Market Talk – January 8, 2020

ASIA:

China has announced they will ban all foreign materials from the classroom in order to keep students focused on the “Chinese” way. The Ministry of Education said that they will insist that education materials promote Marxism and reflect the Chinese style. “All primary and secondary school teaching materials must reflect the will of the party and the country,” said the Ministry which also stated the youth will “bear the great responsibility of the rejuvenation of the Chinese nation.”

A report by the US commission titled Congressional-Executive Commission on China (CECC) states that there is a strong suggestion that China has committed crimes against humanity when dealing with the Muslim population in the northwestern region of China.

China has put into service the world’s first driverless train that is capable of traveling at speeds up to 350 Km/Per hour.

Tens of thousands of workers affiliated to trade unions led a strike in parts of India on Wednesday, disrupting transport and banking services in a protest against privatization and the growing impact of an economic slowdown on jobs. More than 10 national trade unions affiliated to left-wing parties, including the main opposition Congress, have called for a nationwide protest against Prime Minister Narendra Modi’s labor reforms. Those include the privatization of state-run companies Air India and oil major BPCL, as well as a merger of public-sector banks. C.H. Venkatachalam, general secretary of the All India Bank Employees’ Association, said the proposed merger of 10 state banks into four banks would affect jobs and could hit the recovery of bad loans amounting to near $140 billion.

China Development Bank (CDB), the biggest foreign lender to India’s Reliance Communications Ltd (RCom) (RLCM.NS), on Friday withdrew a petition seeking to drag the indebted telecoms carrier into insolvency. A lawyer for CDB told the National Company Law Tribunal that the Chinese bank had filed to withdraw the petition. The tribunal allowed CDB’s plea to go forward. CDB, which is owed around $2 billion along with two other Chinese banks, filed the petition in November seeking insolvency proceedings against RCom. The company said a large amount of loan principal and interest payments was overdue. Last week, RCom signed a deal to sell most of its wireless assets to Jio in a deal people familiar with the matter said was worth nearly $3.8 billion.

The Southeast Asian branch of leading professional services firm Deloitte has launched its Best Managed Companies program in Singapore. This program focuses exclusively on serving privately-run clients and will enable successful and established local private businesses to benchmark themselves against some of the top private companies worldwide. Aimed at recognizing the country’s most outstanding private businesses, cost-free applications are due by the 7th of February, with companies required to meet a number of criteria for eligibility, including revenues in excess of US$50 million in the most recent accounting year, five years of operation, and headquarters or incorporation in Singapore with the majority of shares privately held in the country.

The major Asian stock markets had a negative day today:

• Shanghai decreased 37.91points or -1.22% to 3,066.89
• Kospi decreased 24.23 points or -1.11% to 2,151.31
• ASX 200 decreased 8.80 points or -0.13% to 6,817.60
• NIKKEI 225 decreased 370.96 points or -1.57% to 23,204.76
• Hang Seng decreased 234.14 points or -0.83% to 28,087.92
• SENSEX decreased 51.73 points or -0.13% to 40,817.74

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.0018 or 0.26% to 0.6870
• NZDUSD increased 0.0023 or 0.34% to 0.6652
• USDJPY increased 1.2150 or 1.13% to 109.1190
• USDCNY decreased 0.0147 or 0.21% to 6.9370

Precious Metals:

• Gold decreased 18.21 USD/t oz. or -1.16% to 1,553.09
• Silver decreased 0.4963 USD/t. oz or -2.67%% to 18.1021

Some economic news from last night:

Australia:

AIG Construction Index (Dec) decreased from 40.0 to 38.9

Building Approvals (MoM) (Nov) increased from -7.9% to 11.8%

Private House Approvals (Nov) increased from -6.0% to 6.1%

Japan:

Average Cash Earnings (YoY) decreased from 0.0% to -0.2%

Overall wage income of employees (Nov) decreased from 0.5% to -0.2%

Overtime Pay (YoY) (Nov) decreased from -0.10% to -1.90%

Indonesia:

