August 26, 2019

Daily Market Review – Monday, August 26, 2019

Daily Market Review – Monday, August 26, 2019

Asia

Asian equities are opening this week in the red led by the Hang Seng – down 3% after Japanese brokerage, Nomura downgraded Hong Kong stocks as protests intensify on the isle. The Yuan continues to weaken, 3.7% this month to an 11-year low so far, impacting the valuation of Chinese companies listed on the Hang Seng, after China and the US exchanged more tariffs over the G-7 weekend. Interestingly, China’s soybean imports from the US have tripled year-on-year. This morning, China’s Vice Premier Liu He indicated that he was seeking a negotiated resolution to the US-China trade war after President Trump rescinded his demand that US companies leave China – based on remarks by US national Economic Council Director Larry Kudlow. At the G7 itself, Trump and Japan’s PM Shinzo Abe agreed on next month’s expected trade deal principles – Japan agreeing to purchase surplus US corn.

US

While world leaders attacked the US President’s stance on almost everything (global warming, tariffs, China, Iran…) an attack on the US Dollar’s status as the world’s reserve currency was launched at the Jackson Hole economic summit by UK central banker, Mark Carney, who said the currency was destabilizing the world economy. He suggested creating a replacement currency in concert between the world’s central banks. Despite Fed head Powell’s words to the conference and to the contrary, US manufacturing registered its first month of contraction in nearly 10 years. Markit’s services and composite PMIs fell a full 3 points to hover just above the 50-mark. The following day, new home sales for July contracted a full 12.8% MoM. The dollar index fell a full dollar on the data as US markets collapsed on Friday’s US-China tariffs exchange and Trump’s ordering of US companies out of China. The Nasdaq lost %, the S&P 2.6 and the Dow, 2.37. In Canada, on the other hand, retail sales in June pleased traders by remaining level on expectations of a further 0.1% decline.

Europe

Iranian foreign minister Mohammad Javad Zarif’s surprise appearance yesterday at the G7 Summit in Biarritz, France was yet another twist in Trump’s gut by the French, facing US tariffs of their own on wine exports. The French excuse for the visit – an assessment of how US-Iranian tensions could be resolved. Iran said it would agree to an increase of its oil export quota in return for talks but would not negotiate its ballistics or uranium enrichment activities. Trump has refused to reissue waivers on his Iranian oil embargo. Also, at the conference, Trump reiterated his desire to sign an encompassing trade deal with post-Brexit Britain, while Boris Johnson told the BBC he was meeting with more understanding vis-à-vis his exit demands from France and Germany. He also added, however, that a no-deal Brexit would exonerate the UK from its 39-billion-pound divorce bill. The Euro staged a dramatic 80-pip rebound Friday after end-of-week PMIs from across the union came in better than expected – manufacturing up half a point across the board but still mainly below the 50-point expansion threshold. August’s preliminary consumer confidence reading, however, is down half a point to -7.1.

Commodities

Oil overnight fell to a 2-week low as US China trade war events over the weekend razed markets and investor confidence. WTI opened the Asian week with a 75-cent bear gap, continuing downwards to complete the dollar before regaining half the losses. Meanwhile, China has more than doubled its oil imports from Malaysia, oil actually from Venezuela that Trump has embargoed, and shipped from there to Malaysia by the Russian Rosneft oil firm. Gold, conversely, added 55 cents to the troy ounce, failing to break through resistance at 1560. And bitcoin failed to break through the 10.5K level after adding $500 overnight, after Maxine Waters, the chair of the U.S. House Financial Services Committee said yesterday that Libra continues to raise concerns after meeting with the Facebook and Swiss (where the Libra Association is based) government officials.

Economic Calendar

Today’s Top Economic Events
TIME/PLACERELEASE/DATA
08:00 AM GMT – GermanyIFO – Expectations, Business Climate and Current Assessment (Aug)
12:30 PM GMT – USChicago Fed National Activity Index, Capital Goods Orders and Durable Goods Orders (Jul). Dallas Fed Manufacturing Business Index (Aug) at 14:30
23:50 PM GMT – JapanCorporate Service Price and Large Retailers’ Sales (Jul)

For more, visit our Economic Calendar