Tin tức thì trường

Major US stock indices fell markedly as investors fled risky assets amid concerns that a protracted trade war between the US and China could lead to a recession in the global economy.

An additional negative factor was the report that Hong Kong International Airport canceled all flights for the remainder of the day due to the growing protests. Since the beginning of June, protests have continued in Hong Kong that plunged the Asian financial center into the most serious crisis in decades and have been one of the biggest problems for Chinese leader Xi Jinping since coming to power in 2012.

In conditions of geopolitical uncertainty, investors preferred traditional safe haven assets such as the Japanese yen, gold and US government bonds. Yields on 10-year US Treasury bonds, which fell to their lowest level since 2016, continued to decline on Monday, dropping to 1.64%.

Market participants also continued to closely monitor the exchange rate of the Chinese currency against the US dollar. On Monday, the People’s Bank of China (NBK) set the average RMB exchange rate at 7.0211 per dollar, compared to 7.0136 on Friday. This, however, exceeded market expectations.

Last week, China allowed the yuan to fall below an important level of 7 per dollar for the first time since the global financial crisis in 2008. This happened after US President Trump threatened to introduce new tariffs on goods from China worth $ 300 billion from September 1. This step prompted the US Treasury to call China a currency manipulator.

Almost all DOW components completed trading in the red (28 of 30). Outsiders were the shares of The Goldman Sachs Group, Inc. (GS; -2.75%). Merck & Co., Inc. shares rose more than others (MRK, + 0.41%).

All S&P sectors recorded a decline. The largest decline was shown by the financial sector (-1.6%).

At the time of closing:

Dow 25,896.44  -391.00 -1.49%

S&P 500 2,882.69 -35.96 -1.23%

Nasdaq 100 7,863.41 -95.73 -1.20%

ANZ analysts note that amid the financial market turmoil, they have added another 25bps cut for September from RBNZ to their forecasts, implying an OCR of 0.75% by year-end.

• “The Q2 unemployment rate unexpectedly dropped from 4.2% to 3.9%. Then came the RBNZ; they decided to load our August and September 25bp cuts into one big 50bp hit in August, cutting the OCR to 1% and signalling that it could go even lower.

We still expect a November cut to take the OCR to 0.75%, but note that September remains live with this pre-emptive Committee at the helm.”

Han de Jong, the chief economist at ABN AMRO, says that they have lowered some growth forecasts in response to the most recent further escalation of the trade conflict between the US and China.

• “While negotiations were still ongoing, president Trump suddenly announced a 10% tariff of USD 300 bn worth of US imports from China. China retaliated by allowing the currency to break 7 yuan per dollar and by announcing fewer, not more, agricultural imports from the US. The US then labelled China a currency manipulator’. We do not think the Chinese will want to use the exchange rate without limits as a weapon in this war. But it is clear that they let the currency weaken somewhat from time to time. When the negotiations broke down unexpectedly in May, the yuan moved quickly from 6.70-6.75 to just above 6.90.
• The Chinese response makes it unlikely that a resolution to the conflict will be reached any time soon. We must therefore expect regular outbursts of tit-for-tat measures. Every time that happens, business confidence is shaken and that damages the global economy.
• The latest escalation comes at a time when the manufacturing sector is in recession in many countries and weak in others. This increases the downside risks. Recession between now and the end of 2020 in any of the main economies is not our base case. However, the risks have risen.
• Following a downward adjustment we made to our growth forecasts for many countries in June, our projections were below market consensus. We have now lowered them a little further and are still below the consensus. The deteriorating outlook will trigger more central bank action that previously expected and this will have an effect on bond markets.”

Han de Jong, the chief economist at ABN AMRO, notes that China's imports (in USD) ware down 5.6% yoy in July after -7.4% yoy in June.

• “The July reading was not great, but at least the data is suggesting things aren’t getting an awful lot worse either. The caveat here is that this data is about the period before the latest escalation of the trade war. Chinese imports from the US remain under huge pressure. The value of American products imported by China was down 19.1% yoy (in USD).  If you think that sounds bad, remember that the average for the year is actually -28%, so the July number may perhaps be called promising.
• Taiwan’s trade statistics also allow for an analysis of what is going on with world trade. In this case, I tend to look more at exports than at imports. Taiwan’s exports were down 0.5% yoy in July, slightly better than the average for the year so far: -3.1%.
• A big caveat beside these trade numbers is that they all relate to before the latest escalation of the trade conflict. We will have to wait and see what happens after. We, for one, are not waiting for the data to adjust our global growth forecast and have taken a few tenths off forecasts. However, we continue to think that recessions with a material contraction in output and a material rise in unemployment in key economies is unlikely before the end of our forecast period out to the end of 2020.”

