’re going to do it … is to try to create a China design and engineering center to actually design an original car in China for worldwide consumption,” Musk said.

Pakistani Minister of Technology weighed in on the success by inviting Tesla to open up a factory in Pakistan, he tweeted “Dear Elon Musk your next destination may be Pakistan where 68 per cent of world population lives within 3.5 hours flight radius from Islamabad,”

Ahead of the annual Union Budget presentation, Indian Prime Minister Narendra Modi on Monday interacted with top business tycoons to discuss the issues facing the economy and measures needed to boost growth and create jobs. The Modi government has undertaken a number of measures to arrest the economic slowdown by reducing the tax rates at par with other Asian countries, but experts say none of these measures directly address the widespread weakness in consumption demand, which has been the chief driver of economy. Finance minister Nirmala Sitharaman will present her second Union Budget on February 1 with an eye to reviving growth.

Activity in India’s dominant service industry accelerated to a five-month high in December as the demand rose at the fastest pace in more than three years, a private business survey showed on Monday. The findings are likely to provide some relief to markets and spur hopes of an economic recovery in Asia’s third-largest economy, which registered its weakest growth since 2013 in the July-September quarter.

The Monetary Authority of Singapore said on Tuesday that it has received 21 applications for digital bank licenses. The Monetary Authority of Singapore shook up the country’s banking sector for the first time in two decades when it announced last year it would issue two digital full bank and three digital wholesale bank licenses. That would potentially allow technology players and non-banking companies to challenge traditional lenders in the city-state. The regulator will announce its decision in June and the winners are expected to start their businesses by mid-2021. and payment services providers, according to MAS.

The major Asian stock markets had a green day today:

• Shanghai increased 21.39 points or 0.69% to 3,104.80
• Kospi increased 20.47 points or 0.95% to 2,175.54
• ASX 200 increased 90.70 points or 1.35% to 6,826.40
• NIKKEI 225 increased 370.86 points or 1.60% to 23,575.72
• Hang Seng increased 95.87 points or 0.34% to 28,322.06
• SENSEX increased 192.84 points or 0.47% to 40,869.47

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0069 or 0.99% to 0.6866
• NZDUSD decreased 0.0029 or 0.43% to 0.6639
• USDJPY increased 0.1610 or 0.15% to 108.5400
• USDCNY decreased 0.02645 or 0.38% to 6.94285

Precious Metals:

• Gold increased 6.4 USD/t oz. or 0.41% to 1,573.25
• Silver increased 0.2555 USD/t. oz or 1.41%% to 18.4083

Some economic news from last night:

South Korea:

Current Account (Nov) decreased from 7.83B to 5.97B

Australia:

ANZ Job Advertisements (MoM) decreased from -1.8% to -6.7%

Japan:

Monetary Base (YoY) decreased from 3.3% to 3.2%

Services PMI (Dec) decreased from 50.3 to 49.4

Indonesia:

Consumer Confidence increased from 124.2 to 126.4

Some economic news from today:

Hong Kong:

Foreign Reserves (USD) (Dec) increased from 434.20B to 441.30B

Singapore:

Foreign Reserves USD (MoM) (Dec) increased from 276.0B to 279.5B

China:

FX Reserves (USD) increased from 3.096T to 3.108T

New Zealand:

GlobalDairyTrade Price Index increased from -5.1% to 2.8%

EUROPE/EMEA:

According to CNN, US military intelligence is under alert due to military movement in Iran as well as drones posing a threat to US military targets. According to an Iranian news outlet, Iran has 13 different retaliation measures against the US they can use. The media outlet suggested that the secretary of national defense said that even the most passive option would cause the US a lot of harm.

The UK has deployed ships and helicopters in the gulf, as a standby measure due to the rising tensions.

A five-year multiple-entry tourist visa system was approved by the UAE Cabinet on Monday. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai announced the new tourist visa system on Twitter. Residents here are welcoming this move and the new Visa rule can help UAE parents and will benefit people with families to have a seamless process of procuring UAE visas. This will also help in ease of travel for residents planning a temporary relocation. It is going to make the UAE a bigger melting pot than it already is. With this new initiative, people from all over the world will be able to descend upon the UAE with ease. Needless to say, this will propel the UAE economy further.

The major Europe stock markets had a mixed day today:

• CAC 40 decreased 1.23 points or -0.02% to 6,012.35
• FTSE 100 decreased 1.49 points, or -0.02% to 7,573.85
• DAX 30 increased 99.84 points or 0.76% to 13,226.83

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.0050 or 0.45% to 1.1144
• GBPUSD decreased 0.0049 or 0.37% to 1.3121
• USDCHF increased 0.0028 or 0.28% to 0.9711

Some economic news from Europe today:

Norway:

Credit Indicator (YoY) (Nov) remain the same at 5.6%

Swiss:

