Market Talk – December 12, 2019

Posted Dec 12, 2019 by Martin Armstrong |

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ASIA:

According to reports from Reuters, China is trying to propose a plan to promote Macau to be its next “Hong Kong” by building it into a world-leading financial center. China unveiled plans of creating a yuan-denominated stock exchange, as well as allocating extra land to Macau for it to grow. The region was a former Portuguese colony and will target companies from Portuguese speaking countries such as Brazil in order to avoid direct competition with China and the mainland.

Indian Parliament passed Citizenship Amendment Bill on 11-Dec-2019, which proposes to accord citizenship to illegal Hindu, Sikh, Buddhist, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan. It, naturally, implies that migrants, who identify themselves with any group or community other than those mentioned above, from these countries won’t be eligible for citizenship. The bill also relaxes the provisions for “Citizenship by naturalization.” The proposed law reduces the duration of residency from the existing 11 years to just five years for people belonging to the same six religions and three countries. The bill covers six communities namely Hindu, Sikh, Buddhists, Jains, Parsis and Christian migrants from Pakistan, Bangladesh and Afghanistan.

The Indian government has prohibited gift imports through e-commerce portals except life-saving drugs and rakhi. The import of goods was earlier free and not subject to customs duties. The move will impact Chinese e-commerce web sites like Club Factory, Ali Express and Shein who are the largest users of this route.

The US reprimanded Pakistan Air Force chief for misusing F-16 fighter jets by undermining their shared security platforms and infrastructures months after the Indian Air Force shot down an F-16 jet of Pakistan Air Force during an aerial combat over Kashmir. Andrea Thompson, the then-undersecretary of State for Arms Control and International Security Affairs, wrote a letter to Pakistani Air Force Chief Air Chief Marshal Mujahid Anwar Khan in August over the matter.

The major Asian stock markets had a mixed day today:

Shanghai decreased 8.72 points or -0.30% to 2,915.70
Kospi increased 31.73 points or 1.51% to 2,137.35
ASX 200 decreased 43.80 points or -0.65% to 6,708.80
NIKKEI 225 increased 32.95 points or 0.14% to 23,424.81
Hang Seng increased 348.71 points or 1.31% to 26,994.14
SENSEX increased 169.14 points or 0.42% to 40,581.71

The major Asian currency markets had a mixed day today:

AUDUSD increased 0.00241 or 0.35% to 0.68931
NZDUSD increased 0.00003 or 0.00% to 0.65823
USDJPY increased 0.5860 or 0.54% to 109.1310
USDCNY decreased 0.04597 or -0.65% to 6.98293

Precious Metals:

Gold decreased 5.54 USD/t oz. or -0.38% to 1,470.81
Silver increased 0.013 USD/t. oz or 0.08%% to 16.9207

Some economic news from last night:

Singapore:

Unemployment Rate (Q3) remain the same at 2.3%

Japan:

Core Machinery Orders (MoM) (Oct) decreased from -2.9% to -6.0%

Core Machinery Orders (YoY) (Oct) decreased from 5.1% to -6.1%

Foreign Bonds Buying increased from -511.1B to 235.8B

Foreign Investments in Japanese Stocks decreased from 394.0B to -200.4B

Australia:

MI Inflation Expectations remain the same at 4.0%

New Zealand:

External Migration & Visitors (Oct) decreased from 1.40% to 0.10%

FPI (MoM) (Nov) decreased from -0.3% to -0.7%

Permanent/Long-Term Migration (Oct) decreased from 4,290 to 4,120

Visitor Arrivals (MoM) increased from -0.1% to 0.0%

Some economic news from today:

Singapore:

Retail Sales (MoM) (Oct) decreased from 2.0% to -2.2%

Retail Sales (YoY) (Oct) decreased from -2.1% to -4.3%

India:

CPI (YoY) (Nov) increased from 4.62% to 5.54%

Cumulative Industrial Production (Oct) decreased from 1.30% to 0.50%

Industrial Production (YoY) (Oct) increased from -4.3% to -3.8%

Manufacturing Output (MoM) (Oct) increased from -4.0% to -2.1%

EUROPE/EMEA:

UK elections went underway today, with still the outcome being unpredictable. The election results will be counted out in the morning. Yesterday, both Labour and Conservatives gave their final pitches with PM Boris Johnson saying his side was the only side who can bring Brexit forward.

France is gearing up for another round of strikes tomorrow over the proposed reforms of the pension plan and age of retirement.

According to the WSJ, Saudi Arabia is seeking to defuse the situation with Iran, with the Pakistani FM acting as a mediator between the two.

The US senate comittee has now officially signed off a bill which places sanctions on Turkey over thier recent purchase of the S-400 missile defense system.

The major Europe stock markets had a green day today:

CAC 40 increased 23.39 points or 0.40% to 5,884.26
FTSE 100 increased 57.22 points, or 0.79% to 7,273.47
DAX 30 increased 74.90 points or 0.57% to 13,221.64

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00204 or -0.18% to 1.11126
GBPUSD decreased 0.00821 or -0.62% to 1.31169
USDCHF increased 0.00346 or 0.35% to 0.98606

Some economic news from Europe today:

UK:

Thomson Reuters IPSOS PCSI (Dec) increased from 47.8 to 48.5

RICS House Price Balance (Nov) decreased from -6% to -12%

Germany:

Germany Thomson Reuters IPSOS PCSI (Dec) decreased from 53.55 to 53.43

German CPI (YoY) (Nov) remain the same at 1.1%

German CPI (MoM) (Nov) decreased from 0.1% to -0.8%

German HICP (YoY) (Nov) increased from 0.9% to 1.2%

German HICP (MoM) (Nov) decreased from 0.1% to -0.8%

Swiss:

SNB Interest Rate Decision remain the same at -0.75%

PPI (YoY) (Nov) decreased from -2.4% to -2.5%

PPI (MoM) (Nov) decreased from -0.2% to -0.4%

France:

France Thomson Reuters IPSOS PCSI (Dec) decreased from 43.69 to 42.49

French CPI (YoY) increased from 0.8% to 1.0%

French CPI (MoM) (Nov) decreased from 0.0% to -0.1%

French HICP (YoY) (Nov) increased from 0.9% to 1.2%

French HICP (MoM) (Nov) increased from -0.1% to 0.1%

Italy:

Italian Quarterly Unemployment Rate decreased from 9.9% to 9.8%

Italy Thomson Reuters IPSOS PCSI (Dec) increased from 38.88 to 40.11

Euro Zone:

Industrial Production (YoY) (Oct) decreased from -1.8% to -2.2%

Industrial Production (MoM) (Oct) decreased from -0.1% to -0.5%

Deposit Facility Rate (Dec) remain the same at -0.50%

ECB Marginal Lending Facility remain the same at 0.25%

ECB Interest Rate Decision (Dec) remain the same at 0.00%

US/AMERICAS:

The US-China trade deal is close to completion, according to President Trump. “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” he posted this Thursday. CNBC reported that US negotiators are ready to cancel the new tariffs and cut existing tariffs by 50% ($360 billion). With only three days left before the US imposes an additional $156 billion on Chinese goods, time is of the essence.

Bank of Canada Governor Stephen Poloz sees Canada’s economy expanding in the new year at a steady. Last week, the central bank voted to maintain the target rate at 1.75% where it has remained for over a year. Growing government debt, not just in Canada, is one of Poloz’s main concerns. “Experience shows that high debt levels can amplify the impact of a shock on the economy,” the governor stated. Poloz expressed concerns over global trade as well, stating that companies are dismantling supply chains in favor of cheaper, less effective, options.

Canada’s Conservative Party Leader Andrew Scheer resigned this Thursday. Scheer’s resignation comes after it was revealed that he used Conservative Party funds to pay for his children to attend private school. Dustin van Vugt, executive director of the party, may be forced to resign as well for similar reasons.

Brazil’s central bank voted in favor of dropping the target rate to 4.5%. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” stated Waldery Rodrigues, special secretary to Brazil’s Economy Ministry. Brazil certainly amped up efforts to build business, attract foreign and domestic capital, lower the debt ceiling, and solve the ongoing pension crisis. However, the pension dilemma is ongoing as are domestic conflicts such as the Amazon wildfires. Unemployment remains high at 11.6%, but is expected to decline in the new year. The government cited optimism about continued economic growth and predicts GDP to rise to 2.3% in 2020.

US Market Closings:

Dow advanced 220.75 points or 0.79% to 28,132.75
S&P 500 advanced 26.94 points or 0.86% to 3,168.57
Nasdaq advanced 63.27 points or 0.73% to 8,717.32
Russell 2000 advanced 12.89 points or 0.79% to 1,644.81

Canada Market Closings:

TSX Composite advanced 7.29 points or 0.04% to 16,946.90
TSX 60 advanced 1.56 points or 0.15% to 1,012.93

Brazil Market Closing:

Bovespa advanced 1,235.87 points or 1.11% to 112,199.74

ENERGY:

The IEA report was released this week which was contrary to the OPEC optimism for demand.

The oil markets had a green day today:

Crude Oil increased 0.4992 USD/BBL or 0.85% to 59.3943
Brent increased 0.4959 USD/BBL or 0.78% to 64.3858
Natural gas increased 0.0381 USD/MMBtu or 1.68% to 2.3095
Gasoline increased 0.0032USD/GAL or 0.20% to 1.6422
Heating oil increased 0.0141 USD/GAL or 0.73% to 1.9477
Top commodity gainers: Wheat(2.16%),Steel(13.28%),Ethanol(1.90%), and Natural Gas(1.68%)
Top commodity losers: Cocoa(-9.37%), Oat(-5.03%), Baltic Dry (-4.93%), and Orange Juice(-0.97%)

The above data was collected around 12:40 EST on Thursday.

BONDS:

Japan -0.02%(-2bp), US 2’s 1.63% (+2bps), US 10’s 1.88%(+9bps);US 30’s 2.24%(+2bps), Bunds -0.32% (-0bp), France 0.03% (-1bp), Italy 1.34% (+2bp), Turkey 12.10% (-8bp), Greece 1.39% (-61bp), Portugal 0.41% (+5bp), Spain 0.47% (+4bp) and UK Gilts 0.82% (+5bp).