TD Securities' analysts note that, while the Canadian economy continues to outperform, data has started to normalize and TD’s data surprise index has tipped into negative territory for the first time since April.

• "While we continue to track Q2 GDP of 3%, above the 2.3% projection from the July MPR, recent data has not been as robust. International trade for June showed a sharp correction in trade flows, and the July LFS revealed the largest employment decline since mid-2018 (alongside higher wage growth).
• Core CPI measures continue to sit near 2.0% on average but we are skeptical that the Canadian economy can maintain this performance going forward and we remain comfortable with our forecast for a 25bp cut in January 2020 as the global slowdown starts to weigh more heavily on the domestic outlook.”

The tool is known as the countercyclical capital buffer, the WSJ reports. It allows the Fed to require banks to hold more capital should the economy show signs of overheating.

The tool was approved in 2016, but the Fed hasn’t used it so far.

According to WSJ "now, some Fed officials are debating whether it is time to use the tool, which could provide banks with additional lending firepower in a subsequent downturn. It isn’t clear when they might make a decision."

U.S. stock-index futures fell on Monday, pressured by worries that a drawn-out trade war between the United States and China could tip the world and U.S. economies into recession.

Global Stocks:

Han de Jong, the chief economist at ABN AMRO, thinks Eurozone’s industrial sector is in a bad way, particularly in Germany.

• “The dominance of the car and machinery industry has meant that the German industrial sector is sensitive of the global slowdown of investment spending and car purchases, on top of specific problems for the car industry related to Dieselgate. German industrial production fell 1.5% mom in June and was down 5.2% yoy, after -3.7% in May. That was the worst reading since 2009 and, thus, worse than the Eurozone second-dip recession around 2012.
• German factory orders did better as they rose 2.5% mom in June. The yoy rate improved from an appalling -8.4% to -3.7%. It must be said, however, that the improvement in orders was not broadly based, but seems to have been helped by a small number of lumpy items.
• French industrial production is less sensitive to the woes of world trade. However, in France, too, June industrial production data disappointed. Manufacturing production was down 2.2% mom and down 0.6% yoy, much worse than May’s +3.3% yoy.
• The Dutch industrial sector is strongly linked to Germany. Dutch June manufacturing output contracted by 0.8% mom and was down 2.2% yoy. The Dutch statisticians also publish a series ‘industrial sales’. The June reading was grim: -10.2% yoy against -4.2% yoy in May. The June reading was the poorest monthly yoy reading since 2009.”

(company / ticker / price / change ($/%) / volume)

Advanced Micro (AMD) target raised to $44 at RBC Capital Mkts

Analysts at Royal Bank of Canada (RBC), the U.S.-China trade tensions will continue to dominate concerns about the go-forward economic backdrop.

• “It should keep focus from a data-perspective on the US industrial sector, which has borne the brunt of Trump Administration tariff hikes to-date and has already been looking wobbly.
• But for all the (legitimate) concern about trade tensions and subpar industrial output/sentiment data, it is easy to forget that broader macroeconomic conditions still look pretty solid.  The US unemployment rate is sitting just above multi-decade lows.The story is similar in Canada – with the exception that Canadian industrial output (particularly manufacturing output) has looked a touch firmer than in the US year-to-date.  We don’t expect that to last.  Slower US industrial activity will ultimately spill over into slower Canadian growth as well.  But, like in the US, the rest of the economy has looked decidedly firmer.  Employment in July ticked lower, but was still up (an unsustainably strong) 353k from a year ago.  The unemployment rate is still sitting around multi-decade lows and wage growth has strengthened.
• “The Bank of Canada’s officially ‘neutral’ stance on future interest rate changes will be tested by escalating global trade tensions since their last rate decision.  And market interest rates have already fallen dramatically alongside sharply lower bond yields abroad.
• To be sure, there are still risks to the economic outlook going forward, but that doesn’t change the fact that current conditions still look okay.”

Barrick Gold (GOLD) reported Q2 FY 2019 earnings of $0.09 per share, in line with analysts’ consensus estimate of $0.09.