CPI (MoM) (Dec) increased from -0.1% to 0.0%

CPI (YoY) (Dec) increased from -0.1% to 0.2%

Italy：

Italian Public Deficit (Q3) increased from 1.0% to 1.8%

Italian CPI (MoM) (Dec) increased from -0.2% to 0.2%

Italian CPI (YoY) (Dec) increased from 0.2% to 0.5%

Italian HICP (YoY) (Dec) increased from 0.2% to 0.5%

Italian HICP (MoM) (Dec) increased from -0.3% to 0.2%

UK:

Housing Equity Withdrawal (QoQ) increased from -7.6B to -6.3B

EuroZone:

Core CPI (YoY) (Dec) remain the same at 1.3%

CPI (YoY) (Dec)  increased from 1.0% to 1.3%

CPI, n.s.a (Dec) increased from 105.10 to 105.44

HICP ex Energy & Food (YoY) (Dec) remain the same at 1.4%

Retail Sales (YoY) (Nov) increased from 1.7% to 2.2%

Retail Sales (MoM) (Nov) increased from -0.3% to 1.0%

Spain:

Spanish Consumer Confidence increased from 77.4 to 77.7

US/AMERICAS:

The US trade deficit shrank to $43.1 billion in November from $46.9 billion the month prior. November’s reading is the lowest deficit since October 2016. Resumed trade between the US and China helped the overall trade deficit. In November, the US’ deficit with China reached $25.6 billion with a $1.4 billion rise in exports and an $800 million drop in imports.

The average 30-year fixed mortgage rate in the US dropped to 3.6% this week. The Home Purchase Sentiment Index (HPSI), derived monthly from a survey conducted by Fannie Mae, shows that buyers remain confident in the housing market and see the present as a good time to invest in real estate. According to the survey, Americans generally believe mortgage rates will remain low. However, competition in the marketplace remains high as the demand is beginning to exceed available inventory. Historically, the spring months, especially April, saw the sharpest rise in home sales. January surpassed April last year for a number of major American cities, and that trend may continue into this year.

Boeing is determined to put their 737 MAX jets in the air again after the aircraft was internationally grounded following two crashes that claimed 346 lives. Boeing has not received clearance from the Federal Aviation Administration (FAA) to allow its 737 MAX jet to operate again. However, the company presented a new solution to ensure in-flight safety in the form of flight simulation training for pilots. Boeing has already offered Southwest a $1 million rebate per plane if the flight simulation is used. The new security measure will temporarily halt production and is still pending approval by the FAA.

Canada announced plans to relocate some troops to Kuwait from Iraq in a show of solidarity with the US. Iraq’s parliament voted in favor of removing all US troops from the region. President Trump has threatened Iraq with more economic sanctions in response, and is demanding the country pay the US for their protection. There are currently about 300-500 Canadian troops on the ground in Iraq who are training Iraqi troops to defend themselves against ISIS.

US Market Closings:

• Dow declined 119.70 points or -0.42% to 28,583.68
• S&P 500 declined 9.10 points or -0.28% to 3,237.18
• Nasdaq declined 2.88 points or -0.03% to 9,068.58
• Russell 2000 declined 4.95 points or -0.30% to 1,658.31

Canada Market Closings:

• TSX Composite advanced 62.59 points or 0.37% to 17,168.06
• TSX 60 advanced 3.04 points or 0.30% to 1,021.30

Brazil Market Closing:

• Bovespa declined 215.98 points or -0.18% to 116,661.94

ENERGY:

Brent Crude broke 70 USD a barrel briefly yesterday after tensions arose in the middle east. EIA produced a report yesterday suggesting that global energy consumption will increase by 50% in 2050.

The oil markets had a mixed day today:

• Crude Oil decreased 0.77 USD/BBL or -1.22% to 62.4676
• Brent decreased 0.65 USD/BBL or -0.94% to 68.3483
• Natural gas decreased 0.0072 USD/MMBtu or -0.33% to 2.1491
• Gasoline decreased 0.0251USD/GAL or -1.43% to 1.7375
• Heating oil increased 0.0075 USD/GAL or 0.37% to 2.0360
• Top commodity gainers: Cocoa(1.97%),Ethanol(1.96%),Silver(1.41%), and Palladium(0.76%)
• Top commodity losers: Gasoline(-1.43%), Crude Oil(-1.22%), Bitumen (-1.11%), and Sugar(-1.02%)

The above data was collected around 16.08  EST on Tuesday.

BONDS:

Japan -0.02%(-1bp), US 2’s 1.54% (-0bps), US 10’s 1.82%(+3bps); US 30’s 2.29%(+3bps), Bunds -0.29% (+0bp), France 0.02% (+2bp), Italy 1.40% (+7bp), Turkey 11.96% (-9bp), Greece 1.46% (-50bp), Portugal 0.37% (+2bp), Spain 0.42% (+2bp) and UK Gilts 0.80% (+6bp).

• Japan 10-Year JGB Auction increased from -0.042% to -0.010%
• US 3-Year Note Auction decreased from 1.632% to 1.567%
• UK 10-Year Treasury Gilt Auction increased from 0.738% to 0.794%