Market Talk – May 14, 2019

ASIA:

As we reported yesterday, there are a lot of conspiracies emerging that China will be selling off their treasuries to punish the U.S. for their latest tariff hikes. Many analysts believe this is unlikely due to the massive risk of increasing worldwide interest rates and the probability of backfiring on China. Another question raised is where else could enough yield to risk be obtained for the 1.13 trillion dollars of treasuries they currently hold.

Japanese clothing company UNIQLO has announced they have been hacked with more than 450,000 client account information being breached.

The birthrate in Japan has long been an issue. Recently, a rising number of students from South Korea are migrating to Japan due to the lack of job positions being filled domestically.

The major Asian stock markets had a mixed day today. ASX 200 decreased 57.70 points (-0.92%) to 6,239.90; Hang Seng decreased 428.22 points (-1.50%) to 28,122.02; Shanghai decreased 20.10 points (-0.69%) to 2,883.61; NIKKEI 225 decreased 124.05 points (-0.59%) to 21,067.23. SENSEX and KOSPI took the opposite route and increased 227.71 points (0.61%) to 37,318.53 and 2.83 points (0.14%) to 2,081.84.

The Asian currency markets had a mixed day today: AUDUSD increased 0.0005 or 0.07% to 0.6948; NZDUSD increased 0.0011 or 0.17% to 0.6577; and USDJPY increased 0.3860 or 0.35% to 109.6860. The USDCNY took the opposite route decreased 0.0063 or 0.09% to 6.9048.

Gold decreased 4.64USD/t oz. or -0.36% to 1,295.68 and silver increased 0.017 USD/t. oz or 0.12% to 14.7796.

Some economic news:

South Korea:

• Export Price Index (YoY) (Apr) increased from -0.9% to -0.4%
• Import Price Index (YoY) (Apr) increased from 4.3% to 4.8%

New Zealand:

• External Migration & Visitors (Mar) decreased from -1.30% to -2.60%
• Permanent/Long-Term Migration (Mar) decreased from 5,750 to 5,020
• Visitor Arrivals (MoM) increased from -1.6% to 2.5%

Australia:

• NAB Business Confidence (Apr) increased from -1 o 0
• NAB Business Survey (Apr) decreased from 7 to 3

Japan:

• Adjusted Current Account decreased from 1.96T to 1.27T
• Bank Lending (YoY) (Apr) increased from 2.3% to 2.4%
• Current Account n.s.a. (Mar) increased from 2.677T to 2.848T
• Economy Watchers Current Index (Apr) increased from 44.8 to 45.3

India:

• WPI Food (YoY) (Apr) increased from 5.68% to 7.37%
• WPI Fuel (YoY) (Apr) decreased from 5.41% to 3.84%
• WPI Inflation (YoY) (Apr) decreased from 3.18% to 3.07%
• WPI Manufacturing Inflation (YoY) (Apr) decreased from 2.16% to 1.72%

EUROPE:

In the UK, Chinese telecom giant Huawei’s chairman says concerns about surveillance are overblown and they are prepared to sign an agreement that includes prohibiting sharing any information back to China.

An EU directive today announced that employers must track employee hours in order to fulfill the working time directive, which allows staff at least 11 hours rest after 24 hours of work.

An interesting article from Moscow Times quoted Vladimir Yermakov, Russian head of the Foreign Ministry’s department of arms control and nonproliferation. “[The U.S. is] preparing to use nuclear weapons in Europe with the involvement of non-nuclear states,” Yermakov stated. The two sides have recently abandoned the 1987 Intermediate-range Nuclear Forces (INF) treaty, which prohibits weapons being mounted in Europe.

The major European stock markets had a green day today: CAC 40 increased 78.78 points or 1.50% to 5,341.35; FTSE 100 increased 77.92 points, or 1.09% to 7,241.60; and DAX increased 114.97 points or 0.97% to 11,991.62.

The major European currency markets had a mixed day today: The EURUSD decreased 0.0010 or 0.09% to 1.1213 and The GBPUSD decreased 0.00436 or -0.34% to 1.29114; however The USDCHF took the opposite route increased 0.0029 or 0.29% to 1.0092.

Some economic news:

Germany:

• German CPI (MoM) (Apr) remain the same at 1.0%
• German CPI (YoY) (Apr) remain the same at 2.0%
• German HICP (YoY) (Apr) remain the same at 2.1%
• German HICP (MoM) (Apr) remain the same at 1.0%
• German WPI (MoM) (Apr) increased from 0.3% to 0.6%
• German WPI (YoY) (Apr) increased from 1.8% to 2.1%
• German ZEW Current Conditions (May) increased from 5.5 to 8.2
• German ZEW Economic Sentiment (May) decreased from 3.1 to -2.1

Swiss:

• PPI (MoM) (Apr) decreased from 0.3% to 0.0%
• PPI (YoY) (Apr) decreased from -0.2% to -0.6%

Spain:

• Spanish CPI (MoM) (Apr) increased from 0.4% to 1.0%
• Spanish CPI (YoY) (Apr) increased from 1.3% to 1,5%
• Spanish HICP (YoY) (Apr) remain the same at 1.6%
• Spanish HICP (MoM) (Apr) decreased from 1.4% to 1.1%

UK:

• Average Earnings ex Bonus (Mar) decreased from 3.4% to 3.3%
• Average Earnings Index +Bonus (Mar) decreased from 3.5% to 3.2%
• Claimant Count Change (Apr) increased from 22.6K to 24.7K
• Employment Change 3M/3M (MoM) decreased from 179.0K to 99.0K
• Unemployment Rate (Mar) decreased from 3.9% to 3.8%

Eurozone:

• Industrial Production (YoY) (Mar) decreased from -0.3% to -0.6%
• Industrial Production (MoM) (Mar) decreased from -0.2% to -0.3%
• ZEW Economic Sentiment decreased from 4.5 to -1.6

U.S. / AMERCIAS:

The U.S. markets bounced back today, closing in the green after U.S.-China trade tensions reached a peak over past 48-72 hours. The Dow advanced 207.06 points (+0.82%) to close at 25,532.05; the S&P 500 rose 22.54 points (+0.80%), closing at 28,34.41; the Nasdaq rose 87.47 points (+1.14%), closing at 7,734.49; and the Russell 2000 had the strongest day, gaining 20.06 points (+1.32%) to close at 1,543.06.

“When the time is right we will make a deal with China,” President Trump commented on Tuesday morning. Reiterating America’s diplomacy with Chinese President Xi, Trump said he would like to make a deal with China but it “must be a great deal for the United States or it just doesn’t make sense.”

As has become clear for some time, the Trump administration has been at odds with the Federal Reserve over interest rates and that does not appear to be changing. Today, the President declared that the trade war could be won by simply lowering interest rates. He predicts China will lower interest rates for a competitive advantage, but some experts deny that strategy would work.

On the corporate side, Disney and Comcast today announced a significant deal in the media landscape, allowing Disney to immediately take full operational control of Hulu while Comcast obtains relief from future capital calls and a minimum guarantee on value in an eventual sale of its current one-third equity position in the streaming service to Disney. As part of this deal, NBC Universal content is now assured to remain on the Hulu platform for at least the next few years, if not longer. This is key milestone as both parties get to further pursue their direct-to-consumer aspirations in a manner that aligns to their strategy (Disney launching a consumer-paid services strategy, while Comcast is rumored to pursue an ad-supported strategy), and still enabling both parties to share in the upside of their contributions to Hulu (which Disney now owns two-thirds of after its acquisition of Fox and a subsequent deal with AT&T / WarnerMedia).

In Canada, the TSX Composite advanced 91.12 points (+0.56%), closing at 16,284.53; the TSX 60 rose 4.93 points (+0.51%), closing at 974.85.

Marcos Troyjo, Brazil’s deputy minister for foreign trade, announced that the U.S. and Brazil are “pushing the restart button in terms of their trade relations.” President Jair Bolsonaro has voiced past support of the Trump administration and hopes to strengthen ties between the two countries. Currently, Brazil-U.S. trade is composed of just $100 billion, but President Bolsonaro is hoping to increase that amount in the near future.

Meanwhile, the Bovespa gained 365.90 points (+0.40%), closing the session at 92,092.44.

ENERGY:

Two pumping stations on a Saudi Aramco oil pipeline in Saudi Arabia were attacked by explosive-laden drones in early morning local time on Tuesday, the official Saudi Press Agency (SPA) reported. This is the second attack within a week, and could be a catalyst of something bigger.

The oil markets had a green day today: Crude Oil increased 0.81 USD/BBL or 1.33% to 61.9662;Brent increased 1.14 USD/BBL or 1.62% to 71.2290; Natural gas increased 0.036USD/MMBtu or 1.37% to 2.6565; Gasoline increased 0.0145 USD/GAL or 0.74% to 1.9744 and Heating oil increased 0.0237 USD/GAL or 1.16% to 2.0605.

Top commodity gainers: Orange Juice (6.26%), Corn (3.67%), Soybeans (3.35%), and Ethanol (1.99%). Biggest losers: Oat (-10.01%), Coal (-1.38%), Lithium (-2.72%) and Zinc(-2.40%).

The above data was collected around 14:35 EST on Tuesday.

BONDS:

Japan -0.05%(-0bp), US 2’s 2.21% (+1bps), US 10’s 2.42%(+2bps), US 30’s 2.86%(+2bps), Bunds -0.08% (-0bp), France 0.33% (-0bp), Italy 2.74% (+4bp), Turkey 18.75% (-92bp), Greece 3.58% (+0bp), Portugal 1.15% (-2bp), Spain 0.98% (-2bp) and UK Gilts 1.10% (+0bp).

• Japan 30-Year JGB Auction decreased from 0.540% to 0.530%
• Spanish 3-Month Letras Auction decreased from -0.418% to -0.490%