Market Talk – December 17, 2019

ASIA:

China and Russia have proposed reducing sanctions on North Korea so that they can ease back into global trade and help denuclearization talks. However, the US disagreed saying that any reduction in sanctions would be premature as they believe North Korea is escalating tensions in the region.

Reserve Bank of India Governor Shaktikanta Das said on Monday that there is scope in India for cutting interest rates further, and the central bank will use it when required after studying growth and inflation data. The monetary policy committee (MPC) surprised markets and analysts this month by holding rates steady after trimming the key interest rate by 135 basis points since the beginning of the current rate reduction cycle in February. Das said markets were surprised when the committee started cutting rates in February, but subsequently accepted that it was right in doing so. He also said both the government and the central bank had taken steps to help the economy recover but the outcome of events in the global economy would play a role.

Online sales in India accounted for 1.6% of total retail sales, with intra-regional trade in South Asia remaining low, the World Bank said on Monday. In a recent report, the World Bank said that while online sales had grown substantially in recent years, e-commerce in the region is still very small. Even in India, online sales were only 1.6% versus over 15% for China and around 14% globally. Indian firms, which tend to be more digitized and heavily concentrated in service sectors, tended to highlight regulatory issues such as tax rules, legal liability laws, and data piracy challenges as the top challenges to ecommerce.

The major Asian stock markets had a mixed day today:

• Shanghai increased 38.03 points or 1.27% to 3,022.42
• Kospi increased 27.53 points or 1.27% to 2,195.68
• ASX 200 decreased 2.40 points or -0.04% to 6,847.30
• NIKKEI 225 increased 113.77 points or 0.47% to 24,066.12
• Hang Seng increased 335.62 points or 1.22% to 27,843.71
• SENSEX increased 413.45 points or 1.01% to 41,352.17

The major Asian currency markets had a negative day today:

• AUDUSD decreased 0.0026 or 0.38% to 0.6847
• NZDUSD decreased 0.0021 or 0.32% to 0.6569
• USDJPY decreased 0.0620 or 0.06% to 109.5460
• USDCNY decreased 0.0080 or 0.11% to 6.9932

Precious Metals:

• Gold increased 1.8 USD/t oz. or 0.12% to 1,479.01
• Silver decreased 0.0059 USD/t. oz or -0.03%% to 17.0432

Some economic news from last night:

Australia:

Home Loans (MoM) (Oct) decreased from 1.4% to 0.6%

Invest Housing Finance (MoM) increased from 1.1% to 2.0%

New Zealand:

ANZ Business Confidence (Dec) increased from -26.4 to -13.2

NBNZ Own Activity (Dec) increased from 12.9% to 17.2%

RBNZ Offshore Holdings (Nov) decreased from 49.90% to 49.60%

Singapore:

Non-Oil Exports (YoY) (Nov) increased from -12.50% to -5.90%

Non-Oil Exports (MoM) (Nov) increased from -3.10% to 5.80%

Trade Balance decreased from 3.780B to 3.690B

Some economic news from today:

New Zealand:

GlobalDairyTrade Price Index decreased from -0.5% to -5.1%

Hong Kong:

Unemployment Rate (Nov) increased from 3.1% to 3.2%

EUROPE/EMEA:

UK PM Boris Johnson plans to make it illegal for the government to extend Brexit beyond the 11-month transition period. There have been many vocal critics, namely Irish deputy PM who said the UK is limiting their options.

Poland has been warned by their Supreme Court that they may have to leave the EU if they continue their practice of dismissing judges who oppose the government judicial reforms. “Contradictions between Polish and EU law…. will in all likelihood lead to an intervention by EU institutions regarding an infringement of EU treaties, and in the longer run [will lead to] the need to leave the European Union.”

European top trade officials are concerned by the lack of progress between their own trade deal with China. The aim is having a deal in place by the end of next year which will also touch on political issues. The main issue is to give European companies a chance to enter into the Chinese market.

Turkey has expressed that they wish to mend ties with the EU after relations were a little shaky of late. “In 2020, we have an opportunity to open a new page in Turkey-EU relations. We want it sincerely,” said the deputy foreign minister.

The major Europe stock markets had a mixed day today:

• CAC 40 decreased 23.39 points or -0.39% to 5,968.26
• FTSE 100 increased 6.23 points, or 0.08% to 7,525.28
• DAX 30 decreased 119.83 points or -0.89% to 13,287.83

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0013 or 0.11% to 1.1150
• GBPUSD decreased 0.01379 or -1.04% to 1.31141
• USDCHF decreased 0.0022 or 0.22% to 0.9810

Some economic news from Europe today:

UK:

CBI Industrial Trends Orders (Dec) decreased from -26 to -28

Average Earnings ex Bonus (Oct) decreased from 3.6% to 3.5%

Average Earnings Index +Bonus (Oct) decreased from 3.7% to 3.2%

Claimant Count Change (Nov) increased from 26.4K to 28.8K

Employment Change 3M/3M (MoM) (Oct) increased from -58K to 24K

Unemployment Rate (Oct) remain the same at 3.8%

Car Registration (MoM) (Nov) increased from -58.3% to 9.3%

Car Registration (YoY) (Nov) increased from -6.7% to -1.3%

Euro Zone:

Trade Balance (Oct) increased from 18.7B to 28.0B

Italy:

Italian Car Registration (YoY) (Nov) decreased from 6.7% to 2.2%

Italian Car Registration (MoM) (Nov) decreased from 10.4% to -4.0%

Italian Trade Balance (Oct) increased from 2.686B to 8.057B

Italian Trade Balance EU (Oct) increased from 1.16B to 2.10B

Germany:

German Car Registration (YoY) (Nov) decreased from 12.7% to 9.7%

German Car Registration (MoM) (Nov) decreased from 16.3% to 5.1%

France:

French Car Registration (YoY) (Nov) decreased from 8.7% to 0.7%

French Car Registration (MoM) (Nov) decreased from 9.0% to -8.6%

US/AMERICAS:

Tomorrow the House will determine whether the two articles against Trump provide sufficient support for impeachment. Last week, the House Judicial Committee found President Trump guilty of two impeachable offenses: abuse of power and obstruction of Congress. The Democratic-led House believes Trump abused his power by asking Ukraine to investigate Hunter Biden’s questionable business practices, which they believe was done to retaliate against his political rival Joe Biden. The second article states that Trump obstructed Congress by blocking testimonies and failing to provide proper documentation. It is largely believed that the Democratic-led House will vote to impeach Trump, which would place the vote in the Republican-led Senate.

Low mortgage rates are boosting America’s housing market. Permits for future home construction reached a 12.5-year high this November, according to the Commerce Department. Overall housing starts rose by 3.2% to 1.365 million homes on a month-on-month basis, and grew by 13.6% year-on-year. Single-family home construction reached a 10-month high last month after rising by 0.8%, and construction for multifamily homes experienced a boost of 4.9%.

China lifted its five-year ban on US poultry and awarded a $1 billion contract to Tyson Foods. China originally implemented the ban in December 2014 after the avian influenza outbreak that infected chicken, turkey, and other poultry animals. China recently experienced a depletion of available pork dur to the African Swine Flu outbreak and began importing pork products from other countries such as Brazil. Chicken, a popular pork substitute, will compose the majority of Tyson Foods’ contract. Representatives from Tyson said that they will only ship products labeled “USDA Approved.”

Canadian telco Videotron will begin to purchase 4G LTE-A and 5G equipment from Samsung. China’s Huawei was previously the largest 5G supplier in Canada and held 30% of the market in Q3. In light of recent security concerns regarding Huawei, and political concerns regarding China, companies are beginning to move away from purchasing Huawei equipment.

US Market Closings:

• DJIA advanced 31.27 points or 0.11% to 28,267.16
• S&P 500 advanced 1.07 points or 0.03% to 3,192.52
• Nasdaq advanced 9.13 points or 0.10% to 8,823.36
• Russell 2000 advanced 7.63 points or 0.46% to 1,657.56

Canada Market Closings:

• TSX Composite advanced 18.33 points or 0.11% to 17,074.69
• TSX 60 advanced 0.78 of a point or 0.08% to 1,018.74

Brazil Market Closing:

• Bovespa advanced 719.62 points or 0.64% to 112,615.66

ENERGY:

With the economy slowing down, China has set a new record for oil imports in November after importing 11.18 million barrels of oil. This was greater than the US’ peak in imports in 2005 of 10.77 million barrels.

The oil markets had a mixed day today:

• Crude Oil increased 0.6841 USD/BBL or 1.14% to 60.8473
• Brent increased 0.7158 USD/BBL or 1.10% to 66.1906
• Natural gas decreased 0.0435 USD/MMBtu or -1.85% to 2.3117
• Gasoline increased 0.0188USD/GAL or 1.13% to 1.6844
• Heating oil increased 0.026 USD/GAL or 1.30% to 2.0269
• Top commodity gainers: Ethanol(11.94%),Bitumen(2.78%),Heating Oil(1.30%), and Crude Oil(1.14%)
• Top commodity losers: Coffee(-2.87%), Natural Gas(-1.85%), Palladium (-1.81%), and Lumber(-1.05%)

The above data was collected around 12.30 EST on Tuesday.

BONDS:

Japan 0.00%(+2bp), US 2’s 1.62% (-2bps), US 10’s 1.88%(-1bps); US 30’s 2.30%(-1bps), Bunds -0.29% (-2bp), France 0.01% (-1bp), Italy 1.28% (-2bp), Turkey 12.20% (+0bp), Greece 1.41% (-42bp), Portugal 0.36% (-3bp), Spain 0.40% (-3bp) and UK Gilts 0.77% (-5bp).