The company’s quarterly revenues amounted to $2.063 bln (+20.5% y/y), missing analysts’ consensus estimate of $2.084 bln.

GOLD rose to $18.30 (+0.88%) in pre-market trading.

Deutsche Bank's analysts note that today is going to be a very quiet day for data or scheduled events with only the July monthly budget statement due in the US.

• “Tuesday: The data highlight is the July CPI report in the US. Other data includes the July NFIB small business optimism reading, while in Europe the August ZEW survey and final July CPI revisions are due in Germany and July employment data in the UK. Away from that, the NY Fed will also release its Q2 household debt and credit report.
• Wednesday: The overnight focus will be on the July activity indicators out of China. Not long after we get a first look at Q2 GDP in Germany while a second revision is due for the Euro Area. July CPI data is also expected in the UK and France while June industrial production is also due for the Euro Area. In the US the July import and export price index readings are due. Away from that, the EIA crude oil inventory report is due.
• Thursday: Overnight, June industrial production in Japan and July new home prices data is due in China. In the UK we’re due to get the July retail sales report while in the US the July retail sales report will also be a focus. The August empire manufacturing, August Philly Fed business outlook, Q2 nonfarm productivity and unit labour costs, July industrial production, weekly jobless claims, August NAHB housing market index and June business inventories data are all due also. Elsewhere, monetary policy meetings are due in Mexico and Norway.
• Friday: The main data highlights are in the US with the July housing starts and building permits data, and preliminary August University of Michigan consumer sentiment survey due. In Europe, the June trade balance for the Euro Area is expected. Elsewhere, OPEC will release its monthly oil market report.”

• PM hopes EU understands UK will leave on 31 October, no ifs or buts
• No meeting with Ireland's Varadkar has been scheduled

Deutsche Bank's analysts suggest that in terms of what to look forward to this week, there’s a potentially interesting data release on Tuesday when we get the July CPI release in the US.

• “The consensus expects a +0.2% mom reading for the core however our US economists expect a softer +0.13% mom reading mainly reflecting some unwind of the drivers that drove the strong reading in June. It’s worth noting that markets are still pricing in 63bps of cuts by the Fed this year so it’ll be interesting to see if this data makes much of a dent in that.”

Erik Johannes Bruce, an analyst at Nordea Markets, suggests the weak NOK argues for Norges Bank to signal a rate hike in September despite increased international uncertainty.

• “Norges Bank’s in-between meeting in August will be more interesting than usual. We will not receive any new rate path and a change in interest rates is out of the question. However, we will receive a statement where the Executive Board will present new information since the last meeting in June and give their assessment, which could have a strong market impact.
• Given the drop in actual and expected rates abroad, the market has nearly lost all faith that Norges Banks will hike further.
• Given Norges Bank’s normal reaction function it is hard not to conclude that the weaker NOK more than counteracts downside news and increased international uncertainty. We, therefore, believe Norges Bank still wants to send a message that rates will increase further. We also think Norges Bank will indicate that a hike in September is the most likely outcome, and the bank has some choices in how to communicate this.”

The remark came after last week's reports that Germany considered issuing of new debt to finance climate protection package, which triggered a euro-positive reaction by hinting that government spending could mitigate the need for new stimulus.

Analysts at ING expect an eventful week in terms of Italian political developments, which may continue to fuel upside pressure on BTP rates.

• "After deputy prime minister Matteo Salvini broke the governing coalition last week, we highlighted three possible political scenarios for Italy, also noting how the balance of risks for the EUR and Italian bonds was likely tilted to the downside moving ahead. During the weekend, former prime minister Matteo Renzi (of the Democratic Party) showed interest in forming a coalition with the Five Star to deliver the 2020 budget and avert a VAT tax hike. This option – which may provide some short-term respite to market concerns – has been fiercely opposed by the current Democratic leader (Nicola Zingaretti) and a large part of Democratic MPs. Nonetheless, Renzi still has a number of followers in the parliament and may ultimately have enough seats to govern with Five Stars. It would remain to be seen whether Five Stars would accept the deal.
• All in all, we expect an eventful week in terms of Italian political developments, which may continue to fuel upside pressure on BTP rates. While EUR/USD will probably remain broadly attached to the 1.12 level. For now, we see room for more EUR/CHF downside towards the 1.08 region."

