August 9, 2019
Asian equities are mixed as food inflation in China soars and Japan’s GDP exceeds expectations
Asia-Pacific stocks were mixed on Friday, August 9, as China released data showing food inflation soared in July. On the other hand, the Japanese economy grew more than expected in the quarter ending in June.
Mainland China’s shares reversed in the afternoon after advancing at the start of the session. In Japan, the Nikkei 225 rose 0.55%. The South Korean Kospi index rose by 1.11% and the Australian S&P/ASX 200 also rose slightly.
Wall Street extends its rebound on Thursday, August 8, following good macro data from China.
The dollar fell 0.2% to 105.84 yen. The Japanese yen advanced Friday after the White House announced it would delay a decision to allow U.S. companies to do business with Huawei Technologies.
The yuan remained stable against the dollar after an alarming drop earlier in the week, and continues to be closely watched as traders watch Beijing’s response to escalating trade tensions.
The pound hit a two-year low against the euro after the media reported that new Prime Minister Boris Johnson is preparing to hold elections after the October 31 Brexit deadline.
Oil prices fell on Friday amid fears about demand. It does so despite the fact that prices gained some support on Thursday in the face of expectations of further cuts in OPEC production. Both Brent and West Texas rose more than 2% on Thursday to recover from January’s lows. Oil prices are down more than 20% from April highs.
During Friday’s Asian trading, gold remained firm, on its way to its best week since April 2016 in which it has gained 4.6%. The escalation of the trade dispute between China and the United States and fears of a slowdown in the global economy prompted renewed interest in safe-haven assets.
European markets are expected to open up Friday’s session.
Economic slowdown continue
Dow rises 200 points as Disney and technology stocks lead the market.
Wall Street extends its rebound on Thursday, August 8, after good macro data from China.
Chinese exports in July rose by 3.3%, well above the expected fall of 2%. In addition, imports for the same month fell by 5.6%, below the expected drop of 8.3%. This has caused the Asian giant’s current account balance to rise to $45 billion, above the anticipated $40 billion.
The economic slowdown and the trade war continue to worry the market, but on Thursday the situation was seen with more optimism. Thus, the New York Stock Exchange continues to recover after suffering its biggest fall of the year on Monday, with declines of 3%.
Donald Trump returned to Twitter to charge again against the Federal Reserve and says that the central bank is too proud to acknowledge its mistakes.
European equities rise as falling global bond yields stabilize
European equities traded higher on Thursday, August 8, as investors re-invest in risky assets and digest a range of corporate profits.
The pan-European Stoxx 600 rose 1.3% in the afternoon, while technology stocks rose 1.8%. All sectors and major exchanges traded on positive territory.
The fall in bond yields stabilised late on Wednesday, softening concerns about the slowdown in economic growth. The sharp rise in fixed income caused equity markets to fall in the previous session, with investors fleeing into safe havens.
The profusion of business results in Europe is also the focus of investors’ attention.
Gold on its way to record highs
In the last few weeks gold has pulverized important levels of resistance and, with its logical intermediate corrections, everything suggests that it can return to the highs of 2011.
The strength of the precious metal is not from now, it comes from several months ago.
Exceeding the level of 1,346 dollars shot up the price of gold. Since then it has barely corrected within the sharp price escalation.
The precious metal now presents an important resistance at 1,525 dollars. Above that, there would no longer be any relevant resistance to the historic highs reached in 2011 at 1,920 dollars.
The possibility of ending up looking for historical highs in the medium term is a scenario that cannot be ruled out.
Crude Oil rebounds after trade war collapse
Crude oil rebounds with some vigour after its 5% drop on Wednesday. It is partially recovering from its heavy losses, waiting for lower prices to lead to a cut in production on a global scale.
Surprising US inventory data was released on Wednesday and the market now fears that the trade war is seriously affecting demand for this commodity.
The trade war will continue to mark the future of the markets, although any statement from Saudi Arabia can help stabilize prices.
Given the potential falls in crude oil if the trade war continues, it is more credible to imagine OPEC closing another agreement to further limit its production.
U.S. calls for caution for americans visiting Hong Kong
The U.S. government on Thursday stepped up its warnings to travelers to Hong Kong because of the growing violence surrounding pro-democracy protests in the Chinese city.
The State Department urges increased caution in Hong Kong due to civil unrest, and calls on travelers to avoid demonstrations and be cautious if they are unexpectedly close to large rallies or protests.
The crucial tourism industry in the territory has been affected as Australia, Ireland, Great Britain and Japan have also issued notices to their citizens.
Hong Kong police say a total of 589 people have been arrested in protests since June 9, ranging in age from 13 to 76. They now face charges that include rioting, carrying penalties of up to 10 years in prison.
So far, Beijing’s central government has not visibly intervened in the situation, although in editorials and public comment it has said that protesters and organizers of protests are criminals, clowns and violent radicals.
Salvini’s ultimatum in Italy
‘Either there are changes in the government or Italy will go to the elections’.
The deputy prime minister and leader of La Liga, Matteo Salvini, has threatened to dissolve the government coalition if Giuseppe Conte does not remove certain ministers from the cabinet.
Nervousness returns to the markets, where the 10-year-old Italian bond is the main culprit.
According to the daily Corriere della Sera, Salvini has given an ultimatum to Prime Minister Conte, giving him until Monday to make changes in government. He wants Conte to replace some ministers, including Giovanni Tria, the head of finance, because he sees them as a brake on the spending plans on the table.
For months that the shadow of the crisis plans on the Italian Executive, since La Liga was consolidated in the first position in the polls. Salvini used it to drop in more than one occasion that would have no problem if there is a new appointment at the polls.
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