Market Talk – October 10, 2019

Posted Oct 10, 2019 by Martin Armstrong |

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ASIA:

Today top officials from China will be meeting their US counterparts to kick off the well anticipated trade negotiations. Tomorrow President Trump with meet with Chinese Vice Premier Liu He at the end of the talks. US President Trump tweeted, “Big day of negotiations with China. They want to make a deal, but do I?” But the Chinese see the trade wars as a sign of respect, and would not like to be addressed in such a manner. Yesterday, President Trump spoke to the media, explaining how past presidents have been ripped off by China and a 50/50 deal would not work, it has to be a better deal for the US.

US companies Apple and Google have agreed to take down an app from their app stores that allows Hong Kong protestors to collaborate and share information such as where police are located. This was one of the reasons China put pressure on Apple to take the app down due to the safety concerns of the policemen.

Japanese train operators and airlines announced they are planning to or may suspend their services in eastern and western Japan this weekend, as a powerful typhoon is expected to hit the country.

A common statement you hear in India these days, “There is no credit in the market.” There are many cuts across industries as diverse as real estate, autos, and road construction. An 88% slump in the flow of funds to the commercial sector between April and September shows that the producers’ unease is justified. However, one credit tap is starting to gurgle, giving some cause for optimism. Pocket-sized loans are feeding online consumption, with demand coming from smaller cities and towns. The amounts are still tiny, but as digital spending grows, financing it has the power to turn the page on Indian lenders’ underwriting of soured corporate loans: the source of a $200 billion sigh of collective agony.

Amazon.com Inc. and Walmart Inc.’s Flipkart Online Services Pvt claimed record sales during the recently concluded six-day online shopping bonanza that marks the start of the Indian festival season. Although nowhere close to Alibaba Group Holding Ltd.’s $31 billion Singles’ Day promotion in China, the Indian version of Black Friday has grown five-fold to $3 billion in four years, according to a review of this year’s sales by RedSeer, a consulting firm. Add the spending between now and Diwali, the Hindu festival of lights, and Forrester Research reckons the total for a month of online purchases may fall just shy of $5 billion.

The major Asian stock markets had a mixed day today:

Shanghai increased 22.85 points or 0.78% to 2,947.71
Kospi decreased 18.10 points or -0.88% to 2,028.15
ASX 200 increased 0.40 points or 0.01% to 6,547.10
NIKKEI 225 increased 95.60 points or 0.45% to 21,551.98
Hang Seng increased 25.12 points or 0.10% to 25,707.93
SENSEX decreased 297.55 points or -0.78% to 37,880.40

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.0046 or 0.68% to 0.6769
NZDUSD increased 0.0036 or 0.57% to 0.6327
USDJPY increased 0.4050 or 0.38% to 107.8650
USDCNY decreased 0.0288 or 0.40% to 7.1084

Precious Metals:

Gold decreased 8.25 USD/t oz. or -0.55% to 1,498.79
Silver decreased 0.118 USD/t. oz or -0.67%% to 17.5465

Some economic news from last night:

Australia:

MI Inflation Expectations increased from 3.1% to 3.6%
Home Loans (MoM) (Aug) decreased from 5.0% to 1.8%
Invest Housing Finance (MoM) decreased from 4.3% to 3.2%

New Zealand:

FPI (MoM) (Sep) decreased from 0.7% to 0.0%

Japan:

Reuters Tankan Index (Oct) increased from -7 to -5
Bank Lending (YoY) (Sep) decreased from 2.1% to 2.0%
Core Machinery Orders (YoY) (Aug) decreased from 0.3% to -14.5%
Core Machinery Orders (MoM) (Aug) increased from -6.6% to -2.4%
Foreign Bonds Buying decreased from 870.9B to -428.3B
Foreign Investments in Japanese Stocks increased from -221.2B to 1,072.5B
PPI (YoY) (Sep) decreased from -0.9% to -1.1%
PPI (MoM) (Sep) increased from -0.3% to 0.0%

EUROPE/EMEA:

Irish PM Varadkar has put a positive spin on the Brexit situation by saying that a “treaty” agreement could be possibly by the end of October. This statement comes after the UK PM Boris Johnson and Irish PM met today for three hours. He mentioned that he is convinced that both Ireland and the UK want an agreement. Yesterday, EU chief negotiator Michel Barnier said it is currently not possible to find an agreement with the UK on the Withdrawal Agreement.

