Market Talk – February 20, 2019

Asia:

The markets had a stronger sense of direction today compared to yesterday with the majority of the markets in the green. After Trump’s comments alluding to the 1st of March as being a date which wasn’t necessarily set in stone, the Nikkei 225 rose 60 bps and the Shanghai added 20 bps more. Hang Seng and Kospi who were on the losing side yesterday both jumped greater than 1%.

Some economic news out from Japan with the construction orders down 3.7%.

Asian currencies generally weakened against the dollar today, and the AUD was the exception rising 17 bps. JPY and HKD dropped 9 and 1 bps accordingly. The PBC set the CNY reference point against the USD at 6.7558, 12 bps greater than the previous fix. The onshore yuan trade between plus or minus 2% of the daily midpoint fix.

Gold and silver both increased today, with gold increasing by 30 bps and silver 100 bps. Thus, the gold-silver ratio declined slightly.

In the Middle East, the UAE have relaxed the ban on shipping from Qatar amidst the ongoing issues between the two sovereigns.

Europe:

The European markets were all positive today with the FTSE, CAC, and DAX rising 77, 79, and 94 bps respectively. Bringing the last 5 days to be very successful for the European region. The auto share industry was among the best performers, perhaps due to the US-Chinese trade talks going in the right direction.

The Swiss bank UBS has been fined 3.7bn euros from a court in France. The accusation is that UBS helped French citizens to avoid paying tax. UBS continually state that haven’t breeched any laws in doing so. As well as the 3.7bn fine, UBS are required to pay 800m euros in damages to the French state. Last year UBS made a profit of 4.3Bn euros and have set aside around 1.9Bn euros for future litigations such as this.

Britain says it is currently managing risks with the Chinese smartphone maker Huawei, stating there is no evidence of spying. In a recent interview with Huawei CEO, he stated he had long term plans for the UK and any investments which are cancelled from the US will go into the UK.

The German finance minister Olaf Scholz indicated that Germany and France have agreed a proposal for a new euro zone budget which will be offered in the coming days.

Euro currencies increased against the dollar today, with the EUR and GBP increasing 24 and 13 bps.

U.S./Americas:

Wall Street experienced an up and down day Wednesday as everyone seemed to eagerly anticipate the release of Fed meeting minutes from last month. Analysts and economists alike looked to better understand the Fed’s “pivot” in taking a more patient approach to rate hikes, as well as the balance sheet being normalized via autopilot (even though former Fed Chair, Janet Yellen had essentially said the same thing previously). One comment extracted from the minutes regarding downside risk drew a lot of attention: “the possibilities of a sharper-than-expected slowdown in global economic growth, particularly in China and Europe, a rapid waning of fiscal policy stimulus, or a further tightening of financial market conditions.” But, this is not a shocking statement.

In any event, the major indices closed the day on a positive note after chopping trading. The Nasdaq rose +0.03% (7489.07 close), just barely earning it’s eight consecutive day of gains. The Dow (+0.24%, 25954.44 close) and S&P 500 (+0.18%, 2784.70 close) also ended their day in the green. The Russell 2000 was again the percentage gain leader after closing +0.46% (1581.66 close).

The USD dropped 0.18% to 96.3472 from 96.5200 in the previous trading session. The USD/CAD declined 0.34% to 1.3161 from 1.3206.

Canadian indices performed relatively well, with the TSX Composite rising +.059% (16031.24 close) and the TSX 60 increasing +0.71% (957.06 close).

Brazil passed major pension reform laws that will raise the minimum retirement age to 62 for women and 65 for men. Not surprisingly, the Bovespa gave up some gains made earlier in the week (-1.14%, 96544.81 close).

Energy:

Both Brent and Crude rose today, making returns of over 5% over the last 5 days. Brent is currently trading at 67.1213 and Crude at 56.8013.

Abu Dhabi National Oil Company (ADNOC) today was awarded AA+ credit rating from Fitch rating agency. This is the highest rating an Energy company can get. What is interesting is that the rating is higher than Its main shareholder the Abu Dhabi Government.

Bonds:

Just one auction today from the German state, the 5-year Bobl was sold at a yield of -0.360%.

Japan -0.03%(-1bp), US 2’s 2.49% (–1bps), US 10’s 2.65%(+1bps), US 30’s 3.01%(+2bps), Bunds 0.10% (+0bp), France 0.53% (-0bp), Italy 2.87% (+8bp), Turkey 14.82% (+20bp), Greece 3.77% (-1bp), Portugal 1.52% (+1bp), Spain 1.21% (-0bp) and UK Gilts 1.18% (+1bp).

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