Market Talk – February 28, 2019

Asia:

U.S. President Donald Trump said he had walked away from a nuclear deal at his summit with Kim Jong-un on Thursday as they cannot accept the demands from each other. Kim Jong-un pressed for the end of the US sanctions, however Trump declined as this was not possible until proof of total nuclear disarmament was provided. Although the talks broke down, Trump was optimistic that a future deal could be made.

Most of the major stock indexes were in the “red” today, NIKKEI 225 lost 171.35 (-0.79%) to  21385. Shanghai dropped 12.87(-0.44%) to 2941. Kospi and Hang Seng lost 39.35 (-1.76%) and 124.26 (-0.43%) to 2195 and 28,633 respectfully.

The Asia currency markets were mixed today. The AUDUSD decreased 0.0031 or 0.44% to 0.7107 and The NZDUSD decreased 0.0037 or 0.53% to 0.6808 . However JPY and the CNY took the opposite route as they both strengthened,  0.3580 or 0.32% to 111.3380 and 0.0138 or 0.21% to 6.6951 respectfully. The USDHKD remained flat at 7.8496

Gold and silver didn’t react to the price moves of equities today with both prices falling further down, Gold moved 4 USD/t oz. or 0.30% to 1,318.30  and Silver declined 0.08 USD/t. oz or 0.50% to 15.68 respectfully.

Economic news in the region, Japanese construction orders was up 19.8%, showing signs of recovery for the sector. However Housing starts failed to boom as expected only rising 1.1% rather than the 10.4% forecasted. Manufacturing PMI was the same a previous at 48.5. South Korea is due to release its Trade balance and imports and exports – which are due to be negative compared to previous YoY. The Caixin Manufacturing PMI, which is widely viewed as a central economic number for Chinese Manufacturing is expected to be released with a forecast around 48.5, which concludes a slight improvement over the previous number. Hong Kong’s M3 is 1.5% increase this Q.

India’s GDP was at 7.0% increase, slightly lower than 7.2%. Mumbai was very impressive, there is certainly a lot of buzz surrounding India’s growth prospects and the locals are eager to dive into and improve upon many sectors of the country, from IT, Finance to the Automotive industry. Of course there is still a huge disparity between rich and poor which needs to be addressed, but it is a country that is often overlooked when it comes to international capital flows, however as the GDP demonstrates still offering good growth especially when the rest of the world is struggling. Australia’s Manufacturing Index, was at 52.5 compared to 53.1 – showing they are slightly hit by the global slowdown.

Europe:

European stock markets were mixed today, after being dealt a heavy hand yesterday, perhaps we did not see the reaction a lot of investors would have hoped for. The FTSE 100 decreased 21 points or 0.30% to 7085; CAC 40 and DAX  increased 13 points or 0.26% to 5238 and 23 points or 0.20% to 11510 respectfully.

The European currency markets like the stock markets were also mixed, the GBP decreased 0.0015 or 0.11% to 1.3293 after a decent recent run of form and the CHF also decreased 0.0044 or 0.44% to 0.9970, back under parity with the USD.  The EURO however held ground and advanced slightly rising 0.0017 or 0.15% to 1.1386.

Lot of interesting economic news released from Europe today mainly the CPI numbers from a number of countries, the UK Nationwide HPI MoM was down 0.1%. German CPI YoY was 1.6%, higher than forecasted number of 1.5%. German Import Price Index MoM for Jan was -0.2%, lower than the expectations of 0.3%, the YoY January figures were 0.8%, which was lower than forecasted 1.3% and previous months YoY 1.6%.Swiss GDP YoY was 1.4% for Q4, which was lower than the forecast of 1.7%.The KOF Leading Indicators for Feb was actually at 92.4, down from 96.2. French consumer spending rose in January 1.2%. French CPI slightly lower than Germany’s at 1.3%. Spanish Current account (Dec) had a sharp rose from 1.77B to 4.67B, the CPI (YoY)  actual and forecast were at 1.1%, higher than previous 1.0%.Italians CPI matched that of Spain increasing 1.1%.

U.S. / Americas

Stocks traded flat on the last trading day of the month amid ongoing geopolitical tensions. The Dow dipped for the third consecutive day after losing 70 points (-0.27%, 25916 close). The S&P 500 declined in similar fashion (-0.28%, 2784.49 close) marking the index’s longest losing streak so far in 2019. The Nasdaq had a nearly identical close on a percentage basis (-0.29%, 7532.53 close), while the Russell 2K saw the largest percentage drop of the group (-0.35%, 1575.55 close).

The day had its share of mixed news. As mentioned above, the U.S. and North Korea summit concluded without a denuclearization deal. This was the right move by President Trump, and puts pressure back on Jung Un to demonstrate whether he is really serious about the negotiations, or if the past year was just another tactic to remove sanctions with minimal give in return. Time will tell.

On the home front, U.S. GDP grew by 2.6% during the fourth quarter of 2018, exceeding expectations of 2.2% and calming fears based on some poor economic data up to this point.

White House economic advisor Larry Kudlow went on CNBC today and was very optimistic on a pending U.S. – China deal, saying the two sides are “headed for a remarkable, historic deal.” This follows President Trump’s removal of a March 1 deadline before tariffs increase on Chinese goods from 10% to 25%.  Despite recent confidence, nothing is done until it is done and now everyone waits for the expected meeting in Mar-a-lago later in March.

It was not a great day for Canadian equities either, with the TSX Composite closing down -0.47% (15999.01 close) and the TSX 60 losing -0.56% in the day’s session (953.91 close).

On the currency front, the US Dollar increased 0.0570 or 0.06% to 96.2110, while the USDCAD increased 0.0039 or 0.30% to 1.3193.

The Brazilian Bovespa declined -1.77% (95584.35 close) after the country released slowing GDP data from Q4.

Energy:

Another green day for the oil prices with the exception of Brent oil who decreased 0.38 USD/BBL or 0.57% to 66.05 . Crude Oil increased 0.10 USD/BBL or 0.18% to 57.14, Natural gas increased 0.01 USD/MMBtu or 0.29% to 2.81,Gasoline and Heating oil increased 0.03% to 1.63 and 0.12% to 2.03 respectfully.

Top commodity losers are tea (-7.34%); coffee (-1.04%); cocoa (-4.30%) ; oats (-1.95%) and rubber (-1.91%). Gains are led by Bitumen(2.74%) and Palladium(1.21%)

Bonds:

The US 4-week and 8-week bill auction actual rate are the same at 2.410%, higher than the previous at 2.390% and 2.400%

Japan -0.02%(+0bp), US 2’s 2.52% (+2bps), US 10’s 2.71%(+2bps), US 30’s 3.08%(+1bps), Bunds 0.18% (+3bp), France 0.58% (+2bp), Italy 2.76% (-3bp), Turkey 14.49% (-9bp), Greece 3.66% (-3bp), Portugal 1.47% (+2bp), Spain 1.17% (+1bp) and UK Gilts 1.30% (+3bp).