Market Talk – December 10, 2019

Posted Dec 10, 2019 by Martin Armstrong |

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ASIA:

The latest from the street is that US and China are planning to delay the expected rate hikes that are planned for the 15^th of December. The initial report came from the WSJ, who quoted that trade negotiators close to the case are reporting a possible delay. However, there has been no official release from either government as both sides are still deep in talks.

Japan has announced that it will be purchasing an Island called Mageshima located off the south of Japan from a Tokyo-based development company. They plan to build runways for the US Navy and Marine Corps planes, as well as Japanese self-defense forces which will give them a strategic position in the South China Sea.

Hong Kong has seen one of its larges pro-democracy rallies as thousands took to the streets in a peaceful rally. It is estimated that 800k people took part, however official numbers put the toll at 183k. Meanwhile, Carrie Lam has warned that actions will be taken against teachers who are promoting the idea of democracy in the region.

The major Asian stock markets had a mixed day today:

Shanghai increased 2.84 points or 0.10% to 2,917.32
Kospi increased 9.35 points or 0.45% to 2,098.00
ASX 200 decreased 23.10 points or -0.34% to 6,706.90
NIKKEI 225 decreased 20.51 points or -0.09% to 23,410.19
Hang Seng decreased 58.11 points or -0.22% to 26,436.62
SENSEX decreased 247.55 points or -0.61% to 40,239.88

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.0011 or 0.16% to 0.6813
NZDUSD increased 0.0001 or 0.02% to 0.6545
USDJPY increased 0.0860 or 0.08% to 108.7000
USDCNY decreased 0.0051 or 0.07% to 7.0302

Precious Metals:

Gold increased 3.15 USD/t oz. or 0.22% to 1,465.64
Silver increased 0.0549 USD/t. oz or 0.33%% to 16.6726

Some economic news from last night:

China:

CPI (YoY) (Nov) increased from 3.8% to 4.5%

CPI (MoM) (Nov) decreased from 0.9% to 0.4%

PPI (YoY) (Nov) increased from -1.6% to -1.4%

Japan:

M2 Money Stock (YoY) increased from 2.4% to 2.8%

M3 Money Supply (Nov) increased from 1,817.2T to 1,827.2T

Australia:

House Price Index (QoQ) (Q3) increased from -0.7% to 2.4%

NAB Business Confidence (Nov) decreased from 2 to 0

NAB Business Survey (Nov) increased from 3 to 4

Indonesia:

Retail Sales (YoY) increased from 0.7% to 3.6%

Some economic news from today:

China:

M2 Money Stock (YoY) decreased from 8.4% to 8.2%

New Loans increased from 661.3B to 1,390.0B

Outstanding Loan Growth (YoY) remain the same at 12.4%

Chinese Total Social Financing increased from 618.9B to 1,750.0B

Japan:

Machine Tool Orders (YoY) decreased from -37.4% to -37.9%

EUROPE/EMEA:

Some last minute concerns arose after a leaked document suggested that there was a plan regarding the Great Britain and Northern Irish border. The Prime Minister continuously claimed that there would be no border checks contrary to the leaked report. The Irish foreign minister challenged PM Boris Johnson over his comments and suggested there must be inspections on goods moving across the border. “The EU has made it clear they want to minimize the impact on goods coming from Great Britain to Northern Ireland, but at the same time goods coming from Great Britain to Northern Ireland will need to have some checks to ensure that the EU knows what is potentially coming into their market through Northern Island,” said Simon Coveney Irish foreign Minister.

Russia and Ukraine have agreed upon a ceasefire that will take place at the end of the year. The deal will also include prison exchanges between the two nations. The meeting took place in Paris yesterday, as Europe is starting to push towards a healthier relationship with Russia rather than the current alienation they have been receiving over the last few years. German Chancellor Angela Merkel expressed herself as pleased at the outcome. President Macron of France highlighted that there needs to be an agreement as to when fair elections will take place in Eastern Ukraine – something both sides need to agree upon.

A report created regarding the Afghanistan war shows that the US public was misled many times over the prospect of war. The report showed that over a trillion dollars was spent with the war being “unwinnable.” Over 2,400 US lives were lost with 20,000 injured, as well as the untold amount of innocent Afghani lives.

A report by the nationalintrest.org suggests that the Iranian Navy has built new warships after ramping up its efforts two years ago.

The major Europe stock markets had a mixed day today:

CAC 40 increased 10.78 points or 0.18% to 5,848.03
FTSE 100 decreased 20.14 points, or -0.28% to 7,213.76
DAX 30 decreased 34.89 points or -0.27% to 13,070.72

The major Europe currency markets had a mixed day today:

EURUSD increased 0.0031 or 0.28% to 1.1094
GBPUSD increased 0.0047 or 0.36% to 1.3190
USDCHF decreased 0.0038 or 0.38% to 0.9841

Some economic news from Europe today:

France:

French Non-Farm Payrolls (QoQ) (Q3) decreased from 0.3% to 0.2%

French Industrial Production (MoM) (Oct) remain the same at 0.4%

Italy:

Italian Industrial Production (MoM) (Oct) increased from -0.4% to -0.3%

Italian Industrial Production (YoY) (Oct) decreased from -2.2% to -2.4%

Norway:

Norges Bank regional network Survey decreased from 1.35 to 0.96

Core CPI YTD (Nov) decreased from 2.2% to 2.0%

Core Inflation (MoM) (Nov) increased from 0.0% to 0.1%

CPI (MoM) (Nov) increased from 0.2% to 0.3%

CPI (YoY) (Nov) decreased from 1.8% to 1.6%

PPI (YoY) (Nov) increased from -13.8% to -9.5%

UK:

NIESR GDP Estimate remain the same at 0.0%

U.K. Construction Output (YoY) (Oct) decreased from 0.5% to -2.1%

Construction Output (MoM) (Oct) decreased from -0.2% to -2.3%

GDP (YoY) (Q3) decreased from 0.9% to 0.7%

GDP (QoQ) (Q3) decreased from 0.3% to 0.0%

GDP (MoM) increased from -0.1% to 0.0%

Index of Services decreased from 0.4% to 0.2%

Industrial Production (MoM) (Oct) increased from -0.3% to 0.1%

Industrial Production (YoY) (Oct) increased from -1.4% to -1.3%

Manufacturing Production (MoM) (Oct) increased from -0.4% to 0.2%

Manufacturing Production (YoY) (Oct) increased from -1.8% to -1.2%

Trade Balance (Oct) decreased from -11.52B to -14.49B

Trade Balance Non-EU (Oct) decreased from -2.95B to -5.73B

Germany:

German ZEW Current Conditions (Dec) increased from -24.7 to -19.9

German ZEW Economic Sentiment (Dec) increased from -2.1 to 10.7

Euro Zone:

ZEW Economic Sentiment (Dec) increased from -1.0 to 11.2

US/AMERICAS:

After more than a year in the making, the United States-Mexico-Canada Agreement (USMCA) has been finalized. House Democrats reached an agreement with the Trump administration on the USMCA, after the House had hesitations about labor and environmental components of the deal. Today, US Trade Representative Robert Lighthizer, Mexican Deputy Foreign Minister Jesus Seade, and Canadian Deputy Prime Minister Chrystia Freeland signed the agreement that is designed to open trade between the three neighboring countries. Trump called the agreement “the best and most important trade deal ever made by the USA.”

Below are the key achievements of the USMCA listed on the Office of the United States Trade Representative website:

Expanded Market Access for American Food and Agricultural Products
Canada’s Milk Classes 6 and 7 to Be Eliminated
Setting Unprecedented Standards for Agricultural Biotechnology
Significant Commitments to Reduce Trade Distorting Policies, Improve Transparency, and Ensure Non-Discriminatory Treatment for Agricultural Product Standards
Fair Treatment for Quality Requirements for Wheat and other Agricultural Products
Enhanced Rules for Science-Based Sanitary and Phytosanitary Measures
New Disciplines on Geographic Indications
Market Access for Certain Cheese Names
Prohibiting Barriers for Alcohol Beverages
New Protections for Proprietary Food Formulas

Canada’s Finance Minister Bill Morneau has stated that he does not foresee Canada heading into a recession. Statistics Canada released a weak jobs report last week that showed the workforce declining by 71,200 jobs and unemployment advancing to 5.9%. “I have to worry about numbers that came out last week. I also have to look at that in contrast to numbers that came out the week before. We will always look to ensure that we have the ability to respond to challenges, but no…we’re dealing with an economy that’s strong,” the finance minister stated in an interview with CNBC.

French authorities fined Morgan Stanley $22 billion for allegedly manipulating their bond market. The Autorité des Marchés Financiers (AMF) claim that back on June 15, 2015, Morgan Stanley lost $6 million after a bad position followed by another $8.7 the following day. Allegedly, Morgan Stanley bought French bond futures to hedge against the loss. Traders allegedly used the futures to raise the French and Belgian bond values (AMF considers Belgian and French bonds interchangeable) before offloading the assets. Morgan Stanley denies the “pump and dump” accusations.

US Market Closings:

Dow declined 27.88 points or -0.10% to 27,881.72
S&P 500 declined 3.44 points or -0.11% to 3,132.52
Nasdaq declined 5.64 points or -0.07% to 8,616.18
Russell 2000 advanced 2.10 points or 0.13% to 1,631.71

Canada Market Closings:

TSX Composite declined 0.15 of a point or 0% to 16,950.70
TSX 60 declined 0.02 of a points or 0% to 1,011.40

Brazil Market Closing:

Bovespa declined 305.22 points or -0.28% to 110,672.01

ENERGY:

Turkish President Erdogan announced today that Turkey along with Libya may conduct exploration in the Mediterranean in the next few years. The news came back as Turkey is readying troops to be deployed back to Libya to help the unity government.

The oil markets had a green day today:

Crude Oil increased 0.6129 USD/BBL or 1.04% to 59.4108
Brent increased 0.5649 USD/BBL or 0.88% to 64.6303
Natural gas increased 0.0292 USD/MMBtu or 1.31% to 2.2646
Gasoline increased 0.0088USD/GAL or 0.53% to 1.6648
Heating oil increased 0.0283 USD/GAL or 1.46% to 1.9723
Top commodity gainers: Platinum(2.94%),Coffee(2.79%),Orange Juice(1.80%), and Heating Oil(1.46%)
Top commodity losers: Steel(-7.93%), Cocoa(-7.26%), Ethanol (-1.85%), and Bitumen(-1.77%)

The above data was collected around 14:15 EST on Tuesday.

BONDS:

Japan 0.00%(+1bp), US 2’s 1.65% (+3bps), US 10’s 1.85%(+3bps);US 30’s 2.27%(+1bps), Bunds -0.31% (-1bp), France 0.02% (+1bp), Italy 1.36% (-2bp), Turkey 12.12% (-13bp), Greece 1.42% (-61bp), Portugal 0.39% (+0bp), Spain 0.48% (+1bp) and UK Gilts 0.81% (+4bp).