February 15, 2019
Asian markets appear bearish amid concerns about the slowdown in the U.S. economy
Most Asian markets fell on Friday, February 15, as investors waited for the U.S.-China trade negotiations in Beijing.
Mainland Chinese markets were mostly bearish. The moves came after China's January inflation data did not meet expectations.
Australia's ASX 200 resisted the general trend in the region and rose by around 0.2 percent at the end of the session. Most sectors traded higher. Japan's Nikkei 225 fell 1.23 percent. South Korean Kospi lost 1.49 percent, as the shares of Samsung Electronics and chip maker SK Hynix fell more than 3 percent.
The main focus of the Asian market on Friday remains the result of high-level U.S.-China trade talks. Earlier in the week, markets had praised the US president's optimistic assessment of the talks. White House economic adviser Larry Kudlow said the two main administration negotiators will meet Friday with Chinese President Xi Jinping, but no decision has been made to extend the March 1 deadline to reach an agreement.
President Donald Trump will sign a spending bill to prevent the closing of the government while declaring a national emergency to try to build its border wall with Mexico.
U.S. retail sales recorded their biggest drop since September 2009, according to Thursday's data. It is a sign of weakness in the consumer sector. This is a sector that represents more than two-thirds of the economy.
The dollar and Japanese yen are indicators of risk aversion. The dollar fell against the Japanese yen on Friday, as disappointing U.S. retail sales data reinforced expectations that the Federal Reserve will not raise interest rates this year. Meanwhile, the market is awaiting the development of the Washington-Beijing trade talks.
Against the EUR, the Yen rose 0.24 percent, while on Thursday it rose 0.2 percent. The Australian and New Zealand dollars declined. The euro lost 0.4 percent this week due to weaker than expected euro zone data.
The Brent price reached its 2019 high on Friday. It is above $65 a barrel, boosted by U.S. sanctions against Venezuela and Iran, as well as OPEC-led supply cuts.
The Organization of Petroleum Exporting Countries and some unaffiliated suppliers, including Russia, are withholding supply in order to restrict the market and shore up prices. The main exporter, Saudi Arabia, said it would cut production in March even more than the agreement requires. Russia has reduced its oil production by about 90,000 barrels a day from its October level. To counteract these declines, U.S. crude oil production, which increased by more than 2 million barrels a day last year, has made the United States the world's largest oil producer.
During Friday's Asian trading session, gold was traded in a narrow range, while concerns about the global economic slowdown prompted the purchase of safe haven securities. U.S. retail sales data is a good reason for the U.S. Federal Reserve not to raise interest rates this year, which is supposed to be good for gold prices.
European markets are expected to open Friday's trading session lower.
Poor retail sales figure for December
Wall Street losses after a very negative retail sales figure.
Wall Street recorded a 0.4% loss on Thursday, February 14, following a poor retail sales figure for December.
Retail sales in December were down 1.2%, well below the expected 0.2% rise. In addition, sales excluding cars were down 1.8%, well below the 0.1% expected. This is the biggest monthly decline since 2009.
These figures are expected to change next month, as they do not match the record sales recorded in the Christmas week or the data from the Redbook index.
The consumer is no longer enjoying tax cuts, or falling gasoline prices, but that is no reason to expect a reversal of such a strong positive trend in such a short time.
Turbulent session in European markets
On Thursday 14 February, Germany's gross domestic product for the last quarter was closely monitored. It is assumed that Italy is in technical recession, but Germany is also one step away from entering it.
In the end, the last quarter's reading is flat, i.e. no growth but no destruction of wealth. They did not enter into a technical recession for very little.
The future performance of the European Eurstoxx 50 index is a cause for concern. Technically, we can see that, if we are creating a maximum for the current year, it has turned around and also shows a bearish divergence in the RSI. This is a sign of imminent weakness, in the absence of confirmation.
U.S. Congress avoids another Government closure
An agreement has been reached that includes almost 1.4 billion dollars for new physical barriers on the border with Mexico, but not a wall as the president intended.
The month of December saw an unprecedented closure after Trump's request for $5.7 billion to help build a wall on the U.S.-Mexico border was rejected.
Now the Democrats are giving in, in part, to avoid another collapse of the American administration.
The threat to the stock market that has nothing to do with China
With all the investors worried about the trade war and the Federal Reserve's plans, what really worries Jim Cramer are 'the jeans'.
‘The biggest threat to this bull market is the cowboy’, he said in Mad Money.
Levi Strauss has submitted documentation for its IPO. It's a move that will likely cause many investors to sell shares of other strong companies, such as PVH and Ralph Lauren, in order to get into that company's IPO.
They're not just jeans. We are about to receive a tsunami of new public offerings, which will flood the market with new stocks. What is going to happen is that there is not enough incoming money, in equities, to be able to handle all this supply.
Cramer's concern has to do with supply and demand. When you receive a wave of new offerings, without any increase in demand, what happens is that the prices of all shares collapse.
It doesn't look like a recession is approaching
Goldman Sachs CEO David Solomon said the chances of a recession are quite small, even though the rate of economic growth is slowing.
There is no doubt that the growth momentum in the United States has slowed. However, you should see reasonable growth throughout the year.
The possibility of recession in 2019 is quite small and the expansion should probably continue.
The American stock market is off to a good start this year, but the economic situation remains worrisome.
Meanwhile, optimism among small business owners fell for the fifth consecutive month in January.
Another wave of retail closings is coming and no light is seen at the end of the tunnel
Another wave of store closures is expected to affect shopping malls this year.
Retailers have already announced 2,187 new store closings since January 1. And there are potentially many more closings on the way, due to the number of companies going bankrupt.
Analysts say the U.S. is still 'overstocked,' especially when compared to other countries.
As more purchases are made online, there is less need for so much real estate. In fact, retailers who are still opening new stores do so with another configuration closer to the customer.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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