UK Labour leader Jeremy Corbyn promised to give hope to the youth as well as tackle inequality in his speech today. He also promised that his program will be “the most transformative, radical and exciting programme ever put before the British electorate.”

Italy has issued 7.5bn euros worth of USD denominated bonds in an effort to diversify their client base and attract investors who wish to be dollar denominated. Italy is currently the world’s third largest issuer of public debt.

India today slammed Turkey’s unilateral military offensive in northeast Syria, saying it can undermine stability in the region and the fight against terrorism. In a statement, the Ministry of External Affairs (MEA) said, “We are deeply concerned at the unilateral military offensive by Turkey in north-east Syria.” It said that Turkey’s action also has the potential to cause humanitarian and civilian distress. New Delhi called upon Ankara to exercise restraint and respect the sovereignty and territorial integrity of Syria. India also urged for peaceful settlement of all issues through dialogue and discussion. Turkey’s President Recep Tayyip Erdogan announced air raids on Tuesday aimed at removing Kurdish-led forces from the border area. The move came after the US announced it was withdrawing its troops from the region, leaving the Syrian Democratic Forces (SDF), its main ally in the battle against the Islamic State (IS) terror group, without US military support.

According to reports Russian leader Vladimir Putin may have endorsed Turkey’s military incursion into northeast Syria, but with some restrictions of his own, including that the attacks will not lead to an occupation by the Turks of Syrian territory

The Islamic Republic of Iran unveiled a robotic ground vehicle which was designed to take out tanks and infantry. The vehicle is completely unmanned (UGV) and will be the first in production for the army.

The major Europe stock markets had a green day today:

CAC 40 increased 69.91 points or 1.27% to 5,569.05
FTSE 100 increased 19.86 points, or 0.28% to 7,186.36
DAX 30 increased 69.94 points or 0.58% to 12,164.20

The major Europe currency markets had a green day today:

EURUSD increased 0.0046 or 0.42% to 1.1015
GBPUSD increased 0.02313 or 1.90% to 1.24353
USDCHF increased 0.0005 or 0.05% to 0.9961

Some economic news from Europe today:

Germany:

German Current Account Balance n.s.a (Aug) decreased from 22.1B to 16.9B
German Exports (MoM) (Aug) decreased from 0.8% to -1.8%
German Imports (MoM) (Aug) increased from -2.4% to 0.5%
German Trade Balance (Aug) decreased from 20.5B to 18.1B

Norway:

Core CPI YTD (Sep) increased from 2.1% to 2.2%
Core Inflation (MoM) (Sep) increased from -0.6% to 0.6%
CPI (MoM) (Sep) increased from -0.7% to 0.5%
CPI (YoY) (Sep) decreased from 1.6% to 1.5%
PPI (YoY) (Sep) decreased from -9.4% to -10.7%

France:

French Industrial Production (MoM) (Aug) decreased from 0.3% to -0.9%

Italy:

Italian Industrial Production (YoY) (Aug) decreased from -0.7% to -1.8%
Italian Industrial Production (MoM) (Aug) increased from -0.8% to 0.3%

UK:

NIESR GDP Estimate increased from 0.3% to 0.5%
NIESR Monthly GDP Tracker increased from 0.1% to 0.5%
U.K. Construction Output (YoY) (Aug) increased from 1.9% to 2.4%
Construction Output (MoM) (Aug) decreased from 1.8% to 0.2%
GDP (MoM) decreased from 0.3% to -0.1%
GDP (YoY) decreased from 1.3% to 1.1%
GDP (QoQ) increased from 0.0% to 0.3%
Index of Services increased from 0.2% to 0.4%
Industrial Production (YoY) (Aug) decreased from -1.1% to -1.8%
Industrial Production (MoM) (Aug) decreased from 0.1% to -0.6%
Manufacturing Production (MoM) (Aug) decreased from 0.4% to -0.7%
Manufacturing Production (YoY) (Aug) decreased from -0.9% to -1.7%
Trade Balance (Aug) decreased from -9.62B to -9.81B
Trade Balance Non-EU (Aug) increased from -2.54B to -2.21B

US/AMERICAS:

The US Consumer Price Index (CPI) fell flat last month, producing the weakest reading since January. Analysts at Reuters anticipated a 0.1% increase in September and 1.8% on a YoY basis. Increased rent and food prices offset decreased automobile and energy prices. Inflation slowed to 1.3% in September, well under the Fed’s 2% target. This data may encourage the Fed to decrease interest rates for the third time this year when they meet again at the end of the month.