Chinese banks extended 1.06 trillion yuan ($150.06 billion) in new yuan loans in July, down from June. Analysts had predicted new yuan loans would fall to 1.25 trillion yuan in July, from 1.66 trillion yuan in the previous month and compared with 1.45 trillion a year earlier.

Broad M2 money supply in July grew 8.1% from a year earlier, central bank data showed on Monday, below estimates of 8.4%. It rose 8.5% in June.

Outstanding yuan loan grew 12.6% from a year earlier. Analysts had expected 12.8% growth, slower than June's 13.0%.

Despite a flurry of growth boosting measures since last year, including a push by regulators to ramp up lending, domestic demand in China has remained sluggish.

Italy’s ruling League party would raise its public deficit target to 2.8% of gross domestic product to avoid hiking value-added tax, the party’s main economics spokesman said in an interview with La Stampa newspaper.

League chief Matteo Salvini pulled the plug last week on its coalition government with the anti-establishment 5-Star Movement, starting a potential countdown to elections which the country may need to tackle alongside preparing its budget in autumn.

Party economics chief Claudio Borghi, who has loudly criticized the euro, also told La Stampa there was no intention of starting a fight with the European Union over the currency.

British households' expectations for inflation over the next 12 months rose to 2.8% in July from 2.6% in June, according to a survey from U.S. investment bank Citi and pollsters YouGov.

Longer-term inflation expectations rose to 3.4% from 3.3% in June, the Citi/YouGov survey of 2,011 adults showed.

"Rising inflation expectations should ... support hawks at the (Bank of England)," Citi economists Christian Schulz and Ann O'Kelly said.

China's foreign exchange regulator said on Monday it does not expect disorderly depreciation of the yuan despite the impact from external factors such as trade frictions.

China's foreign debt is stable, and changes in the yuan's exchange rate will not lead to large-scale deleveraging in the country's foreign debt, Pan Gongsheng, head of the State Administration of Foreign Exchange (SAFE), wrote in an article.

Pan added that China has the confidence and capability to effectively fend off shocks and risks and to maintain stable foreign exchange markets.

In opinion of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, the cross keeps the negative bias well in place for the time being.

“EUR/JPY is seeing a minor consolidation at the low of 117.67, but no resistance of note has been overcome, leaving the market well placed for another leg lower. This guards the 114.86 2017 low. The break lower last week saw the market erode a 2012-2019 support line and this leaves a negative bias entrenched. Rallies will now find initial resistance at the 120.06 25th July low and the 20 day ma at 120.04. Key short term resistance is the 55 day ma and the 3 month downtrend at 121.27/37. The market will need to regain this to reassert upside interest”.

In the view of Elliot Clarke & Simon Murray, Analysts at Westpac, Expectations for rest of world are weaker than for the US economy, supporting the US dollar.

“Through both ‘risk-on’ and ‘risk-off’ episodes this year, the US dollar trend has remained upward sloping with the US seen as both the best-performing developed market and a yielding ‘safe-haven’ amid global uncertainty. Despite President Trump's actions this month, to our mind, this US dollar trend is set to extend into 2020. Why has the US dollar appreciated as US interest rates have moved lower? Simply because the deterioration in expectations has been even more dramatic elsewhere. First, the past year has shown that disruption from the Sino-US trade war has had an outsized effect on Europe’s open economy versus the more-insular US. Second, even after our forecast three cuts in the federal funds rate to 1.375% at December, US treasuries will remain a high-yielding safe-haven asset, further aiding the US dollar. Also aiding the US dollar trend over the coming 12 months will be ongoing turmoil in the UK.”

China's July auto sales shrank for the 13th-straight month, down 4.3% from a year earlier to 1.81 million units.

Sales in the world's largest vehicle market declined 11.4% on year in the first seven months of 2019, the Association of Automobile Manufacturers said. Monthly sales were nearly 10% from the July 2017 performance, which was a record for the month at 1.97 million units.

Even electric-vehicle sales, previously a bright spot in the otherwise struggling Chinese auto sector, fell 4.7% on year in July to 80,000 units. A new EV subsidy regime for 2019 and 2020, which makes it tougher for vehicles for qualify for government handouts, came into force at the end of June. That caused demand for EVs to weaken, with sales having spiked in June as consumers rushed to dealerships to find deals on EVs before the tightening of the subsidy rules.

The economic outlook has deteriorated in all parts of the world over the summer due to an escalating trade dispute between the United States and China, a survey showed on Monday.

