Market Talk – December 13, 2019

ASIA:

US and China have passed “phase one” of the trade deal, which has halted the upcoming Sunday tariffs that would have applied tariffs on 160 Billion USD worth of goods. China, meanwhile, has agreed to up their spending on US agricultural products to 50 billion USD in the new year. Trump tweeted that they will work straight away on “phase two” rather than waiting for after the elections, he then concluded by stating it is an amazing deal for all.

India’s fuel demand grew by 10.5% in November from a year earlier, its fastest pace since January 2018, driven by higher consumption of transport fuels, gasoline, and cooking gas. Consumption of refined fuels, a proxy for oil demand in Asia’s second-largest economy, totaled 18.77 million tonnes in the month, preliminary data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. The International Energy Agency in a report released on Thursday forecast India’s oil demand growth in 2019 and 2020 to stay below levels seen between 2015 and 2018.

India’s federal cabinet has approved easier lending rules for shadow banks to help them get more access to funds. The government said it would allow state-run banks to get partial guarantees against the purchase of BBB+ rated securities of these shadow banks in addition to existing norms for AA or higher rated assets. The government had earlier this year announced it would partially guarantee state banks’ purchase of as much as 1 trillion rupees ($13.93 billion) of performing assets of these non-bank financial companies.

Recently, Chinese President Xi Jinping made his state visit to Nepal. During the visit, China and Nepal signed twenty agreements from connectivity to security and Beijing promised around $500 million in economic grants to Nepal. Further, China reinstated its commitment to build the Trans-Himalayan Multi-Dimensional Connectivity Network, which includes linking China to Kathmandu through Himalayan railways. Nepal’s Prime Minister KP Sharma Oli, on his part, reassured his Chinese counterpart by showing his support for the “Belt and Road Initiative” and promised that he will never allow any forces to engage in anti-China activities from Nepali soil.

The major Asian stock markets had a green day today:

• Shanghai increased 51.98 points or 1.78% to 2,967.68
• Kospi increased 32.90 points or 1.54% to 2,170.25
• ASX 200 increased 30.90 points or 0.46% to 6,739.70
• NIKKEI 225 increased 598.29 points or 2.55% to 24,023.10
• Hang Seng increased 693.62 points or 2.57% to 27,687.76
• SENSEX increased 428.00 points or 1.05% to 41,009.71

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.0031 or 0.45% to 0.6897
• NZDUSD decreased 0.0016 or 0.24% to 0.6603
• USDJPY increased 0.0370 or 0.03% to 109.4590
• USDCNY increased 0.03974 or 0.57% to 6.97394

Precious Metals:

• Gold increased 4.06 USD/t oz. or 0.28% to 1,467.39
• Silver decreased 0.0083 USD/t. oz or -0.05%% to 16.9221

Some economic news from last night:

China:

China Thomson Reuters IPSOS PCSI (Dec) decreased from 69.40 to 68.99

Japan:

Capacity Utilization (MoM) (Oct) decreased from 1.0% to -4.5%

Industrial Production (MoM) (Oct) decreased from -4.2% to -4.5%

Reuters Tankan Index (Dec) increased from -9 to -6

Tankan All Big Industry CAPEX (Q4) increased from 6.6% to 6.8%

Tankan All Small Industry CAPEX (Q4) increased from -6.7% to -2.2%

Tankan Big Manufacturing Outlook Index (Q4) decreased from 2 to 0

Tankan Large Manufacturers Index (Q4) decreased from 5 to 0

Tankan Large Non-Manufacturers Diffusion Index (Q4) increased from 15 to 18

Tankan Large Non-Manufacturers Index (Q4) decreased from 21 to 20

Tankan Small Manufacturers Diffusion Index (Q4) decreased from -9 to -12

Tankan Small Manufacturing Index (Q4) decreased from -4 to -9

Tankan Small Non-Manufacturers Diffusion Index (Q4) remain the same at 1

Tankan Small Non-Manufacturing Index (Q4) decreased from 10 to 7

Thomson Reuters IPSOS PCSI (Dec) increased from 39.95 to 40.15

South Korea:

Export Price Index (YoY) (Nov) increased from -7.4% to -6.2%

Import Price Index (YoY) (Nov) increased from -6.0% to -2.1%

New Zealand:

Business NZ PMI (Nov) decreased from 52.6 to 51.4

Some economic news from today:

China:

FDI decreased from 6.6% to 6.0%

India:

FX Reserves, USD increased from 451.08B to 453.42B

Trade Balance (Nov) increased from 11.01B to 12.12B

EUROPE/EMEA:

The UK Conservatives won the majority seats in yesterday’s election, prompting a sharp rise in the GBP peaking out around 1.35 against the dollar. The Conservatives who represented pushing ahead for Brexit won 43.6% of the seats, which equates to 365 seats, where only 326 seats were needed for a majority. UK Labour Party leader Jeremy Corbyn announced that he will be stepping down as leader after failing to sway voter confidence. UK PM Boris Johnson spoke outside downing street today, explaining the results mean closure to the Brexit debate and for the country can start healing. On behalf of the EU, French President Macron has told Boris Johnson that the UK must still adhere to strict standards if they want to maintain access to the EU market. Macron further added that he didn’t want the UK to be an unfair competitor so they must adhere to the regulations.

The New York Times reported that as much as 15 million bank accounts had their information stolen and published online in what was described as a “cyber” attack on the nation. “We faced a very well-coordinated state-sponsored cyberattack on the government’s digital infrastructure,” Mr. Azari Jahromi who is the head of Iran’s cybersecurity team.

