Market Talk – October 1, 2019

Posted Oct 1, 2019 by Martin Armstrong |

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ASIA:

China today held a military event showing off their military might. This event marked the 70^th year anniversary of Communist rule in China. They showed off their new intercontinental ballistic missile, which has a reach of 12 to 15 km. The worrying thing for most of the world is the speed at which it could hit the US within only 30 minutes.

Today a tour guide in California, US, was charged with being a Chinese agent. The US Department of Justice said that Mr. Peng was purchasing secrets from an FBI leak and giving it to Chinese intelligence services.

Japan today increased their consumption tax for the first time in five years, raising the rates from 8% to 10%. The new rates will impact most services and good, although food seems to be exempt from the hike. The reversed ruling will enable more security for lower caste communities.

India’s Supreme Court has reversed one of its previous judgements that put lower caste groups with less protections. After the original ruling, around 8 people died after violent outbreaks occurred across India.

The major Asian stock markets had a mixed day today:

Shanghai closed (public holiday)
Kospi increased 9.37 or 0.45% to 2,072.42
ASX 200 increased 54.50 points or 0.81% to 6,742.80
NIKKEI 225 increased 129.40 points or 0.59% to 21,885.24
Hang Seng closed (public holiday)
SENSEX decreased 361.92 points or -0.94% to 38,305.41

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.0050 or 0.75% to 0.6699
NZDUSD decreased 0.0019 or 0.30% to 0.6242
USDJPY decreased 0.4120 or 0.38% to 107.6480
USDCNY increased 0.0096 or 0.14% to 7.1489

Precious Metals:

Gold increased 12.55 USD/t oz. or 0.85% to 1,483.79
Silver increased 0.295 USD/t. oz or 1.74%% to 17.3089

Some economic news from last night:

Japan:

Jobs/applications ratio (Aug) remain the same at 1.59
Unemployment Rate (Aug) remain the same at 2.2%
Tankan All Big Industry CAPEX (Q3) decreased from 7.4% to 6.6%
Tankan All Small Industry CAPEX (Q3) increased from -9.3% to -6.7%
Tankan Big Manufacturing Outlook Index (Q3) decreased from 7 to 2
Tankan Large Manufacturers Index (Q3) decreased from 7 to 5
Tankan Large Non-Manufacturers Diffusion Index (Q3) decreased from 17 to 15
Tankan Large Non-Manufacturers Index (Q3) decreased from 23 to 21
Tankan Small Manufacturers Diffusion Index (Q3) decreased from -5 to -9
Tankan Small Manufacturing Index (Q3) decreased from -1 to -4
Tankan Small Non-Manufacturers Diffusion Index (Q3) decreased from 3 to 1
Tankan Small Non-Manufacturing Index (Q3) remain the same at 10
Manufacturing PMI (Sep) remain the same at 48.9

Singapore:

URA Property Index (QoQ) (Q3) remain the same at 0.90%

South Korea:

CPI (YoY) (Sep) decreased from 0.0% to -0.4%
CPI (MoM) (Sep) increased from 0.2% to 0.4%
Exports (YoY) (Sep) increased from -13.8% to -11.7%
Imports (YoY) (Sep) decreased from -4.2% to -5.6%
Trade Balance (Sep) increased from 1.65B to 5.97B
Nikkei Manufacturing PMI (Sep) decreased from 49.0 to 48.0

Indonesia:

Nikkei Manufacturing PMI (Sep) increased from 49.0 to 49.1

Australia:

AIG Manufacturing Index (Sep) increased from 53.1 to 54.7
Manufacturing PMI decreased from 50.9 to 50.3
Building Approvals (MoM) (Aug) increased from -9.7% to -1.1%
Private House Approvals (Aug) increased from -3.1% to -2.4%

Some economic news from today:

India:

Nikkei Markit Manufacturing PMI (Sep) remain the same at 51.4

Indonesia:

Core Inflation (YoY) (Sep) increased from 3.30% to 3.32%
Inflation (MoM) (Sep) decreased from 0.12% to -0.27%
Inflation (YoY) (Sep) decreased from 3.49% to 3.39%

Australia:

RBA Interest Rate Decision (Oct) decreased from 1.00% to 0.75%
Commodity Prices (YoY) decreased from 6.3% to 1.8%

New Zealand:

GlobalDairyTrade Price Index decreased from 2.0% to 0.2%

EUROPE/EMEA:

The World Trade Organization reported that they expect global trade growth to the decline to the lowest point in a decade. They revised global growth down to 1.2%, compared from April’s expectation of 2.6% for the year. They mentioned many uncertainties such as trade as well as Brexit, indicating less trade will also equate as less jobs.

The UK factories are currently cutting jobs at the fastest pace in six years. New orders fell at the fastest pace since February 2013. UK transport minister George Freeman confirmed that state could drop further with a no-deal, with the disruption could cost the UK a billion GBP a week.

Anti-Brexit supporters are trying to force a legal motion in a bid to ask the EU for a delay to Brexit. Today, the UK government also apparently revealed its detailed plan for EU negotiations. The UK proposals contain a “custom clearance zone” on both sides of the Irish border. In a tweet by the Deputy PM of Ireland, Simon Coveney said the proposals were not acceptable and both Ireland and NI deserve a better solution. The spokesman for the Irish government said that proposal fell well short of the objectives of the backstop.