Germany's Ifo economic institute said its quarterly survey among nearly 1,200 experts in more than 110 countries showed that its measures for current conditions and economic expectations have both worsened in the third quarter.

"The experts expect significantly weaker growth in world trade," Ifo President Clemens Fuest said, adding that trade expectations hit the lowest since the beginning of the tariff conflict last year.

"Respondents also expect weaker private consumption, lower investment activity, and declining short- and long-term interest rates."

New Zealand’s Prime Minister Jacinda Ardern said on Monday that spending promised in the annual budget would help stimulate the economy, but the government is always looking at other things it can do.

“We are certainly mindful of the role we have to play to stimulate the economy,” Ardern said at a news conference when asked if the government was willing to spend more to boost the economy. “Of course we tried to get ahead of that in the decisions we made in the 2019 budget.”

New Zealand’s central bank stunned markets last week with a steep interest rate cut, and flagged the risks to the domestic economy from international trade tensions and the slowing global economy.

China is unlikely to face serious consequences from the Trump administration's decision to label it a currency manipulator given the apparent lack of G7 and IMF support for the move, former and current U.S. and G7 officials said.

The U.S. Treasury last week put the designation on Beijing for the first time since 1994, roiling financial markets and escalating a bitter tit-for-tat tariff war between the world's two largest economies.

An accord agreed by the Group of Seven of the world's most advanced economies in 2013 says that members should consult each other before taking major currency actions.

But former and current officials said the Treasury failed to make those consultations, contradicting White House economic adviser Larry Kudlow's claim that G7 members were on board.

European countries were astonished by the lack of coordination, one senior official of a European G7 country told.

Amid Italian political turmoil, trade tensions and uncertainties over the European Central Bank’s (ECB) monetary policy outlook, the TD Securities (TDS) analysts believe that the upside attempts in the shared currency are likely to get sold-into.

“Italy has resurfaced in the past few sessions with Salvini calling for fresh elections. Positioning has clouded the impact on the EUR, with the bulk of our positioning proxies showing it has the most extreme short in the G10. Still, lingering growth concerns and the uncertainties about whether more ECB easing will triggers Trump's tariff button are a few reasons to think that EUR rallies look contained here.”

Goldman Sachs Group Inc said that fears of the U.S.-China trade war leading to a recession are increasing and that Goldman no longer expects a trade deal between the world’s two largest economies before the 2020 U.S. presidential election.

“We expect tariffs targeting the remaining $300bn of US imports from China to go into effect,” the bank said in a note.

Goldman Sachs said it lowered its fourth-quarter U.S. growth forecast by 20 basis points to 1.8% on a larger than expected impact from the developments in the trade tensions.

“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in the note authored by three of its economists, Jan Hatzius, Alec Phillips and David Mericle.

Rising input costs from the supply chain disruption could lead U.S. companies to reduce their domestic activity, the note said. Such “policy uncertainty” may also make companies lower their capex spending, the economists added.

Cable remains on the defensive and attention has now shifted to sub-1.2000 levels, suggested Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank.

“GBP/USD last week held sideways then sold off again on Friday. It is on the defensive. Attention has reverted to the January 2017 low at 1.1988. Below here lies the 1.1491 3rd October low (according to CQG). Rallies, if seen, should struggle circa 1.2210/1.2320. It stays negative while contained by its 2 month downtrend at 1.2403 today. Only above the downtrend this would introduce scope to the 55 day ma at 1.2502 and the June high at 1.2784”.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1311 (4275)

$1.1287 (2061)

$1.1257 (756)

Price at time of writing this review: $1.1207

Support levels (open interest**, contracts):

$1.1150 (5998)

$1.1118 (3653)

$1.1080 (4697)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 6 is 98127 contracts (according to data from August, 9) with the maximum number of contracts with strike price $1,1400 (8784);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2258 (1119)

$1.2198 (818)

$1.2153 (314)

Price at time of writing this review: $1.2035

Support levels (open interest**, contracts):

$1.1975 (2331)

$1.1949 (1446)

$1.1920 (1561)

Comments:

- Overall open interest on the CALL options with the expiration date September, 6 is 29197 contracts, with the maximum number of contracts with strike price $1,2750 (4128);

- Overall open interest on the PUT options with the expiration date September, 6 is 23242 contracts, with the maximum number of contracts with strike price $1,2100 (2331);

- The ratio of PUT/CALL was 0.80 versus 1.21 from the previous trading day according to data from August, 9

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.