FX Reserves (USD) increased from 126.60B to 129.20B

Some economic news from today:

Japan:

Household Confidence (Dec) increased from 38.7 to 39.1

EUROPE/EMEA:

US President Trump spoke this morning regarding the Iranian retaliation after the bombing of the US bases in Iraq. He confirmed there were no causalities in what seemed an attempt to de-escalate the situation. During his speech he said Iran appears to be standing down, and that the US was willing to find peace with whoever seeks it. He did however say that the US is preparing a response to Iran in the form of further sanctions. He also stated that NATO will have more of a presence in the Middle East going forward as well as promising the nation that as long as he is president, Iran will never have nuclear weapons.

Several airlines on Wednesday said they would be avoiding Iranian airspace or canceling flights in the wake of heightened tensions in the Middle East. Singapore Airlines, Qantas, China Airlines, Lufthansa and Malaysia Airlines were among those which said they’re avoiding the Iranian airspace. Meanwhile, Dubai-based Emirates and its sister airline Fly Dubai canceled Wednesday flights to Baghdad. The announcements came after Iran launched more than a dozen ballistic missiles against multiple bases housing US troops in Iraq. Meanwhile, Iran said they will not give the black box of the downed airplane to Boeing.

The EU commission head Ursula von Leyen has stated that it would be practically impossible for the UK to agree to a full EU-UK deal by the end of the year as PM Boris Johnson has promised. “The transition time is very, very tight, so it is basically impossible to negotiate all that I have been mentioning, so we will have to prioritize,” she said.

Meanwhile, the US has stepped up its pressure on trying to persuade the UK not to use Chinese manufacturer Huawei when completing their 5G network over fears the Chinese will use a backdoor to provide information to the government.

The UK PM Boris Johnson called for an urgent de-escalation of the US-Iran feud but praised the killing of the Iranian general as he stated that the general had British blood on his hands.

German industrial orders dropped again in November after a lack of foreign demand due to the global slowdown. The drop was 1.3% from the previous month.

The major Europe stock markets had a green day today:

• CAC 40 increased 18.65 points or 0.31% to 6,031.00
• FTSE 100 increased 1.08 points, or 0.01% to 7,574.93
• DAX 30 increased 93.35 points or 0.71% to 13,320.18

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.0039 or 0.35% to 1.1110
• GBPUSD decreased 0.0019 or 0.14% to 1.3094
• USDCHF increased 0.0048 or 0.50% to 0.9737

Some economic news from Europe today:

Germany:

German Factory Orders (MoM) (Nov) decreased from 0.2% to -1.3%

Norway:

Manufacturing Production (MoM) (Nov) decreased from 0.0% to -0.4%

France:

French Consumer Confidence (Dec) decreased from 105 to 102

French Current Account (Nov) increased from -2.10B to 0.50B

French Exports (Nov) decreased from 43.0B to 42.1B

French Imports (Nov) decreased from 47.9B to 47.6B

French Reserve Assets Total (Dec) increased from 174,711.0M to 175,209.0M

French Trade Balance (Nov) decreased from -4.9B to -5.6B

UK:

Halifax House Price Index (YoY) increased from 2.1% to 4.0%

Halifax House Price Index (MoM) (Dec) increased from 1.2% to 1.7%

Labour Productivity (Q3) increased from -0.6% to 0.1%

Euro Zone:

Business and Consumer Survey (Dec) increased from 101.2 to 101.5

Business Climate (Dec) decreased from -0.21 to -0.25

Consumer Confidence (Dec) decreased from -7.2 to -8.1

Consumer Inflation Expectation (Dec) increased from 19.4 to 20.5

Selling Price Expectations (Dec) increased from 0.7 to 1.9

Services Sentiment (Dec) increased from 9.2 to 11.4

Industrial Sentiment (Dec) decreased from -9.1 to -9.3

Spain:

Spanish Business Confidence increased from -3.2 to -1.9

US/AMERICAS:

Iran fired 15 missiles at US-Iraqi bases last night in retaliation for the killing of General Qassem Soleimani. No casualties were reported despite property damage. President Donald Trump made an announcement earlier in the day that the US plans to respond with further sanctions instead of war. Foreign Affairs Minister of Iran Javad Zarif said his country does “not seek escalation or war, but will defend ourselves against any aggression.”

Shortly after the US markets closed for the day, two rockets were launched in Iraq’s capital of Baghdad. The rockets allegedly hit the “Green Zone” that contains embassies for the US and other western nations. The White House and Pentagon have yet to comment on the recent development.

President Trump is urging the United Kingdom, Germany, France, Russia, and China to back away from the Joint Comprehensive Plan of Action (JCPOA) also known as the Iran Nuclear Deal. “We must all work together toward making a deal with Iran that makes the world a safer, and more peaceful place” noted President Trump, who removed the US from the JCPOA in 2018. Iran announced plans over the weekend to accelerate its uranium enrichment operations which nullifies the nation’s JCPOA obligations.

The Nasdaq gained 60.66 points in today’s session and closed at an all-time high of 9,129.24. Tesla’s 4.92% gain led the Nasdaq’s advancement followed by Workda (3.33%), Vertex Pharmaceuticals (3.26%), and Netflix (2.57%). The S&P 500 also reached new highs this Wednesday after advancing 15.87 points and closing at 3,253.05. Contellation Brand was the largest gainer today on the S&P 500 after advancing 3.64%, followed by Vertex Pharmaceuticals, Laboratory (2.77%), and Anthem (2.65%).

Economists with Bloomberg News reportedly see immigration as once of the main driving forces behind Canada’s economy in 2020. Canada added an additional 437,000 citizens through immigration in 2019, and saw a rise in the overall population despite a notable decrease in the birth rate. The surveyed economists foresee Canada’s economy growing 1.6% this year.

US Market Closings:

• Dow advanced 161.41 points or 0.56% to 28,745.09
• S&P 500 advanced 15.87 points or 0.49% to 3,253.05
• Nasdaq advanced 60.66 points or 0.67% to 9,129.24
• Russell 2000 advanced 5.29 points or 0.32% to 1,663.59

Canada Market Closings:

• TSX Composite declined -0.24 of a point or 0% to 17,167.82
• TSX 60 advanced 1.66 points or 0.16% to 1,022.96

Brazil Market Closing:

• Bovespa declined 414.91 points or -0.36% to 116,247.03

ENERGY:

WTI went under 60 USD a barrel today as Trump’s announcement that the US will not retaliate sent the Crude market down by nearly 5%. This was the first time the price dropped below 60 since December 2016.

The oil markets had a mixed day today:

• Crude Oil decreased 2.58 USD/BBL or -4.13% to 59.9386
• Brent decreased 2.36 USD/BBL or -3.46% to 65.9884
• Natural gas increased 0.0034 USD/MMBtu or 0.16% to 2.1400
• Gasoline decreased 0.1146USD/GAL or -6.42% to 1.6707
• Heating oil decreased 0.12 USD/GAL or -5.50% to 1.9721
• Top commodity gainers: Palladium(2.55%),Oat(2.27%),Feeder Cattle(1.08%), and Wheat(1.05%)
• Top commodity losers: Gasoline(-6.42%), Crude Oil(-4.13%), Heating Oil (-5.50%), and Propane(-3.47%)

The above data was collected around 16.32  EST on Wednesday.

BONDS:

Japan -0.02%(-1bp), US 2’s 1.58% (+4bps), US 10’s 1.87%(+5bps); US 30’s 2.36%(+5bps), Bunds -0.28% (+1bp), France 0.05% (+4bp), Italy 1.44% (+7bp), Turkey 11.86% (-19bp), Greece 1.43% (-55bp), Portugal 0.40% (+3bp), Spain 0.41% (-0bp) and UK Gilts 0.82% (+8bp).

• US 10-Year Note Auction increased from 1.842% to 1.869%