May 22, 2019

Daily Market Review – Wednesday, May 22, 2019

Daily Market Review – Wednesday, May 22, 2019

Asia

With Japan’s machinery orders improving MoM (3.8% in May) but the merchandize trade surplus slipping for the 5th month in a row to a mere 60.4 bn Yen (nearly a tenth of March’s figure), the Hang Seng and Nikkei are both slightly up this morning, Chinese indexes to the same extent – down. Yesterday China’s US ambassador said his country is prepared to resume talks, frozen for the past fortnight. President Xi Jingping, on the other hand, called upon his people to prepare for “a new Long March” – a clear bow to Mao’s rebellion tactical retreat before victory – is being taken as an indication that China plans to entrench within its non-conciliatory approach vis-à-vis US trade demands.
The Australian dollar continues to trend sideways along the 6800 region after an elections-rejuvenated PM Scott Morrison met with Central Banker, Phillip Lowe ahead of an extremely possible interest rate drop in June – the first in 3 years. Lowe early this morning indicated a slowing economy, sluggish domestic spending and sub-par inflation as causes for concern. House prices in Australia are currently down 10% from 2017 highs. Last night’s Westpac Leading Index of economic activity shows a 0.1% contraction, and construction continued to contract during Q1 by 1.9%.

US

Meanwhile, US companies are reporting non-tariff barriers to operations in China – extended bureaucratic procedures, for example – is prompting a relocation of manufacturing plants to other locales, a move that could affect about 40% of US companies operating there. This morning, St Louis Fed head James Bullard warned that weak inflation could prompt an interest rate cut – even if the economy continues growing. Home sales yesterday saw a 0.4% contraction in April, and the Redbook Index of same stores sales growth showed a tenth percent reduction. On the equities front, the NASDAQ closed up 1.7% yesterday on post Huawei optimism, regaining half of the week’s trade-war related losses. We’re still below the 8000 resistance level, so whether the recovery becomes a trend is still unclear The Canadian dollar continues its week-long upswing after the 3-NAFTA partners agreed to cancel steel and aluminium tariffs.

Europe

Theresa May set out her new deal to Parliament yesterday after Labour leader Corbyn stated his party would vote against it. Still, Sunday’s figures show housing weathering the storm and today’s retail data is expected to do just as well. Irish Prime Minister Leo Varadkar told reporters last night that the new deal and its backstop guarantees seemed satisfactory. European indexes closed slightly up yesterday after the US removed its reservations of Chinese telecoms firm, Huawei, lowering a tad the US-China trade wars tension. Still, the Euro is indicating a slight pessimism ahead of Parliamentary elections that begin on Thursday and could result in an influx of anti-EU populist parties, like the Italian League and Le Penn’s National Rise, which could wreak havoc with economic policies and Union unity.

Commodities

Despite a relatively small inventory increase – 2.4mB last week, according to the API, oil prices fell nearly a dollar per barrel yesterday on the mere fact that stocks are rising. The commodity is presently at the bottom of a 3-day range, back wind still being provided by Saudi Arabia’s pledge to maintain OPEC+ production quotas. However, Bloomberg this morning indicates that Russia could pull out of the pact after Q1 GDP growth rested on a stymied 0.5% – well below projections and last year’s 2.7% for the same period.

Economic Calendar

Today’s Top Economic Events
TIME/PLACE RELEASE/DATA
07:00 AM GMT – EU Non-Monetary Policy ECB Meeting followed by ECB’s President Draghi speech at 07:30
08:30 AM GMT
– UK
Retail, producer & consumer Price Indexes, and Public Sector Borrowing (Apr)
11:00 AM GMT
– US
MBA Mortgage Applications (May 17), and FOMC Meeting Minutes at 18:00
12:30 PM GMT
– Canada  
Retail Sales (Mar)
14:30 PM GMT
– Oil
EIA Crude Oil Stocks Change (May 17)
23:50 PM GMT
– Japan
Foreign Stocks & Bond Investment (May 17), and preliminary Nikkei Manufacturing PMI (May) at 00:30 AM (+1)

For more, visit our Economic Calendar