Market Talk – September 30, 2019

Posted Sep 30, 2019 by Martin Armstrong |

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ASIA:

Chinese economic data from last Friday showed that industrial company profits dropped 2% in August from a year ago. It reversed a 2.6% gain in the previous month, indicating growing pressure on the corporate sector as the economy slows further.

President Xi of China paid his respects to the founder of the Communist party Mao ahead of the 70^th year anniversary of Communist rule in China. Tomorrow, there is expected to be a large buildup of military personnel in case any protests occur in Hong Kong.

Scientists at the Fudan University and Changchun Institute of Optics Fine Mechanics and Physics in China have developed a 500MP cloud-connected ‘super camera’ that can reportedly pick out facial details of an individual person among thousands in a crowded stadium. The new tech is raising serious concerns about privacy and government monitoring.

Pakistan’s prime minister, Imran Khan, warned last night that India’s actions in Kashmir could cause a “bloodbath” in the region and provoke war between the two countries. Tensions have been rising of late between the two nations since India repealed article 370. US President Trump has called on Imran Khan to critique Chinese treatment of Uighur Muslims.

A bid by four of the Indo-Pacific’s largest economies banded together to counter China’s growing influence in the region; the Quad group met for the first time at the ministerial-level in New York last Friday.

The major Asian stock markets had a mixed day today:

Shanghai decreased 26.98 points or -0.92% to 2,905.19
Kospi increased 13.12 or 0.64% to 2,063.05
ASX 200 decreased 27.80 points or -0.41% to 6,688.30
NIKKEI 225 decreased 123.06 points or -0.56% to 21,755.84
Hang Seng increased 137.46 points or 0.53% to 26,092.27
SENSEX decreased 155.24 points or -0.40% to 38,667.33

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.0016 or 0.23% to 0.6750
NZDUSD decreased 0.00348 or -0.55% to 0.62602
USDJPY increased 0.1820 or 0.17% to 108.1020
USDCNY increased 0.0036 or 0.05% to 7.1396

Precious Metals:

Gold decreased 23.21 USD/t oz. or -1.55% to 1,472.40
Silver decreased 0.4943 USD/t. oz or -2.82%% to 17.0579

Some economic news from last night:

Japan:

Industrial Production (MoM) (Aug) decreased from 1.3% to -1.2%
Industrial Production forecast 1m ahead (MoM) (Sep) increased from 1.3% to 1.9%
Industrial Production forecast 2m ahead (MoM) (Oct) increased from -1.6% to -0.5%
Retail Sales (YoY) (Aug) increased from -2.0% to 2.0%

China:

Chinese Composite PMI (Sep) increased from 53.0 to 53.1
Manufacturing PMI (Sep) increased from 49.5 to 49.8
Non-Manufacturing PMI (Sep) decreased from 53.8 to 53.7
Caixin Manufacturing PMI (Sep) increased from 50.4 to 51.4

Singapore:

Bank Lending (Aug) increased from 680.7B to 684.9B

South Korea:

Industrial Production (MoM) (Aug) decreased from 2.8% to -1.4%
Industrial Production (YoY) (Aug) decreased from 0.6% to -2.9%
Retail Sales (MoM) increased from -0.9% to 3.9%
Service Sector Output (MoM) (Aug) increased from 1.1% to 1.2%

New Zealand:

Building Consents (MoM) (Aug) increased from -1.3% to 0.8%
ANZ Business Confidence (Sep) decreased from -52.3 to -53.5
NBNZ Own Activity (Sep) decreased from -0.5% to -1.8%

Australia:

MI Inflation Gauge (MoM) increased from 0.0% to 0.1%
Housing Credit (Aug) decreased from 0.3% to 0.2%
Private Sector Credit (MoM) (Aug) remain the same at 0.2%

Some economic news from today:

India:

Federal Fiscal Deficit (Aug) increased from 5,476.05B to 5,538.40B
Balance of Payments (USD) (Q2) increased from 0.400B to 14.000B
Current Account % of GDP (QoQ) (Q2) decreased from -0.70% to -2.00%
Current Account (USD) (Q2) decreased from -4.60B to -14.30B
Trade Balance (USD) (Q2) decreased from -35.200B to -46.200B
Foreign Debt (USD) (Q2) increased from 543.0B to 557.4B
Infrastructure Output (YoY) (Aug) decreased from 2.7% to -0.5%

Indonesia:

M2 Money Supply (YoY) (Aug) decreased from 7.8% to 7.3%

Japan:

Construction Orders (YoY) decreased from 26.9% to -25.9%
Housing Starts (YoY) (Aug) decreased from -4.1% to -7.1%

Hong Kong:

M3 Money Supply (Aug) decreased from 3.3% to 1.9%

EUROPE/EMEA:

The House of Commons today talked about the prospect of banning hedge funds from shorting the pound after the pound rebounded from the lowest point in history against the dollar. The UK also announced the economy has dropped 0.2% in GDP for the second quarter of 2019.

