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Market evolution

May 6, 2019

Chinese markets plummet more than 5% as U.S.-China trade tensions increase

Shares in Asia fell on Monday, May 6, while the U.S. president threatened on Sunday to apply more tariffs to Chinese products. China is considering canceling its trade talks with the United States this week after Trump’s latest threats.

Australia’s ASX 200 fell 0.9%, with almost all sectors down. The Japanese and South Korean markets are closed for holidays.

On Friday, U.S. employment data was released indicating an increase in employment in April. The unemployment rate falls to its lowest level since 1969. 263,000 new jobs were added, exceeding expectations of 190,000 jobs. The unemployment rate fell to 3.6% from a projected 3.8%.

On Friday, the dollar fell against most of its major currency pairs as investors focused on the release of April’s Non-Farm Payrolls. Despite the gains, the modest monthly wage growth rate of 0.2% and the drop in the labour force participation rate led to the sale of the U.S. currency.

The euro gained 0.21% against the dollar, after hitting a week-long low, while the dollar fell 0.38% against the yen.

Oil prices rose on Friday as strong U.S. economic data drives demand. Production losses from sanctions on Iran and Venezuela also affect oil prices. The rise is limited by a rebound in U.S. oil inventories, which were released earlier this week. Saudi Arabia’s production could increase in June to meet domestic demand for power generation.

Gold rose on Friday from a 4-month low in the previous session. The drop in the dollar is benefiting gold, despite data from the U.S. employment sector showing an improvement last month. The rebound comes after an oversold level that is causing technical purchases at the moment.

European markets are expected to open lower on Monday.

U.S. unemployment falls

Dow rises 190 points after U.S. unemployment falls to its lowest level in half a century and Amazon stocks rise.

U.S. indices rose on Friday, May 3, recovering from their previous losses. Data showed that job creation in the U.S. was stronger than expected in April.

It created 263,000 new jobs, while the unemployment rate fell to 3.6%. It is the lowest since December 1969. Non-agricultural payroll growth far exceeded Wall Street expectations. The average for the last three months has only been 164,000 new jobs, so it is well above previous data.

The market was also driven by Federal Reserve Chairman Jerome Powell’s comments that low inflationary pressures are temporary. These comments reduced the likelihood of an interest rate cut, which disappointed investors.

Friday’s rise was led by Amazon whose shares rose, for the first time in five days, after Buffett said he had been buying Amazon shares. The e-commerce giant’s shares rose 3.2% on Friday.

The strong earnings from the earnings season have been supporting the markets. More than half of the S&P 500 companies reported earnings in the first quarter and the results far exceeded expectations.

Stocks in Europe weaken

The BoE kept its interest rates unchanged and factory activity rose by 4%.

The EUR rose by 0.21% against the Dollar after hitting a week-long low. The Dollar was down 0.38% against the Yen.

Traders are reacting to the Fed Chairman’s comments, business results and disappointing euro zone data.

The Federal Reserve is looking for a new program that could be another version of quantitative easing

Federal Reserve economists have come up with the idea of a ‘permanent repo facility’ that would allow banks to exchange bonds for reserves.

The idea would be to get banks to hold fewer reserves and thus help the Fed in its attempt to reduce its balance sheet.

The measure would be aimed at ensuring liquidity in difficult times and would help the Federal Reserve reduce the size of its balance sheet, which reaches almost $4 trillion.

The plan has considerable support, but critics say it could represent dangerous manipulation of financial markets.

Data points to Federal Reserve being on the lookout for inflation

The Federal Reserve’s preferred inflation indicator showed no change in March and remained well below the central bank’s target.

At the same time, consumer spending increased thanks mainly to spending on motor vehicles and health care.

The personal consumption expenditure index, which excludes food and energy prices, remained stable on a monthly basis and increased by 1.6% year-on-year.

The PCE deflator is the Federal Reserve’s main measure of inflation. The central bank considers 2% to be a healthy level, but one that has not been reached for most of the last decade.

Federal Reserve officials have said they expect interest rates to remain stable for the rest of the year, due in part to a low inflation rate.

U.S. Crude Oil price drops to its lowest monthly level

West Texas stands at $61.81, as supply concerns ease.

On Thursday, May 2, oil prices fell by up to 4%, breaking a key support level. The increase in U.S. reserves helped counter concerns about a supply contraction.

Oil futures fell despite a wave of geopolitical concerns, including political turmoil in Venezuela and the launch of new measures aimed at bringing Iran’s oil exports to zero.

U.S. crude oil reserves have increased in five of the last six weeks, helping to alleviate market concerns about global oil supply.

Reports that Asian refineries are asking Saudi Arabia for more crude also weigh on prices and any sign that the Saudis can respond to that call will push prices down.

Apple shares should increase more than 70% in the next 24 months

Apple is one of the most bullish companies on Wall Street.

It has outperformed the S&P 500 by 14% since the December low. The share price has risen 39% since then and 24% in the last 12 months.

But the race has not come without challenges. Apple warned in January that quarterly iPhone sales would probably be below expectations. In addition, Microsoft has overtaken Apple as the world’s most valuable company.

In the long term, there are great business opportunities for Apple’s new arcade and streaming services.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 7, 2019

Dow recovers more than half the fall after Trump threats

U.S. equities fell on Monday, May 6, after President Donald Trump said the U.S. will increase tariffs on goods imported from China. However, equities partially recovered at the end of the first part of the session.

Many people with bullish positions have been trapped, but the situation is relatively under control. Trump is probably trying to pressure China to make a move. Although trade negotiations between Washington and Beijing will resume on Wednesday, the US president has lamented that progress is being made too slowly as China tries to renegotiate the terms of the agreement.

Alphabet, Google’s heir, rose by 0.1%, erasing its previous decline of 1.5%. Disney traded 0.5% higher, after dropping to 1.5%. McDonald’s and Chevron also traded higher.

European equities were down on Monday, May 6, after President Trump said the U.S. would increase tariffs on products from China. Germany’s DAX and France’s CAC fell by about 2%. In the UK, markets have been closed because it is a holiday. The sale was quite significant in the shares of automotive companies, which fell more than 3%.

US debt prices rose on Monday. The yield on the 10-year Treasury bond, which moves in the opposite direction to the price, fell to 2.48%. It is the lowest level since May 1, while the yield on the 30-year Treasury was around 2.91%.

Oil prices stabilized on Monday, recovering from their previous decline, after President Trump showed his change of strategy. The statement risks derailing trade talks between the world’s two largest economies.

On Monday gold was not much affected by the new situation. Investors are now selling risky assets. Uncertainty over trade negotiations is creating nervousness in the markets. The dollar is somewhat stronger and counteracts the potential movements that could have been seen in the evolution of the price of gold.

Jobs increase in the United States in April and the unemployment rate falls to its lowest level since 1969

263,000 new jobs were added in April, exceeding expectations of 190,000. The unemployment rate fell to 3.6% from a forecast 3.8% and is the lowest since December 1969.

Average growth in hourly earnings remained at 3.2% last year. This is one point below estimates of 3.3%. The monthly gain was 0.2%, below the expected 0.3% increase.

Great job growth continues, with economic expansion only a few months away from being the longest in history.

Buffett opens the door to more buybacks due to lack of investment ideas

Buffett addressed tens of thousands of people in Omaha, Nebraska, over the weekend, where Berkshire President and CEO and Vice President Charlie Munge answered more than 50 questions from shareholders and analysts over six hours at the epicenter of a weekend of events.

Warren Buffett signaled his commitment to Kraft Heinz Co and defended his shares in Wells Fargo & Co. These are two of the largest investments of Berkshire Hathaway Inc.

Berkshire also reported that operating income, a measure of Berkshire’s business performance, increased 5 percent with the help of car insurer Geico and the BNSF railroad. They fell, however, below analysts’ expectations.

Berkshire also repurchased $1.7 billion in stock, reflecting Buffett’s difficulty in finding better uses for the company’s $114.2 billion in accumulated cash.

Berkshire owns more than $50 billion shares of Apple Inc. and Buffett said one of Berkshire’s portfolio managers, Todd Combs and Ted Weschler, has invested in Amazon.com Inc.

Munger also lamented Berkshire’s lack of investment in Google.

Berkshire’s more than 90 businesses and approximately 389,000 employees make the company a barometer for the U.S. economy.

What could happen to the U.S.-China trade war

The U.S. president’s threat to increase tariffs on Chinese products is an indication that trade negotiations may have reached an impasse.

This represents a change from the optimistic statements of U.S. officials in recent weeks. It suggests that the likelihood of a short-term deal is slightly less than it appeared to be recently.

The most important short-term indicator to consider, according to Goldman, will be whether the delegation of Chinese officials arrives in Washington on May 8, as planned.

Buffett rejects Elon Musk’s plan for Tesla to sell insurance

Warren Buffett said Tesla will probably fight while venturing into the insurance business, a field in which Berkshire Hathaway thrives.

Buffett says it’s ‘not an easy business’.

Musk had announced that Tesla would launch its own insurance product in May. However, Buffett is not impressed and would bet against any automotive company getting into the insurance business.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

May 8, 2019

Asian markets plummet amid doubts over trade deal and Chinese economic data surprise

Asian equities fell on Wednesday, May 8, as investors assimilated problems in the U.S.-China trade negotiations, causing Wall Street equities to plummet as well.

China’s shares were mixed. Chinese trade data in April showed that both exports and the trade surplus did not meet expectations, while imports rose surprisingly. The Japanese Nikkei 225 fell 1.52%, while SoftBank Group and Fanuc shares declined. In South Korea, the Kospi fell 0.14% and Samsung Electronics shares fell slightly. The Hang Seng index in Hong Kong fell around 0.6%. Australia’s ASX 200 also fell by 0.39% as most sectors were trading lower.

The major Wall Street investment banks are preparing their clients for the worst, after the US said it would implement higher tariffs on Chinese products by the end of this week. An escalation of tariffs could lead the S&P 500 to a correction, which means a drop of 10% or more from the most recent high. World indices could fall by as much as 20%, according to Standard & Poor’s. Bank of America recommends customers buckle up and hold their breath. Others are anticipating a major blow to global gross domestic product. Morgan Stanley predicted that an all-out trade war would reduce global economic growth by half a percentage point and reduce China’s GDP by as much as 1.5%.

The Cboe Volatility Index, known as the ‘VIX’ or fear gauge, reached a new high of 21.09 on Tuesday. It is its highest level since January 22.

Chinese Vice Premier Liu He is expected to join a Chinese delegation in the United States this week. However, he will only attend the negotiations on Thursday and Friday. Originally he was scheduled to attend the negotiations from Wednesday to Saturday.

The evolution of the foreign exchange markets has been relatively orderly compared to that of the stock markets. On Wednesday, fears of the impact of the crisis on global growth pushed the Japanese yen to a six-week high against the dollar. In all other markets, the New Zealand dollar reached its lowest level in half a year, after the country’s central bank cut interest rates to historic lows and projected the possibility of further cuts in the future.

Oil prices stabilized on Wednesday. With U.S. sanctions against Iran and Venezuela in place, analysts contend that world oil markets continue to face supply shortages.

Gold peaked a week ago during Wednesday’s Asian trading session, while concerns about the U.S.-China trade dispute and its potential impact on global growth have led investors to seek refuge in safe assets. Gold is being backed by the purchase of risk aversion at this time.

European markets are expected to open downward on Wednesday.

This is the biggest drop since early January

Dow sinks under growing threat of all-out trade war.

U.S. equities fell sharply on Tuesday, May 7, after the U.S. indicated that higher tariffs on Chinese products will arrive later this week. This has disappointed traders, who expected Trump’s weekend threat to be just a negotiating tactic.

This is the biggest drop since early January.

The shares of Caterpillar and Boeing fell by 2.26% and 3.87%, respectively. Boeing also broke below its 200-day moving average for the first time since January. Chip manufacturers, especially vulnerable if China retaliates, led the technology sector’s downturns with a 3.75% drop in Nvidia. Apple also fell by 2.7%.

European markets drop sharply as US-China trade tensions increase

On Tuesday, May 7, the European stock market closed with a bearish trend as investors watched U.S.-China trade.

The pan-European STOXX Europe 600 fell by 1.5% at the close and most sectors and major exchanges recorded strong losses.

European banking stocks showed the biggest decline, falling to the 2.6% level. Barclays, HSBC and Standard Chartered were all around 3% negative. Italy’s FinecoBank led the sector’s losses, down 7%, after UniCredit said it could reduce its share.

The European Commission published its latest economic forecasts. It still expects growth across the European Union to reach 1.4% this year and 1.6% next year.

For the second time this year, growth forecasts for Germany are being cut, as trade tensions and the slowdown in the Chinese economy weigh on Europe’s traditional economic engine.

Crude Oil suffers from Trump’s new position

Oil is also suffering the consequences of Donald Trump’s new stance. The US president threatens to increase tariffs on Chinese products from the current 10% to 25% this Friday. He also threatens to apply 25% tariffs on more Chinese products soon.

As a direct consequence, Beijing is considering cancelling all its trade negotiations with Washington following this new US president’s order.

The return to tensions between the world’s two largest economies has once again shaken financial markets, including raw materials.

Trump is heavily grown by the latest macroeconomic data from the United States

The gross domestic product for the first quarter has been very good and there is also a good labour market situation.

The data gives Trump a backing when negotiating with China. In fact, they put Trump in an advantageous position.

The rest of the countries agree that this is a negative situation for the whole world. There are no winners or losers because everyone loses.

China thinks the warning to leave the talks and has said again that the team is going to continue treating the situation as if there really was a new round of negotiations. They are going to show that the one who is intransigent and harmful is Donald Trump, while they remain open to multilateralism and negotiations.

Europe recognises that it supports Donald Trump’s position. It does not like China’s modus operandi in the areas that the United States complains about.

Tesla’s dream is dead and investors face reality

Tesla’s stock accelerated in the last week, after having been down for most of the year.

Stocks remain below their highs and Tesla could be trapped in neutrality for quite some time.

Boris Schlossberg has stated that he remains skeptical about these stocks. Investors have stopped buying Tesla’s dream and are starting to focus on the Company’s reality.

Schlossberg says ‘reality’ focuses on sales and project execution, two areas in which Tesla often falls short.

Dull growth in Europe

Eurozone PMI readings showed some weakness. The IHS Markit PMI stood at 51.6 in April, following a reading of 51.6 in March.

PMIs tell a familiar story…

Manufacturing continues to be under pressure from falling new orders and production, which is impacting backlogs in employment growth.

In services, however, trading conditions are much better, despite the fact that production growth and new orders have slowed in the last twelve months.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 9, 2019

Asian markets fall after Trump’s claim that China broke the previously agreed deal

Asian equities were trading lower on Thursday, May 9, with investors cautious after the U.S. president said China has broken the deal.

Japan’s Nikkei 225 fell 1%. South Korean Kospi lost 1.61% with shares of chipmaker SK Hynix plummeting more than 4%. Australia’s ASX 200 opposed the downward trend and rose slightly with most sectors in positive territory.

The worrying trend in the S&P 500 is not as bad as it seems. After a bad Tuesday on Wall Street, with the Dow Jones Industrial seeing its worst daily level since January 3rd and the 11 sectors in the S&P 500 falling, some analysts have changed their focus. The Wall Street Journal’s three-year chart shows the S&P 500’s shares at 52-week highs, although it has declined significantly since 2018.

The dollar hit a six-week low against the Japanese yen as risk aversion took over most markets with the China-U.S. trade dispute going through a rough patch. Investors were nervously awaiting the start of trade talks in Washington. It is expected to see if Chinese negotiators can convince the White House to withdraw the threat of a tariff hike this Friday.

The Japanese yen, which has advanced against most currencies, tends to attract demand in times of political conflict and market turbulence. The Australian dollar hit a four-month low. The euro also fell against the yen, after falling more than 1% this week.

The price of oil fell on Thursday, amid concerns about the worsening trade battle between the U.S. and China, despite a surprising drop in U.S. crude oil reserves. In fact, U.S. inventories only gave oil a transitory boost.

During Thursday’s Asian trading, gold remained stable, while demand for bonds and yen limited the gains of the precious metal as a safe haven currency. Despite current risk aversion, no gold price rally is being seen.

European markets are expected to open lower on Thursday.

A highly volatile trading day

U.S. equities close with little change in a highly volatile trading day.

U.S. indices failed to recover on Wednesday, May 8, from a deep decline this week.

The Dow Jones Industrial Average ended the day up 2.24 points, while the S&P 500 fell slightly and the Nasdaq Composite did the same.

The Dow rose after White House press secretary Sarah Sanders said China will come to Washington this week to reach an agreement.

The Dow fell 75 points to its intraday low and then rose 153 points throughout the day. The volatile session followed the heavy losses of the previous two days, with the Dow dropping nearly 540 points in those two sessions.

A disappointing forecast from Intel at the end of the day weighed heavily. Intel dropped by 2.46% in the end.

Investors remain concerned that the U.S. and China will not be able to resolve their trade dispute before the implementation of new tariffs on Friday.

European stocks were positive in the face of China’s apparent interest in reaching agreements

The European shares closed on Wednesday May 8 upwards, after President Donald Trump announced that China will attend the new round of negotiations in the United States.

President Trump said in a tweet on Wednesday that a Chinese delegation would travel to the United States with the intention of continuing trade negotiations. The information was confirmed by White House press secretary Sarah Sanders.

The STOXX 600 pan-European index was slightly up, with all major exchanges in positive territory.

Sectors of greatest concern to Wall Street analysts

Wall Street analysts have a wide range of sectors in their universe of coverage.

Many believe that retail stocks could suffer in the absence of trade agreements. In fact, they could drop as low as 40%.

The most important sectors to consider are automotive and semiconductors. The threat of a trade disagreement could have potentially far-reaching ramifications for the automotive industry.

The two numbers that gave Trump confidence to hit China

Washington threatens China with further tariff increases if trade negotiations fail.

Two data determine everything: 3.2% of GDP and 3.6% of unemployment.

The Chinese have bet heavily on the negotiations, but they seem to have rushed too much. The US economy remains strong and this supports the more aggressive stance of the US.

US companies that did not reduce their exposure to China at the start of the trade war may now have problems.

Chinese exports decelerate in April

China’s yuan exports rose by 3.1% year-on-year in April, a sharp slowdown from the 20.8% rise in March.

In contrast, imports in April rose 10.3% year-on-year, compared with a fall of 2.1% in the third month of the year.

China increased its trade surplus by 31.8% in the first four months of the year.

China’s trade with the United States has declined by 11.2%. However, there was an increase in trade with the European Union, which stood at 11.8%, and with the member countries of the Association of Southeast Asian Nations, which stood at 9%.

Sell in May and go away but maybe not this year

Historically, investing in the Dow between November 1 and April 30 of each year and switching to fixed income for the other six months has been a winning strategy. No other strategy has matched the results of this in the last six decades.

This year, however, things are not so clear.

The ‘Best Six Months’ strategy has become a legend on Wall Street. Although stock market performance has not been so good lately, the Dow has risen between May and November in 5 of the last 6 years.

What could explain this good performance?

In spring and summer there are clear seasonal trends. It’s a time when investors prefer the golf course, the beach or the pool to the trading room or the computer screen.

In summer, trading volume may decrease and then, in September, there is a return to work.

With a view to improving results, in the fourth quarter of the year institutions help to boost markets.

Christmas shopping and year-end bond inflows are important support. The New Year tends to bring a positive mindset, with new forecasts and predictions driving the market higher in the second quarter as well.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

May 10, 2019

Asian markets appear mixed at the same time as tariffs on Chinese products rise

On Friday, May 10, Asian stock markets were affected by increased tariffs on Chinese products.

The Nikkei 225 in Japan fell slightly at the end of the session. In South Korea, the Kospi also dropped slightly. The ASX 200 in Australia rose slightly. Chinese equities, however, remained defiant at the end of the first part of the session, although they moderated some of their earlier gains. They still remained in positive territory.

The chances of reaching a trade agreement have diminished considerably, along with the possibility of disruption of negotiations. If the talks continue on Friday it will be interpreted as a positive development. The tariffs implemented this Friday will be a great handicap for the good progress of the negotiations and it will be very difficult for both parties to regain a good level of harmony.

Chinese Deputy Prime Minister Liu He is currently in Washington. Liu meets with Trump’s team without the special envoy status of Chinese President Xi Jinping. This is a role he played in previous talks, suggesting that he may have diminished his authority to make concessions that could be crucial in reaching agreements.

Washington is moving ahead with plans to increase tariffs on hundreds of billions of dollars of goods imported from China. Before they return to the table on Friday, the United States will have raised tariffs on $200 billion of Chinese goods from 10 percent to 25 percent. American shares fell on Thursday, May 9, after President Trump said China had broken the trade agreement.

The Japanese yen and Swiss franc stood firm on Friday amid investor concerns that the U.S.-China trade gap may deepen. The dollar is clearly on a downward trend against the yen, both in technical terms and in terms of investment flows. The yen and Swiss franc tend to attract demand in times of market turbulence and political tensions. The EUR rose to a high of $1.1251. The Australian dollar, sensitive to changes in risk sentiment, rose to $0.6997.

Oil prices rose on Friday. Investors fear a prolonged tariff war will hurt global economic growth.

On Friday gold remained stable once again, although the weekly balance has been bullish. Investors are increasing their risk aversion sentiment, while fearing a deepening of the U.S.-China trade gap.

European markets are expected to open lower on Friday.

Sales accelerate this week

Dow falls 350 points as sales accelerate this week.

American shares fell on Thursday, May 9, after President Trump said China had broken the trade agreement. This fuels concerns that the U.S. and China will not agree before the new tariffs take effect on Friday.

Intel’s shares fell almost 6% on Thursday, after losing almost 5% in the previous session. The chip maker said it sees both revenue and earnings per share grow only in single digits over the next three years.

Other shares of chip companies fell as well, due to concerns about the trade war.

Liu He, China’s deputy prime minister and chief trade negotiator, will have a dinner with U.S. Trade Representative Robert Lighthizer on Thursday night in Washington. Liu is not expected to meet with Trump.

European markets fall with the automotive sector losing 3%

European equities traded lower on Thursday, May 9, as trade tensions between the United States and China soar.

The pan-European STOXX 600 closed more than 1.74% down, with all sectors and major exchanges in negative territory. The French CAC index was the worst, with a loss of 2%.

Europe’s car industry, heavily exposed to China, experienced a sharp drop on Thursday. It traded 2.96% lower.

The shares of the German supplier Continental fell by 5.5%, while the shares of the spare parts supplier Hella fell by 5%.

The Italian Bpm Bank recorded a 7.48% drop in its shares after it reported that its total revenues were down 8.9% in the first quarter.

A survey conducted on Thursday revealed that demand for personnel within companies in the UK reached its lowest level since 2012 in April.

Meanwhile, Theresa May offered to meet with the leaders of an influential group of pro-Brexit Conservative Party legislators to discuss the growing demands for her resignation. Opposition leader Jeremy Corbyn said on Thursday that May must move her demands on Brexit if she wants to make any progress towards an agreement in Parliament.

The drama of international trade is dividing the U.S. stock market into two groups

Goldman Sachs has warned its customers that service companies like Amazon should resist better than companies producing goods like Apple, as the United States and China remain caught up in their trade disputes.

Goldman said the actions of services, such as Amazon, Google and Microsoft, are less dependent on tariffs.

Even if trade disputes are resolved, service companies have better corporate foundations than goods companies.

On the other hand, companies producing goods such as Apple, with $10.22 billion in sales in China in its second quarter, along with Johnson & Johnson and Exxon Mobil, are more exposed to any kind of tariff retaliation from China.

Facebook lifts ban on crypto currency ads

The policy shift comes amid reports that Facebook is intensifying efforts to build its own crypto currency.

Facebook now allows more companies working on these technologies to promote their efforts on the social network.

Facebook began blocking ads promoting cryptodivisas in January 2018, fearing that users might be swindled. The company relaxed its ban in June to allow ads that received prior written approval.

Now it is softening the policy even further, so many ads will no longer need approval.

The company has been under scrutiny for the broad scope of this policy for the past year.

China says it will take countermeasures if U.S. raises tariffs

Beijing will retaliate if U.S. tariffs on $200 billion of Chinese products rise to 25%.

The Chinese side deeply regrets that, if tariff measures are implemented, they will have to take countermeasures.

The escalation of trade friction does not benefit the people of the two countries or the people of the rest of the world.

North Korea has launched two unidentified missiles

North Korea fired unidentified shells Thursday, according to the South Korean army, less than a week after leader Kim Jong Un supervised tests of multiple rocket and missile launches.

South Korean and U.S. authorities are conducting their analyses for more detailed information.

The launches are likely to heighten tensions between Washington and Pyongyang.

The South Korean army has stepped up surveillance, along with the United States.

The alleged short-range missiles appear to have been launched from a location close to a base in Sino-Ri. That location is about 130 miles north of the demilitarized zone.

The new launches occur when the U.S. Special Representative for North Korea, Stephen Biegun, travels to Seoul to meet with government officials and discuss denuclearization efforts.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 13, 2019

Mainland Chinese markets fall amid trade uncertainty

Asia-Pacific stocks fell on Monday, May 13. Hong Kong markets remained closed for holidays. Tariffs on Chinese products rose last Friday, increasing pressure on trade negotiations between China and the United States.

The Nikkei 225 in Japan dropped slightly at the end of the session, with Softbank Group shares falling more than 2%. In South Korea, the Kospi fell 1.02%, while Australia’s ASX 200 also dropped slightly. The lack of important economic data, and the festivities in some countries, will make the week start without much movement. However, the escalation of the trade war continues to provide a risk factor.

Investors are still waiting for an agreement and analysts believe that President Trump will be watching the movement of the stock markets. If there are dramatic declines, there is likely to be a turnaround in trade negotiations. Trump said in a tweet that the negotiations were constructive and would continue, adding that the relationship with President Xi remains very good.

The parties were at an impasse on Sunday, when Washington demanded promises of concrete changes in Chinese law and Beijing said it would not admit points that would harm its interests. White House economic adviser Larry Kudlow said the president of the United States and the president of China are likely to meet at the next G-20 summit in Japan in June.

On Monday, the Japanese yen made strong gains, while the Chinese yuan and the Australian dollar fell after a new escalation in the U.S.-China trade war broke out.

Oil futures were mixed on Monday in Asia, with U.S. crude declining as investors and traders worry about the outlook for global economic growth.

Gold fell on Monday as trade tensions between China and the U.S. weighed on the yuan. This made gold expensive for Chinese buyers, who are the world’s largest consumers of gold. The price of gold in yuan has risen quite a bit since early May. That fact has made many investors tend to sell gold.

European markets are expected to open up on Monday.

Trade negotiations with China will continue

Wall Street ends up after Trump says trade negotiations with China will continue.

American shares rose on Friday, March 10, after Donald Trump said talks with China will continue and his relationship with President Xi Jinping remains strong.

The indices reached their session highs after Trump sent a tweet in which he said: 'The United States has imposed new tariffs on China, which may or may not be eliminated depending on what happens with respect to future negotiations’.

The president also noted that the trade talks with China were frank and constructive.

The most important stocks began to cut some of their losses mid-session after Treasury Secretary Steven Mnuchin said the trade talks with China were over for the time being and constructive. Chinese Deputy Prime Minister Liu He also said the talks went quite well.

European indices rise despite new U.S. tariffs on China

European shares closed up on Friday 10 May, despite new tariffs on Chinese products worth $200 billion.

The pan-European STOXX 600 rose slightly. The German DAX, with a high volume of exports, rose by 0.85%. All but three sectors closed in positive territory. The automotive sector, with its strong exposure to China, was the worst.

The UK released first quarter GDP data, which showed the country’s highest level of growth since 2017.

Thyssenkrupp was the best in the European index with a rise of 28%, after the news that the company is considering a partial sale of its elevator business.

Conditions are not right for large declines in equities

The titan of hedge funds, Leon Cooperman, predicted that recent sales on the stock exchanges will amount to only a 5% correction and that the conditions for a big drop are not in place.

Cooperman pointed out that a non-aggressive Fed policy and reasonable valuations are reason enough to be relatively calm.

Gamco founder and CEO Mario Gabelli underscored the long-term benefits of renegotiating trade agreements.

Cooperman and Gabelli are not worried about short-term sales but, if trade negotiations are not resolved, the new situation would be negative for everyone.

Technology has reached its peak

Technology stocks are having their worst week of the year, amid rising trade tensions.

Despite the 3% drop, the technology sector remains the best performer in the S&P 500 this year. Big names like Apple, Microsoft, Cisco, IBM and Oracle are 20% or more ahead.

Mark Newton, technical analyst at Newton Advisors, says the next step is down. In the short term there are signs that the technology is beginning to reach its peak.

This should mean at least a change of direction in the short term, allowing for a shift away from technology, especially as the summer months approach.

Iran appears to be restarting oil shipments to Syria

Oil tanker monitoring companies believe that Iran is sending crude oil back to Syria, thus resuming illicit trade as tensions with Washington increase and the Islamic Republic faces increasing international isolation.

According to TankerTrackersy and ClipperData, two groups following the oil vessels, an Iranian delivery was made to the Syrian port of Baniyas during the first week of May.

This would be the first delivery of Iranian oil to Syria since the end of 2018.

Tesla faces double assault

Mercedes and VW begin to receive orders for their first electric vehicles.

It’s been a tough month for Tesla, and the challenges facing the Silicon Valley electric car manufacturer are growing all the time.

Now two major European automakers are launching their first long-range electric vehicle units for sale.

Each of the two companies plans to continue with a wave of additional sales in the coming years.

It is not certain that this will directly affect Tesla, but the two German manufacturers are investing billions of euros in their electrification programs.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 14, 2019

Asian stocks falls as U.S.-China trade war advances

Asian stocks were down on Tuesday, May 14, a day after Beijing increased tariffs on some U.S. products in retaliation for Washington’s decision to increase tariffs on Chinese products.

China’s shares fell at the end of the session. Japan’s Nikkei 225 fell slightly, with Softbank Group shares falling more than 5%. In South Korea, Kospi resisted the general trend, and rose slightly, as Samsung Electronics and chip maker SK Hynix recovered from their previous losses. Australia’s ASX 200 fell 0.9%, with most sectors falling.

The trade war between the world’s two largest economies intensifies. China will increase tariffs on U.S. imports by $60 billion from June 1. Target products include a wide range of agricultural products.

The Chinese yuan and the Australian dollar regained strength Tuesday. General sentiment stabilized after the U.S. president said he expects trade negotiations between China and the United States to succeed. The timing of the announcement was a surprise, so movements in the currency market were quite large. Trump said he believes the trade talks will succeed, but success for him is not necessarily a success for China.

The Australian dollar managed to strengthen. This currency is often seen as an indicator of Chinese growth, because the Australian economy depends on exports and China is the country’s main destination for its commodities. Against the Japanese yen, the dollar gained a quarter of a point, in line with the recovery in investor sentiment.

Oil prices rose on Tuesday, although profits were held back by the escalation of the trade war. Analysts argue that the U.S.-China trade war is eclipsing the market, although fundamentals provide some support. A full-blown trade war would have lasting consequences for global growth, seriously limiting the positive side of energy demand. Reduced demand and increased US production could lead to a rapid fall in prices.

Gold stabilized on Tuesday after recovering to the key level of $1,300 in the previous session. Beijing’s announcement of a tariff hike to counter Washington reinforced risk sentiment and supported appetite for safe-haven assets.

European markets are expected to open lower on Tuesday.

China retaliates with tariff increases

Dow drops 600 points after China retaliates with tariff increases.

U.S. stocks fell sharply on Monday, May 13, after China decided to increase tariffs on some U.S. products as the trade war between the world’s two largest economies intensified.

China will increase tariffs on U.S. imports by $60 billion beginning June 1. The products targeted include a wide range of agricultural products. This comes after President Trump raised tariffs on Chinese imports last week.

China said in a statement that the U.S. decision jeopardizes the interests of both countries and does not meet the general expectations of the international community.

European stock markets return to cutbacks as trade war intensifies

The European stock markets have picked up the falls of Asia and Wall Street and closed the session on Monday 13 May with decreases.

Brexit is back on the front line of the news, ahead of the next European elections in which the United Kingdom will participate.

According to some polls, the Brexit Party of Nigel Farage has surpassed the conservatives of Theresa May in a poll on voting intention. The poll puts Jeremy Corbyn’s Labour in first place. As a result, the pound fell sharply against most currencies.

SEC approves new Silicon Valley Stock Exchange

The U.S. government on Friday approved the formation of a new Silicon Valley stock exchange after regulatory criticism late last year.

It aims to be a market that reduces short-term pressures and fosters a constant cycle of innovation and investment in long-term value creation.

It would benefit both companies and their investors and will be backed by the Marc Andreessen venture capital fund.

The SEC announcement is considered a big step by analysts.

Consumer prices in the United States rose in April

U.S. consumer prices rose in April, but core inflation remained contained, suggesting that the Federal Reserve could keep interest rates unchanged for a while.

The Department of Labour said consumer prices rose 0.3% last month. They were driven by rising gasoline prices, rents and health care costs.

The Federal Reserve keeps interest rates unchanged at present and shows little desire to adjust its monetary policy in the near future.

Federal Reserve Chairman Jerome Powell said he believes recent weak inflation readings may end up being transitory.

Apple shares suffer worst week in 2019

Investors fear that trade turbulence with China will threaten the iPhone’s sales growth.

Apple shares have fallen by 6.9% since President Trump said he would raise tariffs.

UBS and Morgan Stanley analysts pointed to Apple’s revenues in China as a continuing risk facing the technology giant.

In late April, Tim Cook, the company’s CEO, attributed some of Apple’s strong first-quarter earnings to the company’s improved outlook in China.

China remains very important to Apple and is likely to be an obstacle to growth this year.

Uber ends its first day of downward trading

Uber fell 7.6% on its first trading day on the New York Stock Exchange. This IPO was the most anticipated debut so far this year.

It began trading on Friday at $42 per share, after setting the initial price at $45 on Thursday night.

The stock market capitalization stood at $69.7 billion, well below the $120 billion it was looking for when the news was released that it was preparing to go public.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 15, 2019

Asia’s shares are trading higher after this week’s losses

Asian markets rose on Wednesday, May 15, after a fall at the start of the week as U.S.-China trade tensions intensified.

The Japanese Nikkei 225 rose slightly at the end of the session. Japanese automaker Nissan Motor saw its shares plummet by more than 7% after the company released its 2018 earnings, which reached their lowest level in 11 years. In South Korea the Kospi rose, with LG Chem shares rising more than 2%. In Australia, the ASX 200 gained 0.73%, with most sectors trading higher.

Mainland Chinese equities advanced in the second part of the session, while industrial production in April was below expectations. Industrial production rose by 5.4% year-on-year, compared to expectations of a 6.5% year-on-year increase. The country’s retail sales growth in April was also at its slowest pace since May 2003. Industrial production and retail sales are disappointing and come at a bad time when trade tensions have increased.

Investors are assimilating the impact of the escalating U.S.-China trade war. The current US administration is totally disruptive and only history will tell whether this was good or bad.

The foreign exchange market reacted little to a worse-than-expected growth in China’s industrial production and retail sales in April. These data highlight the need for Beijing to take further stimulus measures to support its economy. The Chinese yuan is still under pressure, close to its recent lows, and traders will probably be watching for confirmation of a cooling in the trade war before entering new buying positions.

On Wednesday, the Australian dollar remained stable, at a four-month low, as traders waited for data from Europe and the US. The U.S. dollar gained on Tuesday after the U.S. president insisted that trade negotiations with China had not collapsed.

Oil prices fell on Wednesday after data showed a surprise increase in U.S. crude oil reserves and Chinese industrial production in April grew less than expected. Crude oil inventories rose by 8.6 million barrels in the week of May 10, compared to analysts’ expectations of a decline of 800,000 barrels. Yet prices are supported by rising tensions in the Middle East.

Gold fell sharply on Wednesday after hitting monthly highs and optimism about the Washington-Beijing trade talks eased investor concerns. This sentiment boosted the global stock market and the dollar. The stronger dollar makes gold more expensive for holders of other currencies.

European markets are expected to open up on Wednesday.

U.S. equities rose on Tuesday

Dow jumps over 300 points which is more than half of Monday’s fall.

U.S. equities rose on Tuesday, May 14, regaining some of the ground lost after a sharp drop in the previous session.

Investors are assimilating the impact of the escalating U.S.-China trade war. The current US administration is totally disruptive and only history will tell whether this was good or bad.

Boeing and Apple shares rose by 1.9% and 1.7%, respectively, while Caterpillar rose by 2.1%.

Banking stocks also rose overall. Citigroup, Bank of America and J.P. Morgan Chase traded more than 1.5% higher, while Wells Fargo shares rose 0.9%.

Microsoft shares rose 1.7%, boosting the technology sector. Cisco Systems also gained 1.7%.

European stocks rebound and close tightly

European equities traded higher on Tuesday, May 14, as investors began to mitigate the sharp drop caused by China’s announcement of retaliatory tariffs on U.S. imports.

The pan-European STOXX 600 closed slightly higher. By sector, basic resources and technology led the gains, with an increase of 1.74% and 1.8%, respectively.

The UK Foreign Minister has warned of a possible conflict in the already unstable Gulf region while US Secretary of State Mike Pompeo was holding talks with European leaders on the situation in Iran.

Bayer’s shares fell 2% after a Californian jury awarded the pharmaceutical giant $2 billion in compensation for a carcinogenic herbicide. It is the highest sanction imposed by a US jury to date in a chemical dispute.

All eyes are on companies doing business in China

Apple, Intel and Caterpillar have stumbled, with more than a 10% loss, in the six days of negotiation since Trump announced in a tweet that tariffs on a large part of the products imported from China would go from 10% to 25%.

Intel could be vulnerable to a deterioration of the talks between the United States and China, with about 25% of its sales coming from that country.

On the other hand, China represents around 18% of Apple’s revenues and 5% of those of the equipment giant Caterpillar.

United Technologies, Cisco Systems, 3M and Goldman Sachs have also fallen more than 6% in the same period of time.

On Monday Beijing responded and said that on June 1 it would increase tariffs on U.S. imports by $60 billion.

Apple threatened with antitrust sanctions

The U.S. Supreme Court ruled against Apple on Monday in a case involving the App Store.

So far, that app is the only way most iPhone and iPad users can download software.

Users have argued that Apple’s 30% commission on app sales had inflated iPhone software prices.

Apple has argued that consumers are not legitimized to sue, because the Company simply provides a market for the apps.

However, the Supreme Court ruled that consumers have the ability to sue Apple, which poses a significant threat to Apple’s App Store business.

Future court battles arising from the decision could last for years. Now, to win the lawsuit, consumers would have to prove that they have been harmed by the bottleneck of software distribution resulting in higher prices.

Bitcoin emerges as a global hedge

Bitcoin is becoming an uncorrelated and secure asset, while major markets are plummeting.

The world’s largest crypto currency climbed to 15 percent last Monday. Meanwhile, U.S. stock markets have done nothing but fall during the week.

Although its not easy to see who is buying bitcoins, but its possible to see that the bidding for bitcoins in this latest streak has coincided with a big drop of the Chinese yuan against the dollar.

The high volatility of Bitcoin has prevented it from becoming a useful payment method. Instead it is becoming a hedging value or ‘digital gold’.

Tariffs are increasing prices for final consumers

The tariffs enacted so far in the U.S.-China trade battle have dramatically raised goods prices above the rate of inflation.

Consumer prices, in the categories affected by tariffs, have increased much more than the prices of goods not affected by tariffs.

Goldman Sachs has said the impact on prices could be much worse for U.S. consumers if the world’s two largest economies do not reach an agreement.

U.S. tariff costs have also affected U.S. businesses, with similar trade-offs from China. However, the final payment has been passed on to prices and it is the final consumer who pays the consequences of the trade war.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 16, 2019

Asian equities appear mixed as U.S.-China trade relationship sharply worsens

Shares in Asia show a mixed tone on Thursday 16 May. United States turn again against Huawei, which further increases the tension.

Mainland China’s shares recovered from their previous downturn and rose in the end. Japan’s Nikkei 225 fell 0.71% at the end of the session. Australia’s ASX 200 rose slightly as most sectors advanced.

Stocks of Asian automakers were mixed on Thursday, with South Korean Hyundai Motor dropping slightly and Kia Motors rising 1.55%. In Japan, Nissan advanced slightly, while Toyota fell 1.28%. These moves came after the U.S. plans to postpone car tariffs for up to six months.

However, trade tensions continued to weigh on investor sentiment as Trump declared a national emergency over threats to U.S. technology. The U.S. Department of Commerce announced the addition of Huawei Technologies and its affiliates to the Bureau of Industry and Security’s list of entities, making it difficult for the Chinese telecommunications giant to do business with U.S. companies. Eurasia Group analysts described the Trump administration’s move as a serious escalation of tension with China.

Meanwhile, the recent release of weaker-than-expected economic data fueled fears that the U.S.-China trade war is negatively affecting global economic growth. U.S. retail sales fell 0.2% in April.

The euro and yen remained stable against the dollar on Thursday, after U.S. officials said President Trump is expected to delay the implementation of tariffs on imported cars and parts for up to six months to give trade negotiators more time.

The euro was affected when Italian deputy prime minister Matteo Salvini criticized EU rules for the second time. The long-term outlook for the euro is not particularly good, given the region’s poor economic fundamentals.

The dollar fell slightly against the yen. Uncertainty over the escalation of the trade war between China and the US weighs on the US currency.

The Australian dollar fell slightly against the dollar. The disappointing employment data reinforced the view that the Reserve Bank of Australia will be forced to cut interest rates soon. Polls show that the Liberal-National coalition governing Australia is likely to be defeated by the opposition Labour Party in this weekend’s general election.

The pound has been hit by expectations that Theresa May will not get her agreement on Brexit approved. She could soon face a leadership challenge, adding to the uncertainties.

Oil advanced for the third time in a row as the risk of conflict in the Middle East fuelled fears that supply would be affected. Analysts maintain that the price of oil is rising because of rising tensions in the Middle East, where several helicopters had to remove U.S. personnel from the embassy in Baghdad. The Organization of Petroleum Exporting Countries said Tuesday that global demand for its oil would be higher than expected this year.

Gold stabilized Thursday, consolidating into a narrow range, while Washington imposed sanctions on Chinese telecommunications giant Huawei. This discouraged optimism for a de-icing of U.S.-China trade tensions. There are still many tensions that could support gold.

European markets are expected to open downward on Thursday.

Trump delays tariffs on cars

Dow rises more than 100 points as Trump delays tariffs on cars.

U.S. stocks rose on Wednesday, May 15, with news that President Donald Trump plans to delay the implementation of tariffs to the automotive sector.

The news caused stocks to rise. Fiat Chrysler in the U.S. rose 1.9%, while Ford Motor and General Motors rose 1.2% and 0.9% respectively.

Initially, markets fell after weaker-than-expected economic data was released raising fears that the U.S.-China trade war is dragging global economic growth.

U.S. retail sales fell 0.2% in April.

European markets close on the rise

European equities traded higher again on Wednesday 15 May after news that Trump plans to delay the application of tariffs on European car imports.

The pan-European STOXX 600 closed provisionally with a 0.39% increase. The automotive sector rose by 2.02 percent, after initially being the weakest sector. Porsche, BMW and Daimler recorded increases of around 3%.

Meanwhile, the Italian bank UniCredit has intensified preparations to bid on Commerzbank. An agreement with the former suitor, