Market Talk – July 13, 2022

ASIA:

China’s economic growth likely slowed sharply in the second quarter as COVID-19 lockdowns hit factories and consumer spending, a Reuters poll showed, suggesting policymakers may have to do more to spur a faster recovery. On a quarterly basis, GDP is forecast to drop 1.5% in the second quarter, versus growth of 1.3% in January-March, the poll showed. The central bank has pledged to step up support for the slowing economy, but some analysts believe the room to ease policy could be limited by worries about capital outflows, as the U.S. Federal Reserve raises interest rates.

India’s annual consumer inflation remained painfully above the 7% mark, and beyond the central bank’s tolerance band for the sixth month in a row, official data showed on Tuesday, raising prospects of more rate hikes by central bank next month. June’s print of 7.01% was almost in line with the 7.04% forecast by economists in a Reuters poll, and higher than 6.26% in the year earlier period, data released by the National Statistics Office showed on Tuesday. The RBI’s Monetary Policy Committee raised its benchmark repo rate by 50 basis points to 4.90% last month and hinted at more rate hikes to come.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 142.11 points or 0.54% to 26,478.77
  • Shanghai increased 2.83 points or 0.09% to 3,284.29
  • Hang Seng decreased 46.79 points or -0.22% to 20,797.95
  • ASX 200 increased 15.30 points or 0.23% to 6,621.60
  • Kospi increased 10.85 points or 0.47% to 2,328.61
  • SENSEX decreased 372.46 points or -0.69% to 53,514.15
  • Nifty50 decreased 91.65 points or -0.57% to 15,966.65

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00185 or 0.27% to 0.67719
  • NZDUSD increased 0.00033 or 0.05% to 0.61393
  • USDJPY increased 0.453 or 0.33% to 137.242
  • USDCNY decreased 0.0135 or -0.20% to 6.72310

Precious Metals:

l Gold increased 10.4 USD/t oz. or 0.60% to 1,736.21

l Silver increased 0.356 USD/t. oz or 1.89% to 19.250

Some economic news from last night:

China:

Exports (YoY) (Jun) increased from 16.9% to 17.9%

Imports (YoY) (Jun) decreased from 4.1% to 1.0%

Trade Balance (USD) (Jun) increased from 78.76B to 97.94B

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Japan:

Reuters Tankan Index (Jul) remain the same at 9

South Korea:

Unemployment Rate (Jun) increased from 2.8% to 2.9%

New Zealand:

FPI (MoM) (Jun) increased from 0.7% to 1.2%

RBNZ Interest Rate Decision increased from 2.00% to 2.50%

EUROPE/EMEA:

The UK’s blue-chip FTSE 100 fell on Wednesday after hotter-than-expected U.S. inflation data slammed global markets, while a surprise growth in Britain’s economy failed to assuage recession worries. The FTSE 100 , which houses several global companies that draw a large part of their revenue in dollars, dropped 0.7% as sterling edged higher. Data showed Britain’s economy grew unexpectedly in May, driven by a rise in doctor appointments and demand for holidays, which could reassure the Bank of England about its plans to keep on raising interest rates. The wider European markets fell sharply after U.S. inflation data, and the euro dropped below parity against the dollar for the first time in almost two decades, as a hawkish Fed and growing concern about rising recession risks in the euro area continued to batter the currency.

Hungarian Prime Minister Viktor Orban’s government has ordered an export ban on fuels like gas and scrapped a years-long cap on utility prices for higher-usage households, Reuters reported. The measures, which also include a plan to boost domestic gas output to 2 billion cubic meters from 1.5 billion, will take effect from August to ensure the continued supply of energy in winter, Orban’s chief of staff Gergely Gulyas said. Gas supplies to Europe have tightened and fuel costs have soared since Russia’s invasion of Ukraine in February and subsequent sanctions, leaving countries scrambling to refill storage and diversify supply channels. Under a 15-year deal with Russian energy giant Gazprom signed last year, Hungary receives 3.5 billion cubic metres (bcm) of gas per year via Bulgaria and Serbia, and a further 1 bcm via a pipeline from Austria.

The major Europe stock markets had a negative day:

l CAC 40 decreased 43.96 points or -0.73% to 6,000.24

l FTSE 100 decreased 53.49 points or -0.74% to 7,156.37

l DAX 30 decreased 149.16 points or -1.16% to 12,756.32

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00306 or 0.30% to 1.00636
  • GBPUSD increased 0.00214 or 0.18% to 1.19026
  • USDCHF decreased 0.00252 or -0.26% to 0.97908
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Some economic news from Europe today:

UK:

NIESR Monthly GDP Tracker increased from -0.1% to 0.2%

  1. K. Construction Output (YoY) (May) increased from 3.1% to 4.7%

Construction Output (MoM) (May) increased from 0.3% to 1.5%

GDP (QoQ) decreased from 0.8% to 0.4%

GDP (MoM) increased from -0.2% to 0.5%

GDP (YoY) decreased from 3.7% to 3.5%

Index of Services decreased from 0.2% to 0.1%

Industrial Production (YoY) (May) decreased from 1.6% to 1.4%

Industrial Production (MoM) (May) increased from -0.1% to 0.9%

Manufacturing Production (MoM) (May) increased from -0.6% to 1.4%

Manufacturing Production (YoY) (May) increased from 1.3% to 2.3%

Monthly GDP 3M/3M Change increased from 0.3% to 0.4%

Trade Balance (May) increased from -21.52B to -21.45B

Trade Balance Non-EU (May) increased from -11.41B to -10.37B

Germany:

German CPI (MoM) (Jun) decreased from 0.9% to 0.1%

German CPI (YoY) (Jun) decreased from 7.9% to 7.6%

German HICP (MoM) (Jun) decreased from 1.1% to -0.1%

German HICP (YoY) (Jun) decreased from 8.7% to 8.2%

France:

French CPI (YoY) increased from 5.2% to 5.8%

French CPI (MoM) (Jun) remain the same at 0.7%

French HICP (MoM) (Jun) increased from 0.8% to 0.9%

French HICP (YoY) (Jun) increased from 5.8% to 6.5%

Spain:

Spanish CPI (MoM) (Jun) increased from 0.8% to 1.9%

Spanish CPI (YoY) (Jun) increased from 8.7% to 10.2%

Spanish HICP (MoM) (Jun) increased from 0.7% to 1.9%

Spanish HICP (YoY) (Jun) increased from 8.5% to 10.0%

Euro Zone:

Industrial Production (MoM) (May) increased from 0.5% to 0.8%

Industrial Production (YoY) (May) increased from -2.5% to 1.6%

US/AMERICAS:

Inflation in the US reached a new high in June after spiking 9.1%, according to data from the Bureau of Labor Statistics. This marks the fastest pace of inflation since 1981. Core CPI excluding energy and food rose 5.9% which is down from March’s high of 6.5% but still well above a sustainable level. Headline CPI rose 1.3% on the monthly level. Energy prices have risen 41.6% YoY, 7.5% from the month prior, and are one of the main contributors to inflation woes. Shelter costs, accounting for one-third of CPI, rose 5.6% YoY and 0.6% for the month.

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The Bank of Canada surprised the markets today by increasing rates by 100 basis points, raising the policy rate to 2.5% from 1.5%. Thee markets had originally priced in a 75 bps move, but growing inflation caused the central bank to act more aggressively. “With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates,” the bank said. The central bank has not raised rates at such a rapid pace since August 1998. The bank is warning that inflation will continue to rise over the next few months and will likely reach 8%.

US Market Closings:

  • Dow declined 208.54 points or -0.67% to 30,772.79
  • S&P 500 declined 17.02 points or -0.45% to 3,801.78
  • Nasdaq declined 17.15 points or -0.15% to 11,247.58
  • Russell 2000 declined 2.15 points or -0.12% to 1,726.04

Canada Market Closings:

  • TSX Composite declined 63.45 points or -0.34% to 18,615.19
  • TSX 60 declined 4.26 points or -0.38% to 1,131.71

Brazil Market Closing:

  • Bovespa declined 390.05 points or -0.4% to 97,881.16

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil increased 0.08 USD/BBL or 0.08% to 95.920
  • Brent decreased 0.26 USD/BBL or -0.26% to 99.23
  • Natural gas increased 0.517 USD/MMBtu or 8.39% to 6.6800
  • Gasoline decreased 0.0469 USD/GAL or -1.44% to 3.2177
  • Heating oil increased 0.0012 USD/GAL or 0.03% to 3.6638
  • The above data was collected around 14:24 EST on Wednesday
  • Top commodity gainers: Coal (1.41%), Natural Gas (8.39%), Silver (1.89%) and Sugar (2.41%)
  • Top commodity losers: Palm Oil (-8.62%), Zinc (-2.85%), Cotton (-4.43%) and Oat (-26.87%)

The above data was collected around 14:26 EST on Wednesday.

BONDS:

Japan 0.234%(-0.4bp), US 2’s 3.15% (+0.103%), US 10’s 2.9152% (-4.28bps); US 30’s 3.09% (-0.049%), Bunds 1.145% (+1.1bp), France 1.6650% (+2bp), Italy 3.2280% (+3.1bp), Turkey 18.19% (+4bp), Greece 3.458% (-3.9bp), Portugal 2.276% (+3.6bp); Spain 2.266% (+4bp) and UK Gilts 2.0600% (-0.5bp).

Original Article

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