Morning Update Note
Friday 16th August 2019
- Stocks rose on Thursday making back some of the steep losses in the previous session, as retail giant Walmart’s earnings and strong retail sales figures led investors to believe the U.S. consumer could help the country avoid a recession.
- The Dow Jones Industrial Average ended the volatile session 99.97 points, or 0.39%, higher to 25,579.39 after suffering its worst day of the year on Wednesday. The S&P 500 was up 0.25%, or 7 points, to 2,847.6, while the Nasdaq Composite was slightly lower at 7,766.62.
- Retail sales rose solidly in July and beat expectations, the Commerce Department said on Thursday. Consumers spent more at stores and restaurants last month, a sign that fears of a global slowdown that have roiled financial markets haven’t soured consumer optimism.
- Walmart reported better-than-expected earnings and raised its outlook for the full year, sending its stock 6.1% higher.
- Somewhat positive trade news also helped the tone on Thursday. A spokesperson at China’s Ministry of Foreign Affairs said Beijing “hopes the U.S. will meet China halfway” on trade issues, fueling optimism about a resolution between the two countries.
- Cisco shares plunged 8.6% on Thursday after it said future earnings would be lighter than expected because of a “significant impact” from the U.S.-China trade war. The tech giant also said China revenue fell 25% last quarter on an annualized basis.
- Press takeaways from US Treasury data highlighted how China was eclipsed by Japan as the largest foreign holder of US bonds in June, despite China’s holdings growing for the first time in five months to $1.11tn. This compares to Japan’s $1.12tn.
- London stocks finished firmly in the red again on Thursday amid ongoing China-US trade frictions and as sterling was boosted by better-than-expected retail sales data.
- The FTSE 100 finished down 1.13% at 7,067.01, while the GBP was up 0.44% against the USD at 1.21 and 0.83% firmer versus the EUR at 1.09, after figures from the Office for National Statistics showed that retail sales unexpectedly ticked higher in July.
- Retail sales edged up 0.2% last month, down from a 0.9% increase in June but ahead of expectations for a 0.2% decline. On the year, retail sales rose 3.3%, down from 3.8% growth in June but beating expectations for a 2.6% jump.
- Ex-dividends weighed on the market, with RBS, Anglo American, Ashtead, Aviva, Evraz, Ferrexpo, HSBC, Ibstock, Legal & General, Mondi, Pearson, Phoenix Group, Provident Financial, Royal Dutch Shell, Segro and TI Fluids all in the frame.
- Europe’s main stock markets finished in the red again after Beijing said that it would retaliate for the latest round of US trade tariffs.
- By the end of trading, the benchmark Stoxx 600 was down by 0.29% at 365.09, alongside a drop of 0.70% to 11,412.67 for the German Dax and a fall of 2.53% to 20,020.28 on the FTSE Mibtel.
- In Italy there was talk that the recent upheaval in the governing coalition could result in the League being sidelined by a coalition between the Five Star movement and the Socialist PD party, instead of taking over the reins of government, despite its sharp rise in voter polls.
- There was little fresh economic data out of the single currency bloc for investors to chew on come Thursday, although following the Norwegian central bank, some analysts said that rate-setters in Oslo were likely done with raising interest rates.
- Monetary policymakers at Norges Bank kept short-term official interest rates unchanged at 1.25% as expected.
- Asian markets were mixed in early trading Friday, after China threatened to retaliate if the Trump administration goes ahead with its latest tariff threats, yet still held out hopes for a trade deal.
- China’s central bank set the daily midpoint for the yuan at 7.0312 per U.S. dollar, the seventh consecutive session it’s been set weaker than the 7 level.
- Concerns that Beijing may resort to yuan devaluation magnified after USD/CNY reached the key 7 threshold, though PBOC pledged to refrain from competitive devaluation.
- At the time of writing, in China, the CSI 300 was up 0.48% at 3,711.83 and the SSE Composite in Shanghai was also up 0.31% at 2,824.44.
- In Japan, the Nikkei was marginally up by 0.06% at 20,418.81, Hong Kong’s Hang Seng was up 0.64% to 25,654.87, however, South Korea’s Kospi was down 0.58% at 1,927.17.
- 10yr and 30yr US treasuries are currently yielding at 1.55% and 2.00% respectively.
- 10yr UK gilts trade with a yield of 0.42%.
- German 10yr bund yields trade at -0.71%.
- 10yr Italian and Spanish bond yields trade at 1.37% and 0.04% respectively.
- The WTI crude oil price is $55.11.
- Brent crude is $58.91.
- The gold price is $1,515.59.
- The silver price is $17.17.
- The COMEX copper price is $2.59.
- The US dollar is trading at 106.15 against the Yen.
- The pound is trading at 1.21 against the US dollar.
- The pound is trading at 1.09 against the Euro.
The Psigma Investment Team
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