August 12, 2019

Daily Market Review – Monday, August 12, 2019

Daily Market Review – Monday, August 12, 2019

Asia

China’s trade surplus in July fell but not enough to appease investors who had expected a $10bn drop to $40 bn. The result was half that, pushing indexes down as the week ended. This morning finds Chinese consumer inflation up to 2.8% in July (YoY) and indexes up a percent and a 1/3, the Hang Seng just under a percent up, and the Nikkei up 0.44%. Japan’s preliminary GDP reading for the year’s 2nd quarter shows a 0.4% drop to 1.8% – not as bad as the 0.4% growth feared. Meanwhile, though, South Korea this morning dropped Japan from its fast-track trade status list following a similar move by Japan earlier in the month.

Europe

European indexes closed in the green Friday, led by the DAX’s 1.16% increase. Friday was a bad day for UK data watchers, preliminary Q2 GDP down to 1.2% growth on contracting manufacturing, industrial production and business investments. June saw a £1.779bn trade surplus, up from a £2bn deficit, however, while France’s industrial output contracted by 2.3% in June (MoM0, but Italy’s global trade surplus increased by €450 mn. UK Brexit minister Michael Grove said on Friday that PM Johnson is “keen to explore” a new deal with the EU, and that the British government’s commitment to no post-Brexit hard Irish borders is “cast iron”

US

US indexes ended down Friday led by the Nasdaq’s 1% loss. What US data that appeared as last week ended was tepid, the 4-week and 30-year bond auctions offering slightly lower yields – 2.335% as opposed to 2.644% the month before. Goldman Sachs on Sunday announced that they do not expect a US-China trade deal before the next elections, and that the continuing trade war would most probably lead to a recession. Given the lack of support from the G7 and the IMF, there seems little the Trump administration can do in response to China’s Yuan devaluation last week, other than branding China a currency manipulator. And since it did so without consulting its partners in the two organizations, these are remaining mum, saying – at most – that there is no proof of the claim.

Commodities

Oil Friday added a dollar 30 after the Baker Hughes organization reported a 6-rig cut in active oil wells in the US. Monday saw prices correcting downward, however, as trade war fears continue. Russia has been slowly increasing its production quotas’ and on the Paris-based International Energy Agency reports that oil demand has been increasing at its slowest pace since 2008. And, as Saudi forces intervene in Yemen against the Iranian-backed Houthi insurgents, the nation’s Aramco oil company income fell 12% during the year’s 1st half as plans for its privatization are being accelerated to 2020. With Bitcoin failing again to cross the 12k resistance level, Nikkei on Friday reported that 15 governments, some belonging to the G7, are planning a cryptocurrency oversight institution to be launched by 2020 by the Financial Action Task Force (FATF).

Corporate

The latest company to be hit in the ego by the US-China Trade war is Cathay Pacific, which has been forced by the Chinese government to fire staff participating in protests. Owned by the UK firm, Swire Pacific Ltd, shares fell Monday to a 10-year low on the news. Google too has been threatened over geopolitical matters – in this case, Russia warning the company not to allow advertisements from anti-Putin demonstrators.

Economic Calendar

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Today’s Top Economic Events
TIME/PLACE RELEASE/DATA
15:30 PM GMT – US 3-Month & 6-Month T-Bill Auctions
18:00 PM GMT – US Monthly Budget Statement (Jul)
22:45 PM GMT – NZ Food Price Index (Jul)
23:50 PM GMT – Japan Domestic Corporate Goods Price Index (Jul). Tertiary Industry Index (Jun) at 04:30 (+1)
01:30 AM GMT (+1) – Australia National Australia Bank’s Business Conditions & Confidence (Jul)