Monday 23rd September 2019

US

  • Stocks fell Friday, on news that Chinese officials were cutting short their visit to the US, dampening hope around trade negotiations between the two countries.
  • The Dow Jones Industrial Average closed 159 points lower (0.6%) at 26,935.
  • The S&P 500 pulled back 0.5% to 2,992.
  • The Nasdaq Composite dropped 0.8% to 8,117.
  • The major indexes also snapped a three-week winning streak. The Dow and Nasdaq fell 1.1% and 0.7%, respectively, for the week, while the S&P 500 lost 0.5%.
  • A China delegation had canceled a visit to US farms in Montana, the Montana Farm Bureau said around midday Friday. Nicole Rolf, the Bureau’s director of national affairs said the officials were headed back to China earlier than planned. President Donald Trump had said China would increase its purchases of US agricultural products as part of a bilateral trade deal. The cancellation may be seen by some investors, as a sign the two countries are no closer to reaching a trade deal. Lean hog futures hit their limit-down levels on the report. Caterpillar shares closed 1.5% lower while Boeing lost 1.3%. Apple slid more than 1%.
  • Earlier in the session, deputy trade negotiators from the US and China resumed face-to-face talks for the first time in almost two months. The deputy-level trade talks are expected to help lay the groundwork for high-level negotiations early next month.
  • In recent weeks, economic stimulus around the world has helped to ease fears about slowing global growth. Monetary easing by the US Federal Reserve this week and by the European Central Bank last week appears to have improved market sentiment. The Fed lowered rates on Wednesday by 25bps for the second time this year.
  • St. Louis Fed President James Bullard explained in a note why he thought the Fed should have made a deeper cut this week. “There are signs that US economic growth is expected to slow in the near horizon. Trade policy uncertainty remains elevated, US manufacturing already appears in recession, and many estimates of recession probabilities have risen from low to moderate levels,” he said.

Europe

  • European stocks closed slightly higher Friday, as stimulus measures by global central banks eased fears about slowing economic growth.
  • The pan-European Stoxx 600 closed up around 0.3%, with most sectors and major bourses trading in positive territory.
  • Looking at individual stocks, Denmark’s third-largest bank Jyske Bank soared to the top of the European benchmark, after announcing it would lower negative interest rates even further for clients depositing over $111,100 in their bank accounts. The move follows interest rate cuts from both the European and Danish central banks. Shares in the firm rose over 5%.
  • France’s Alten was another standout gainer. The IT services and consulting company reported a better-than-expected operating margin in the first six months of the year, prompting SocGen to raise its stock recommendation to “buy” from “hold.” Shares of the Paris-listed stock jumped 4% on the news.
  • Meanwhile, Investec slumped to the bottom of the index after issuing a profit warning. The Anglo-South African financial services firm said H1 profit would be lower than a year earlier, due to a rise in restructuring costs. Global trade tensions and Brexit uncertainty have also weighed on the company. Investec shares fell over 8%.
  • In the UK, investors are likely to closely monitor an expected ruling from the Supreme Court this week. The Supreme Court’s 11 judges, or justices, have been tasked on ruling whether the government acted lawfully in suspending parliament following a legal challenge brought by opposition lawmakers.

Asia

  • Shares in Asia were mostly lower in Monday afternoon trade, as investors watch for developments on the US-China trade front.
  • Mainland Chinese shares declined by the afternoon, with the Shanghai composite dropping 1.3% and the Shenzhen composite down 1.4%.
  • Hong Kong’s Hang Seng index shed 0.9%. Shares of companies related to China’s Fosun saw declines, following the collapse of the world’s oldest travel firm Thomas Cook, the Chinese conglomerate is the largest shareholder in the British firm. Fosun Tourism dropped 3.8% and Fosun International declined 1%.
  • Anheuser-Busch InBev, is set to price its Budweiser IPO in Hong Kong on Monday. It is the firm’s second attempt at doing so, after halting an earlier attempt at going public.
  • South Korea’s Kospi was 0.1% lower, while the S&P/ASX 200 in Australia rose 0.4%.
  • In India, shares bucked the overall downward trend, as the Nifty 50 and S&P BSE Sensex both jumped more than 1.5% each, adding to large gains seen last Friday after a surprise tax cut was announced.
  • Markets in Japan are closed on Monday for a holiday.

Bonds

  • 10yr and 30yr US treasuries are currently trading at 1.75% and 2.19% respectively.
  • 10yr UK gilts trade with a yield of 0.63%.
  • German 10yr bund yields trade at -0.52%.
  • 10yr Italian and Spanish bond yields trade at 0.91% and 0.23% respectively.

Commodities

  • The WTI crude oil price is $58.77.
  • Brent crude is $65.07.
  • The gold price is $1,515.64.
  • The silver price is $18.29.
  • The COMEX copper price is $2.59.

Currency

  • The US dollar is trading at 107.74 against the Yen.
  • The pound is trading at 1.25 against the US dollar.
  • The pound is trading at 1.13 against the Euro.

 

Kind Regards,
The Psigma Investment Team