August 21, 2019

Daily Market Review – Wednesday, August 21, 2019

Daily Market Review – Wednesday, August 21, 2019

Asia

In Asia, the Nikkei is down despite a weakening yen, as most Chinese indexes straddle the zero mark ahead of today’s FOMC minutes, this as signs of a recession begin to grip the financial globe at large. Hopes for a US-Japan trade deal being signed this month are fading as negotiators meet this week. The main topics of contention – cars (which Trump is threatening to tax to the tune of 25%) and agriculture (imports that Japan taxes). And Germany’s ZEW Centre for European Economic Research has downgraded expectations for the Chinese economy due to US sanctions and expects further devaluations of the Yuan over the coming year.

Europe

With Italy in the throes of yet another government resignation, European markets closed in the red yesterday led by the FTSE’s 0.9% decline. Former PM Giuseppe Conte accused Interior Minister Matteo Salvini of “sinking the ruling coalition and endangering the economy for personal and political gain.” Germany’s Finance Minister, Olaf Scholz told Reuters that he does not see any of this as a threat to the Euro. European signs of recession are in the air following Germany’s reported manufacturing decline, and the consensus is growing for coming monetary easing from the ECB. As Eurozone construction climbs out of contraction to 0% growth in June (MoM), Britain’s CBI Industrial Trends survey shows an improvement from -34 in May to -13 in June. A note from the European Commission debunks UK PM Johnson’s proposal to drop the Irish Backstop in a post-Brexit world, saying that the UK had not delivered any concrete proposals but wishes to “replace a legally operative solution with a commitment to finding a solution.”

US

US indexes yesterday capped their climb as the Redbook Index shows a ½% improvement in sales growth to 4.9% YoY for August 16. The USD gave up this week’s gains yesterday as markets await the Federal Reserve’s Open Market Committees forward guidance on future interest rate cuts. Global banking officials will be gathering at the Fed’s Jackson Hole Summit this coming weekend to hear remarks from Jerome Powell, as 10 and 2-year bond yields once again inverted last week – a sign of potential recession. Reacting to the situation, Donald Trump – in a rare admission of its economic damage – said that the US-China trade war was necessary despite short-term damage to the economy, since “China had been cheating Washington for decades.” Meanwhile, US regulators have approved a watered-down version of the Volker Rules, which were meant to limit banks that accept deposits insured by US taxpayers from speculative proprietary trading.

Commodities

Oil continues a slack week-long climb as the API yesterday reported 3.5mB in oil inventories this past week. Brent cut through the 60-mark after a sub-par week, as Middle East tensions pressure prices upwards. Yesterday US State Sec Pompeo threatened actions against the Iranian Grace-1 tanker headed for Syria, as yet another Iranian tanker – the Bonita Queen – fuels up and sets sail for forbidden territory. Russia’s Tass news service reported yesterday that OPEC+ reduced production by 159% in the past month YoY. Meanwhile, Australia has announced it will join the US-led defence force in the Strait of Hormuz, to thwart Iranian disruption attempts against oil shipments. British Airways and Shell have announced plans for a plant to manufacture aircraft fuel from household waste. And gold trading continues to bounce above the 1500 mark as global tensions swirl and safe havens thrive.

Corporate

The Alibaba board has officially delayed the company’s $15bn Hong Kong listing amidst political unrest and the Chinese government’s crackdown on foreign-owned companies in the island (HSBC, Cathay Pacific and more). The move follows Anheuser-Busch’s cancellation of its $9.8 bn listing on the Hang Seng.

Economic Calendar

Today’s Top Economic Events
TIME/PLACE RELEASE/DATA
08:30 AM GMT – UK Public Sector Net Borrowing (Jul)
11:00 AM GMT – US MBA Mortgage Applications (Aug 16) Existing Home Sales (Jul) at 14:00 and FOMC Minutes at 18:00. Jackson Hole Summit opens at midnight GMT
12:30 PM GMT – Canada Consumer Price Index (Jul)
14:30 PM GMT – OIL EIA Crude Oil Stocks Change (Aug 16)
22:00 PM GMT – Australia Commonwealth Bank Services Preliminary PMI (Aug)
23:50 PM GMT – Japan Foreign Investment in Japan Stocks & Bonds (Aug 16). Nikkei Manufacturing Preliminary PMI (Aug) at 00:30 AM (+1), and All Industry Activity Index at 0:4:30 AM GMT (+1)
For more, visit our Economic Calendar