UK PM Boris Johnson is said to be planning to reveal the plan for Brexit at the last minute because he fears members of Parliament will block it again. MPs are discussing a possible legal case if the UK were to withdraw out of the EU by the 31^st of October. Seems like that was the plan wasn’t it? Still, Boris Johnson feels adamant he can get it done, whilst Sajid Javid plans with the Tories to raise the minimum wage up to 10.50 pounds an hour. European ministers are calling the situation “gloomy,” stating that it is unlikely the EU will budge on a few points and 27 member states would have to agree on it.

The European Union has included Japan in its Asia “connectivity” plan, signing a landmark deal to coordinate transport, energy, and digital projects amid concerns over China’s dominance in infrastructure funding. This will be a direct competition to the silk road initiative by China.

Saudi Crown Prince Mohammed bin Salman told the international community that failure to control Iran could cause the price of oil to soar, and in turn destabilize the economy. He was also questioned of his involvement regarding the killing of Saudi news reporter Jamal Khashoggi, in which he replied, “I take full responsibility as a leader in Saudi Arabia, especially since it [the killing] was committed by individuals working for the Saudi government.” Yet, he denied being personally involved.

Oil slid after Iranian President Hassan Rouhani claimed Friday that the U.S. offered to remove all sanctions on Iran in exchange for negotiations. President Donald Trump and the State Department later denied those claims, causing oil to rebound from the lows.

The major Europe stock markets had a mixed day today:

CAC 40 increased 37.21 points or 0.66% to 5,677.79
FTSE 100 decreased 18.00 points, or -0.24% to 7,408.21
DAX increased 47.14 points or 0.38% to 12,428.08

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00357 or -0.33% to 1.09023
GBPUSD increased 0.0008 or 0.06% to 1.2296
USDCHF increased 0.0072 or 0.73% to 0.9979

Some economic news from Europe today:

Norway:

Core Retail Sales (MoM) (Aug) decreased from 0.8% to 0.0%
Central Bank Currency Purchase (Oct) remain the same at -700.0M

Swiss:

KOF Leading Indicators (Sep) decreased from 95.5 to 93.2

Spain:

Spanish CPI (MoM) increased from -0.1% to 0.0%
Spanish CPI (YoY) decreased from 0.3% to 0.1%
Spanish GDP (QoQ) (Q2) decreased from 0.5% to 0.4%
Spanish GDP (YoY) (Q2) decreased from 2.4% to 2.0%
Spanish HICP (YoY) (Sep) decreased from 0.4% to 0.2%
Spanish HICP (MoM) increased from -0.1% to 0.0%
Spanish Current account (Jul) increased from 2.05B to 3.24B

Germany:

German Retail Sales (MoM) (Aug) increased from -0.8% to 0.5%
German Retail Sales (YoY) (Aug) decreased from 5.2% to 3.2%
German Unemployment Change (Sep) decreased from 2K to -10K
German Unemployment Rate (Sep) remain the same at 5.0%
German Unemployment (Sep) decreased from 2.286M to 2.276M
German Unemployment n.s.a. (Sep) decreased from 2.319M to 2.234M
German CPI (MoM) (Sep) increased from -0.2% to 0.0%
German CPI (YoY) (Sep) decreased from 1.4% to 1.2%
German HICP (MoM) (Sep) remain the same at -0.1%
German HICP (YoY) (Sep) decreased from 1.0% to 0.9%

Italy:

Italian Monthly Unemployment Rate (Aug) decreased from 9.8% to 9.5%
Italian CPI (MoM) (Sep) decreased from 0.4% to -0.5%
Italian CPI (YoY) (Sep) remain the same at 0.4%
Italian HICP (YoY) (Sep) decreased from 0.5% to 0.3%
Italian HICP (MoM) (Sep) increased from 0.0% to 1.5%

Euro zone:

Unemployment Rate (Aug) decreased from 7.5% to 7.4%

UK:

BoE Consumer Credit (Aug) decreased from 1.007B to 0.901B
Business Investment (QoQ) (Q2) increased from -0.5% to -0.4%
Business Investment (YoY) (Q2) increased from -1.6% to -1.4%
Current Account (Q2) increased from -33.1B to -25.2B
GDP (QoQ) (Q2) remain the same at -0.2%
GDP (YoY) (Q2) increased from 1.2% to 1.3%
M4 Money Supply (MoM) (Aug) decreased from 0.7% to 0.4%
Mortgage Approvals (Aug) decreased from 67.01K to 65.55K
Mortgage Lending (Aug) decreased from 4.52B to 3.85B
Net Lending to Individuals decreased from 5.5B to 4.8B

US/AMERICAS:

Rumors have been circulating that the US may delist Chinese companies from US stock exchanges. Senate Majority Leader Mitch McConnell dispelled rumors this Monday during an interview with CNBC. “We don’t want to make it more difficult for American companies to do business in China and for Chinese companies to do business here, but these national security implications are important,” McConnell stated. The Treasury Department has also quelled rumors, stating they have no interest in delisting Chinese companies. “The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time. We welcome investment in the United States,” tweeted Treasury spokeswoman Monica Crowley.

The US economy grew by 2% during the second quarter and the Federal Reserve recently upgraded their overall GDP projection for 2019 by 10 basis points to 2.2%. However, former Federal Reserve Chairman Janet Yellen referred to this forecast as “an optimistic projection.” Despite low unemployment, Yellen pointed to concerns over an overall decreasing workforce due to low birthrates and an aging population.

The presidential impeachment inquiry is continuing to grab headlines in the US, with the Democratic House of Representatives killing a resolution by the Republicans, who disapprove of a formal impeachment inquiry, in a vote of 222-184. Meanwhile, US President Trump attacked the lawmaker heading the House’s impeachment efforts, saying the chairman of the Intelligence Committee made misrepresentations when listening to the president’s conversation with Ukraine’s leader and subsequently called for him to resign. As of now, the House panels placed a subpoena on Secretary of State Pompeo for documents related to Ukraine probe. Today, Mitch McConnell stated he would have “no choice” but to bring the issue to the Senate floor if the House voted in favor of proceeding with the impeachment.

US Market Closings:

The Dow advanced 96.58 points or 0.36% to 26,916.83
Nasdaq advanced 59.71 points or 0.75% to 7,999.34
S&P 500 advanced 14.95 points or 0.50% to 2,976.74
Russell 2000 advanced 2.9 points or 0.19% to 1,523.37

Canada Market Closings:

TSX Composite declined 35.64 points or -0.21% to 16,658.63
TSX 60 declined 1.22 points or -0.12% to 997.93

Brazil Market Closing:

Bovespa declined 332.31 points or -0.32% to 104,745.32

ENERGY:

Oil prices fell on Friday after fresh Chinese economic data revived concerns of slowing economic growth. A faster than expected recovery in Saudi crude oil output this week eased concerns of major supply disruptions. Today the oil price continued to fall by 3%.

The oil markets had a negative day today:

Crude Oil decreased 1.72 USD/BBL or -3.08% to 54.2951
Brent decreased 1.18 USD/BBL or -1.91% to 60.8234
Natural gas decreased 0.075 USD/MMBtu or -3.12% to 2.3336
Gasoline decreased 0.049 USD/GAL or -2.97% to 1.6041
Heating oil decreased 0.0399 USD/GAL or -2.06% to 1.9025
Top commodity gainers: Corn (4.17%), Ethanol (5.08%), Sugar(3.47%), and Coal (2.66 %)
Top commodity losers: Platinum (-5.33 %), Cotton (-4.78%), Natural gas (-3.12%), and Crude Oil (-3.08%)

The above data was collected around 15:40 EST on Monday.

BONDS:

Japan -0.21%(+3bp), US 2’s 1.63% (+0bps), US 10’s 1.68%(+1bps), US 30’s 2.13%(+1bps), Bunds -0.58% (+bp), France -0.27% (+1bp), Italy 0.83% (+1bp), Turkey 13.20% (-20bp), Greece 1.39% (+2bp), Portugal 0.17% (-1bp), Spain 0.16% (+0bp) and UK Gilts 0.48% (+0bp).