Director General Roberto Azevedo of the World Trade Organization (WTO) is urging the US and EU to discuss trade before implementing additional tariffs and sparking a potential trade war that could prove lethal for the global economy. “I hope parties will sit down and talk and find a negotiated solution because the last thing we need at this point in time is an escalation of tariff barriers and trade restrictions,” Azevedo told reporters. This comes after the WTO awarding the US $7.5 billion in penalties from the EU after the 15-year long Airbus debacle.

Tomorrow, President Trump will meet with Chinese Premier Liu He for the 13^th time since the trade dispute began. “Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House,” President Trump tweeted today. Both China and the US seem unwilling to compromise, and every step forward has been met with opposition. Chinese representative said they may be open to a “partial deal,” but time is running out. If progress is not made during tomorrow’s meeting, additional tariffs will be placed on $250 billion worth of Chinese goods on October 15.

The Trump administration will soon issue licenses to US companies wishing to conduct business with Huawei. The Chinese tech giant was blacklisted earlier in the year amid national security concerns. According to a report by the New York Times, President Trump plans to permit certain companies to conduct business with Huawei if it does not post a security threat to the US. So far, over 130 companies have applied for permits.

Mexico is close to legalizing recreational cannabis in an effort to crackdown on the underground market and reclaim profits from drug cartels. Deputy Ana Lucía Riojas Martínez called the proposal “one step to build peace.” Mexico’s Supreme Court has ruled the prohibition unconstitutional and Mexico’s Senate leader Ricardo Monreal seemed optimistic that lawmakers may officially pass legislation at the end of the month.

US Market Closings:

Dow increased 150.66 points or 0.57% to 26,496.67
S&P 500 increased 18.73 points or 0.64% to 2,938.13
Nasdaq increased 47.04 points or 0.60% to 7,950.78
Russell 2000 increased 5.90 points or 0.40% to 1,485.36

Canada Market Closings:

TSX Composite increased 42.81 points or 0.26% to 16,422.68
TSX 60 increased 3.15 points or 0.32% to 982.49

Brazil Market Closing:

Bovespa increased 568.35 points or 0.56% to 101,817.13

ENERGY:

OPEC Secretary General Mohammad Barkindo said, “The conference will take appropriate, strong, positive decisions that will set us on the path of heightened and sustained stability for 2020,” in London today, suggesting that they are ready to cut production further in December. This caused the oil markets to rally somewhat but with Brent still hovering shy of 60 USD a barrel.

The oil markets had a mixed day today:

Crude Oil increased 0.98 USD/BBL or 1.86% to 53.6475
Brent increased 0.78 USD/BBL or 1.34% to 59.2018
Natural gas decreased 0.014 USD/MMBtu or -0.63% to 2.2225
Gasoline increased 0.036 USD/GAL or 2.27% to 1.6206
Heating oil increased 0.0007 USD/GAL or 0.04% to 1.9162
Top commodity gainers: Gasoline (2.27%),Cocoa (2.12%),Crude Oil(1.86%), and Copper (1.56 %)
Top commodity losers: Corn(-3.61 %), Bitumen (-2.03%), Ethanol (-1.67%), and Coffee (-1.62%)

The above data was collected around 14:20 EST on Thursday.

BONDS:

Japan -0.20%(+0bp), US 2’s 1.51% (+4bps), US 10’s 1.66%(+7bps), US 30’s 2.15%(+7bps), Bunds -0.56% (+4bp), France -0.27% (+3bp), Italy 1.06% (+8bp), Turkey 13.80% (+0bp), Greece 1.47% (-28bp), Portugal 0.20% (+8bp), Spain 0.24% (+8bp) and UK Gilts 0.60% (+14bp).