Turkey has summoned the US ambassador in order to discuss the recognition of the Armenian genocide on behalf of the Turkish. Previously, President Erdogan called the remarks a huge insult to their nation.

Sweden has already sourced a partner in Accenture to develop its e-krona digital currency project. They recently also trialed a “cashless” society as they are moving forward with the digital age.

The major Europe stock markets had a green day today:

• CAC 40 increased 34.76 points or 0.59% to 5,919.02
• FTSE 100 increased 79.97 points, or 1.10% to 7,353.44
• DAX 30 increased 61.08 points or 0.46% to 13,282.72

The major Europe currency markets had a negative day today:

• EURUSD decreased 0.00515 or -0.46% to 1.11345
• GBPUSD decreased 0.01472 or -1.09% to 1.33248
• USDCHF decreased 0.0005 or 0.05% to 0.9843

Some economic news from Europe today:

Germany:

German WPI (MoM) (Nov) remain the same at -0.1%

German WPI (YoY) (Nov) decreased from -2.3% to -2.5%

Spain:

Spanish CPI (YoY) (Nov) increased from 0.1% to 0.4%

Spanish CPI (MoM) (Nov) decreased from 1.0% to 0.2%

Spanish HICP (YoY) (Nov) remain the same at 0.5%

Spanish HICP (MoM) (Nov) decreased from 0.7% to 0.0%

Italy:

Italian Industrial New Orders (MoM) (Oct) decreased from 0.9% to 0.6%

Italian Industrial New Orders (YoY) (Oct) decreased from 0.2% to -1.5%

Italian Industrial Sales (MoM) (Oct) increased from 0.2% to 0.6%

Italian Industrial Sales (YoY) (Oct) increased from -1.6% to -0.2%

UK:

Inflation Expectations decreased from 3.3% to 3.1%

US/AMERICAS:

The US and China plan to sign phase one of the trade deal in January, according to US Trade Representative Robert Lighthizer. China has agreed to purchase $40 billion worth of US agriculture products, although Trump is pushing for $50 billion. Lighthizer also stated that China agreed to “structural reforms” to meet the US’ demand for increased intellectual security. The US will maintain 25% tariffs on $250 worth of Chinese imports. Additionally, the US will reduce tariffs on $120 billion of Chinese goods to 7.5% from 15% after the deal has been finalized for 30 days. President Trump said negotiations for phase two of the deal will begin “immediately” after phase one is signed.

The US markets were barely impacted by the US-China trade news, as skepticism over the finalization remains. National Economic Council Director Larry Kudlow called the verbal agreement a sign of “goodwill” but is not fully confident that the deal will be implemented. “We will see if the Chinese stick with their word, Kudlow told reporters at CNBC. Furthermore, Kudlow stated that there is a chance the Chinese may still ratify the agreement prior to signing. There are other looming issues causing friction between the two world powers. Senior Chinese diplomat Wang Yi stated this Friday that the US is “seriously damaging” its relationship with China by criticizing the communist regime’s handling of Hong Kong and the Muslim Uighurs.

Democrats on the House Judiciary Committee voted in favor of proceeding with impeaching President Trump. The Democrats charged Trump with two articles of impeachment that include abuse of power and obstruction of justice. Republicans unanimously voted against the charges. The full House of Representatives will vote on the impeachment proceedings next week. The Democratic-led House is likely to pass the vote, which will send it to the Republican-led Senate.

Brazil has decided to postpone two critical railway projects until Q3 of 2020. According to Reuters, Brazil plans to auction 44 different projects with the hope of raising $24 billion.

US Market Closings:

• Dow advanced 3.40 points or 0.01% to 28,135.45
• S&P 500 advanced 0.22 of a point or 0.01% to 3,168.79
• Nasdaq advanced 17.56 points or 0.20% to 8,734.88
• Russell 2000 declined 6.84 points or -0.42% to 1,637.98

Canada Market Closings:

• TSX Composite advanced 56.23 points or 0.33% to 17,003.13
• TSX 60 advanced 2.56 points or 0.25% to 1,015.49

Brazil Market Closing:

• Bovespa advanced 365.12 points or 0.33% to 112,564.86

ENERGY:

Brent moved over 65 USD a barrel for the first time since the attacks on a Saudi Arabian facility as OPEC+ production cuts go underway. Also, the news regarding “phase one” of the US-China trade deal helped push up expectations for demand.

The oil markets had a mixed day today:

• Crude Oil increased 0.384 USD/BBL or 0.65% to 59.9083
• Brent increased 0.5967 USD/BBL or 0.92% to 65.0566
• Natural gas decreased 0.0125 USD/MMBtu or -0.54% to 2.3103
• Gasoline increased 0.0218USD/GAL or 1.33% to 1.6629
• Heating oil increased 0.0259 USD/GAL or 1.32% to 1.9850
• Top commodity gainers: Palladium (1.36%), Gasoline (1.33%),Ethanol (3.24%), and Heating Oil(1.32%)
• Top commodity losers: Steel (-12.12%), Bitumen (-6.21%), Wheat (-1.60%), and Platinum (-1.30%)

The above data was collected around 10.30 am EST on Friday.

BONDS:

Japan -0.02%(+1bp), US 2’s 1.64% (-3bps), US 10’s 1.89%(-1bps); US 30’s 2.31%(-2bps), Bunds -0.25% (+2bp), France 0.05% (+1bp), Italy 1.31% (+1bp), Turkey 12.00% (-7bp), Greece 1.40% (-49bp), Portugal 0.40% (-1bp), Spain 0.45% (-1bp) and UK Gilts 0.85% (+3bp).