Iran sentenced a man to death today for spying for the US in Iran; two others were sentenced for 10 years and a UK citizen also was charged. Later, a UK spokesman said that the death sentence was later repealed. Iranian parliament speaker Ali Larijani also opened an invite to the Saudi crown prince for talks with the two countries in an attempt to resolve issues with the two countries. The crown prince was also quoted stating, “The political and peaceful solution is much better than the military one.”

The major Europe stock markets had a negative day today:

CAC 40 decreased 80.15 points or -1.41% to 5,597.63
FTSE 100 decreased 47.89 points, or -0.65% to 7,360.32
DAX decreased 164.25 points or -1.32% to 12,263.83

The major Europe currency markets had a mixed day today:

EURUSD increased 0.0039 or 0.36% to 1.0937
GBPUSD increased 0.0009 or 0.07% to 1.2296
USDCHF decreased 0.0043 or 0.43% to 0.9935

Some economic news from Europe today:

UK:

Manufacturing PMI (Sep) increased from 47.4 to 48.3
Nationwide HPI (MoM) (Sep) decreased from 0.0% to -0.2%
Nationwide HPI (YoY) (Sep) decreased from 0.6% to 0.2%

Swiss:

Retail Sales (YoY) (Aug) decreased from 1.5% to -1.4%
procure.ch PMI (Sep) decreased from 47.2 to 44.6

Norway:

Manufacturing PMI (Sep) decreased from 53.9 to 50.4

Spain:

Spanish Manufacturing PMI (Sep) decreased from 48.8 to 47.7

Italy:

Italian Manufacturing PMI (Sep) decreased from 48.7 to 47.8

France:

French Manufacturing PMI (Sep) decreased from 51.1 to 50.1

Germany:

German Manufacturing PMI (Sep) decreased from 43.5 to 41.7

Eurozone:

Manufacturing PMI (Sep) decreased from 47.0 to 45.7
Core CPI (YoY) increased from 0.9% to 1.0%
CPI (YoY) (Sep) decreased from 1.0% to 0.9%
CPI, n.s.a (Sep) increased from 105.06 to 105.31
HICP ex Energy & Food (YoY) (Sep) increased from 1.1% to 1.2%

US/AMERICAS:

US manufacturing declined to a 10-year low in September. The Institute for Supply Management (ISM) Purchasing Manager’s Index read 47.8% last month, a reading unseen since June 2009. Notably, June 2009 was also the last month of America’s Great Recession. According to the ISM, any reading beneath 50% signals a contraction. The data caused momentarily appeased investors to fear a potential recession once again. “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” stated Timothy Fiore, chair of the ISM Business Manufacturing Survey Committee. Fiore believes the best way to reverse the contraction would be to increase new exports. “There needs to be some relaxation here in trade,” Fiore continued. The data released today shows that new exports declined to 41% in September, down from August’s reading of 43.3%. Many see this decline as a clear signal that the US-China trade war is beginning to damage the economy.

Although the ISM cited trade and tariff wars as the main culprit for the manufacturing decline, President Donald Trump pointed a finger at the Federal Reserve. “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!” Trump tweeted this Tuesday. This data is likely to influence the Fed’s next rate decision at the end of the month.

Huawei Technologies executive Meng Wanzhou’s lawyers are now claiming that Canada’s border security illegally arrested their client last December. Citing the Extradition Act, Wanzhou’s lawyers claim that Canada was not permitted to issue an arrest on behalf of the US, who was seeking Wanzhou’s detainment over violating sanctions placed on Iran. The issue is further straining both US’ and Canada’s deteriorating relationship with China. Wanzhou’s extradition trial will take place this January.

US Market Closings:

Dow declined 343.79 points or -1.28% to 26,573.04
S&P 500 declined 36.49 points or -1.23% to 2,940.25
Nasdaq declined 90.65 points or -1.13% to 7,908.69
Russell 2000 declined 29.94 points or -1.97% to 1,493.43

Canada Market Closings:

TSX Composite declined 210.97 points or -1.27% to 16,447.66
TSX 60 declined 12.90 points or -1.29% to 985.03

Brazil Market Closing:

Bovespa declined 691.92 points or -0.66% to 104,053.40

ENERGY:

Oil prices rebounded intraday on reports that output from the world’s largest oil producers (OPEC, Russia, and the US) fell during the third quarter, although positive supply from Saudi curbed the rebound and pushed crude oil back into the red.

The oil markets had a negative day today:

Crude Oil decreased 0.68 USD/BBL or -1.26% to 53.2824
Brent decreased 0.5 USD/BBL or -0.84% to 58.7163
Natural gas decreased 0.048 USD/MMBtu or -2.06% to 2.2863
Gasoline decreased 0.0359 USD/GAL or -2.24% to 1.5692
Heating oil decreased 0.0125 USD/GAL or -0.66% to 1.8958
Top commodity gainers: Silver (1.38%), Palm Oil (1.27%), Sugar(8.05%), and Oat (1.00 %)
Top commodity losers: Lean Hogs(-2.94 %), Cotton (-4.28%), Coal (-2.69%), and Gasoline (-2.24%)

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

BONDS:

Japan -0.15%(+8bp), US 2’s 1.54% (-8bps), US 10’s 1.62%(-5bps), US 30’s 2.09%(-3bps), Bunds -0.56% (+1bp), France -0.27% (+0bp), Italy 0.86% (+3bp), Turkey 13.46% (+26bp), Greece 1.40% (-24bp), Portugal 0.18% (+2bp), Spain 0.17% (+2bp) and UK Gilts 0.47% (-2bp).