Market Talk – July 10, 2023

ASIA:

In June, China experienced a significant decline in producer prices, reaching their lowest level in over seven years, while consumer prices approached deflation. This reinforces the need for policymakers to implement additional stimulus measures to stimulate weak demand. The producer price index (PPI) has been decreasing for nine consecutive months, falling by 5.4% compared to the previous year, marking the sharpest decline since December 2015. Analysts had anticipated a 5.0% decrease. The consumer price index (CPI) remained unchanged year-on-year, contrary to expectations of a 0.2% increase, primarily due to a faster decline in pork prices. Nomura predicts a 0.5% year-on-year decline in consumer prices for July. These lower-than-expected inflation figures had a negative impact on financial markets, causing the yuan to weaken and Asian stocks to decline. China aims for an average consumer inflation rate of around 3% in 2023, following a 2% increase in prices in 2022.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 decreased 198.69 points or -0.61% to 32,189.73
• Shanghai increased 7.09 points or 0.22% to 3,203.70
• Hang Seng increased 114.02 points or 0.62% to 18,479.72
• ASX 200 decreased 38.30 points or -0.54% to 7,004.00
• Kospi decreased 6.01 points or -0.24% to 2,520.70
• SENSEX increased 63.72 points or 0.10% to 65,344.17
• Nifty50 increased 24.10 points or 0.12% to 19,355.90

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.00136 or -0.20% to 0.66744
• NZDUSD increased 0.00034 or 0.05% to 0.62124
• USDJPY decreased 0.585 or -0.41% to 141.485
• USDCNY decreased 0.00198 or -0.03% to 7.23042

Precious Metals:

• Gold increased 1.31 USD/t oz. or 0.07% to 1,925.59
• Silver increased 0.067 USD/t. oz or 0.29% to 23.122

Some economic news from last night:

China:

CPI (MoM) (Jun) remain the same at -0.2%

CPI (YoY) (Jun) decreased from 0.2% to 0.0%

PPI (YoY) (Jun) decreased from -4.6% to -5.4%

Japan:

Adjusted Current Account (May) decreased from 1.90T to 1.70T

Current Account n.s.a. (May) decreased from m1.895T to 1.862T

Australia:

Building Approvals (MoM) increased from -6.8% to 20.6%

No economic news from today:

EUROPE/EMEA:

Bank of England Governor Andrew Bailey has dismissed the idea of raising the inflation target above 2%, emphasizing that such a move would disrupt expectations. Speaking at a conference in France, Bailey acknowledged that the Bank has flexibility within its mandate to address prolonged price growth but stressed the importance of not deviating from the 2% target. Currently, the Bank of England is facing inflation at 8.7%, more than four times its objective. Last month, it unexpectedly raised interest rates by 0.5% to 5%. Market expectations now suggest a further increase to 6.5% to prevent a wage-price spiral. Some economists have proposed raising the inflation target to 3% in order to alleviate immediate pressure on central banks and avoid a slump caused by rate hikes. However, most economists believe that if the Bank of England raises its benchmark rate to 6.5%, a recession will become unavoidable.

The major Europe stock markets had a green day today:

• CAC 40 increased 31.81 points or 0.45% to 7,143.69
• FTSE 100 increased 16.85 points or 0.23% to 7,273.79
• DAX 30 increased 69.76 points or 0.45% to 15,673.16

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00222 or 0.20% to 1.09892
• GBPUSD increased 0.0007 or 0.05% to 1.28430
• USDCHF decreased 0.00165 or -0.19% to 0.88655

US/AMERICAS:

Home prices have hit new highs due to tighter supply. Total inventory is now about half of what it was just before the pandemic, which caused a massive housing boom. Sales of pre-owned homes are still much weaker than they were a year ago, but that has less to do with higher costs and more to do with less supply. Meanwhile, an article on Forbes states that home prices remain stubbornly elevated, perpetuating affordability challenges for many, especially first-time homebuyers. The nation’s housing supply remains limited, and probably will remain so for at the near future, due in part to those who purchased homes in recent years at record-low interest rates staying put.

US Market Closings:

• Dow advanced 209.52 points or 0.62% to 33,944.4
• S&P 500 advanced 10.58 points or 0.24% to 4,409.53
• Nasdaq advanced 24.76 points or 0.18% to 13,685.48
• Russell 2000 advanced 30.59 points or 1.64% to 1,895.25

Canada Market Closings:

• TSX Composite declined 8.59 points or -0.04% to 19,822.45
• TSX 60 declined 1.92 points or -0.16% to 1,189.77

Brazil Market Closing:

• Bovespa declined 955.55 points or -0.8% to 117,942.44

ENERGY:

The oil markets had a mixed day today:

• Crude Oil decreased 0.805 USD/BBL or -1.09% to 73.055
• Brent decreased 0.71 USD/BBL or -0.90% to 77.760
• Natural gas increased 0.0963 USD/MMBtu or 3.73% to 2.6783
• Gasoline decreased 0.0331 USD/GAL or -1.28% to 2.5562
• Heating oil decreased 0.0127 USD/GAL or -0.50% to 2.5464

The above data was collected around 13:20 EST on Monday

• Top commodity gainers: Natural Gas (3.73%), Cheese (2.99%), Rapeseed (2.33%) and Lumber (2.78%)
• Top commodity losers: HRC Steel (-1.06%), Steel (-1.35%), Gasoline (-1.28%) and Crude Oil (-1.09%)

The above data was collected around 13:29 EST Monday.

BONDS:

Japan 0.467% (+2.6bp), US 2’s 4.86% (-0.076%), US 10’s 3.9898% (-5.82bps); US 30’s 4.03% (-0.006%), Bunds 2.625% (-1.1bp), France 3.188% (-0.1bp), Italy 4.373% (+1.3bp), Turkey 16.22% (+0bp), Greece 4.044% (+5.3bp), Portugal 3.378% (+1.6bp); Spain 3.667% (-2bp) and UK Gilts 4.634% (-0.8bp).