Market Talk – August 25, 2023

ASIA:

Japan’s economy grew at a surprisingly fast pace in the second quarter of the year, driven by strong auto exports and an increase in tourist arrivals. This growth of 6.0% on an annualized basis and 1.5% quarterly exceeded expectations, with GDP reaching a new high. This growth rate was the fastest since the end of 2020, following a 3.7% expansion in the previous quarter. Despite a sluggish post-Covid consumer recovery, factors like car exports and tourism offset the slowdown. Private consumption, a significant economic component, decreased by 0.5% due to higher prices affecting sales of goods and household items. Exports, especially cars and tourism, expanded by 3.2% in the quarter, while capital expenditure remained unchanged. Japanese automakers benefited from a weaker yen, supporting their profits amid challenges in the Chinese market and the transition to electric vehicles. Robust demand from the US and Europe, coupled with a surge in foreign tourists post-Covid, provided a positive impact on the economy. However, there are concerns about the global economic downturn affecting Japan’s outlook.

The major Asian stock markets had a negative day today:

• NIKKEI 225 decreased 664.93 points or -2.06% to 31,622.28
• Shanghai decreased 0.10 points or -0.00% to 3,082.14
• Hang Seng decreased 92.78 points or -0.51% to 18,119.39
• ASX 200 decreased 63.90 points or -0.89% to 7,118.20
• Kospi decreased 16.87 points or -0.66% to 2,520.81
• SENSEX decreased 365.83 points or -0.56% to 64,886.51
• Nifty50 decreased 120.90 points or -0.62% to 19,265.80

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.00138 or -0.21% to 0.64052
• NZDUSD decreased 0.00157 or -0.27% to 0.59043
• USDJPY increased 0.417 or 0.29% to 146.287
• USDCNY increased 0.01178 or 0.16% to 7.29448

Precious Metals:

• Gold decreased 8.32 USD/t oz. or -0.43% to 1,909.11
• Silver decreased 0.020 USD/t. oz or -0.08% to 24.115

Some economic news from last night:

Japan:

Tokyo Core CPI (YoY) (Aug) decreased from 3.0% to 2.8%

No economic news from today:

EUROPE/EMEA:

The Bank of England has released policy papers discussing central bank digital currency (CBDC), specifically the UK’s version called the digital pound. These papers explore the necessity of a digital pound, its design features, and its potential uses by consumers and businesses. The article assumes the definition of CBDC as electronic central bank money for payments and value storage. While the decision to introduce the digital pound is still pending, both the Bank of England and HM Treasury suggest that it will likely be necessary in the future to promote payments innovation.

The major Europe stock markets had a green day today:

• CAC 40 increased 15.14 points or 0.21% to 7,229.60
• FTSE 100 increased 4.95 points or 0.07% to 7,338.58
• DAX 30 increased 10.33 points or 0.07% to 15,631.82

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.00146 or -0.14% to 1.07944
• GBPUSD decreased 0.00161 or -0.13% to 1.25829
• USDCHF increased 0.00075 or 0.08% to 0.88515

Some economic news from Europe today:

Germany:

German GDP (YoY) (Q2) remain the same at -0.2%

German GDP (QoQ) (Q2) increased from -0.1% to 0.0%

German Business Expectations (Aug) decreased from 83.6 to 82.6

German Current Assessment (Aug) decreased from 91.4 to 89.0

German Ifo Business Climate Index (Aug) decreased from 87.4 to 85.7

Swiss:

Employment Level (Q2) increased from 5.389M to 5.432M

US/AMERICA:

The Federal Reserve is considering more interest rate hikes to combat inflation, which has been rising at a rapid pace. The Fed has already raised interest rates several times this year, with the most recent hike taking place in July 2023. The Fed’s decision to raise interest rates is aimed at slowing spending, crimping business investment and expansion, and cooling off a hot job market. The central bank is trying to wrestle down the fastest inflation in 40 years, and to do that, officials believe that they need to lift interest rates enough to slow spending. The Fed’s decision to raise interest rates has been met with some criticism, as it raises the cost of borrowing money and could lead to a slowdown in the economy. However, the Fed believes that the benefits of raising interest rates outweigh the risks.

US Market Closings:

• Dow advanced 247.48 points or 0.73% to 34,346.9
• S&P 500 advanced 29.4 points or 0.67% to 4,405.71
• Nasdaq advanced 126.67 points or 0.94% to 13,590.65
• Russell 2000 advanced 7.35 points or 0.4% to 1,853.63

Canada Market Closings:

• TSX Composite advanced 59.92 points or 0.3% to 19,835.75
• TSX 60 advanced 3.26 points or 0.28% to 1,187.31

Brazil Market Closing:

• Bovespa declined 1,188.4 points or -1.02% to 115,837.2

ENERGY:

The oil markets had a green day today:

• Crude Oil increased 0.664 USD/BBL or 0.84% to 79.714
• Brent increased 0.908 USD/BBL or 1.09% to 84.268
• Natural gas increased 0.0024 USD/MMBtu or 0.10% to 2.5214
• Gasoline increased 0.047 USD/GAL or 1.69% to 2.8270
• Heating oil increased 0.1108 USD/GAL or 3.51% to 3.2672

The above data was collected around 12:20 EST on Friday

• Top commodity gainers: Heating Oil (3.51%), Soda Ash (6.14%), Cocoa (2.20%) and Sugar (2.26%)
• Top commodity losers: Wheat (-1.84%), Steel (-1.23%), Methanol (-0.64%) and Palladium (-0.75%)

The above data was collected around 12:33 EST Friday.

BONDS:

Japan 0.663% (+1.2bp), US 2’s 5.06% (+0.042%), US 10’s 4.2433% (+0.83bps); US 30’s 4.29% (-0.017%), Bunds 2.557% (+3.4bp), France 3.086% (+3.9bp), Italy 4.238% (+5.4bp), Turkey 18.65% (-43bp), Greece 3.911% (+5.5bp), Portugal 3.298% (+6bp); Spain 3.579% (+3.6bp) and UK Gilts 4.436% (+1bp)