Market Talk – May 22, 2023

ASIA:

China’s benchmark lending rates have remained unchanged for the ninth consecutive month in May, aligning with market expectations. The decision was influenced by factors such as a weakening yuan and widening yield differentials with the United States, which limited the potential for significant monetary easing. Although recent data indicated a slowdown in the economy after the initial recovery from the COVID-19 pandemic, concerns about capital outflows and the depreciation of the yuan may prompt the People’s Bank of China (PBOC) to reduce the required reserve ratio for banks instead of lowering interest rates. The PBOC also maintained the interest rate on medium-term lending facility (MLF) loans and rolled over maturing MLF loans from the previous week. The MLF rate is used as a reference for the lending benchmark, and market participants typically view changes in the medium-term rate as an indicator of future adjustments to the lending rates.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 increased 278.47 points or 0.90% to 31,086.82
• Shanghai increased 12.93 points or 0.39% to 3,296.47
• Hang Seng increased 227.60 points or 1.17% to 19,678.17
• ASX 200 decreased 16.20 points or -0.22% to 7,263.30
• Kospi increased 19.29 points or 0.76% to 2,557.08
• SENSEX increased 234.00 points or 0.38% to 61,963.68
• Nifty50 increased 111.00 points or 0.61% to 18,314.40

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.00041 or -0.06% to 0.66459
• NZDUSD decreased 0.00046 or -0.07% to 0.62794
• USDJPY increased 0.418 or 0.30% to 138.368
• USDCNY increased 0.02143 or 0.31% to 7.04543

Precious Metals:

• Gold decreased 0.72 USD/t oz. or -0.04% to 1,975.84
• Silver decreased 0.129 USD/t. oz or -0.54% to 23.698

Some economic news from last night:

China:

PBoC Loan Prime Rate remain the same at 3.65%

Some economic news from today:

Hong Kong:

CPI (YoY) (Apr) increased from 1.70% to 2.10%

EUROPE/EMEA:

The Bank of England (BOE) plans to accelerate the reduction of its balance sheet, according to the deputy governor for markets. Currently, the BOE is unwinding approximately £20 billion of quantitative easing (QE) every three months through a combination of asset maturities and active sales. The target is to unwind around £80 billion per year, which would involve fewer active sales as redemptions increase. Initially, the BOE was cautious about exceeding £100 billion in reduction as it could disrupt market liquidity. The BOE’s balance sheet swelled to £1 trillion during the pandemic due to increased asset purchases, but it has since been reduced to around £820 billion since the unwinding process began in February. The aim is to reduce the size of the balance sheet while maintaining it in the hundreds of billions of pounds to allow flexibility in responding to future events, as opposed to its pre-financial crisis level of less than £100 billion.

The major Europe stock markets had a mixed day today:

• CAC 40 decreased 13.80 points or -0.18% to 7,478.16
• FTSE 100 increased 14.12 points or 0.18% to 7,770.99
• DAX 30 decreased 51.39 points or -0.32% to 16,223.99

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.001 or 0.09% to 1.08120
• GBPUSD decreased 0.00168 or -0.14% to 1.24272
• USDCHF decreased 0.00161 or -0.18% to 0.89799

Some economic news from Europe today:

Euro Zone:

Consumer Confidence (May) increased from -17.5 to -17.4

US/AMERICAS:

US Treasury Secretary Janet Yellen has stated that June 1 is a “hard deadline” for raising the federal debt limit, with the odds “quite low” that the government will collect enough revenues to bridge to June 15, when more tax receipts are due. Yellen has warned that there would be hard choices to make about payments to Americans if Congress failed to agree on the $31.4 trillion debt ceiling before Treasury ran out of cash. The Treasury Department’s combined fiscal resources continue to dwindle, and the window for Congress to get legislation through is narrowing. If Congress cannot reach an agreement on the ceiling, economists warn of dire consequences, including default.

US Market Closings:

• Dow declined 140.05 points or -0.42% to 33,286.58
• S&P 500 advanced 0.65 of a point or 0.02% to 4,192.63
• Nasdaq advanced 62.88 points or 0.5% to 12,720.78
• Russell 2000 advanced 21.67 points or 1.22% to 1,795.38

Canada Market Closings:

• TSX Composite advanced 53.97 points or 0.27% to 20,351.06
• TSX 60 advanced 3.29 points or 0.27% to 1,226.22

Brazil Market Closing:

• Bovespa declined 531.39 points or -0.48% to 110,213.12

ENERGY:

The oil markets had a mixed day today:

• Crude Oil increased 0.675 USD/BBL or 0.94% to 72.365
• Brent increased 0.859 USD/BBL or 1.14% to 76.439
• Natural gas decreased 0.1805 USD/MMBtu or -6.98% to 2.4045
• Gasoline increased 0.0875 USD/GAL or 3.40% to 2.6636
• Heating oil increased 0.0113 USD/GAL or 0.48% to 2.3735

The above data was collected around 13:39 EST on Monday

• Top commodity gainers: Gasoline (3.40%), Soybeans (2.54%), Potatoes (9.41%) and Orange Juice (3.87%)
• Top commodity losers: Methanol (-3.58%), Bitumen (-3.50%), Natural Gas (-6.98%) and Zinc (-2.08%)

The above data was collected around 13:47 EST Monday.

BONDS:

Japan 0.388% (-1.3bp), US 2’s 4.31% (+0.022%), US 10’s 3.7033% (+1.13bps); US 30’s 3.96% (+0.007%), Bunds 2.451% (+2.8bp), France 3.025% (+2bp), Italy 4.309% (+4.7bp), Turkey 8.81% (-46bp), Greece 3.882% (-17.8bp), Portugal 3.242% (+2bp); Spain 3.503% (+3.5bp) and UK Gilts 4.05% (+5.5bp).

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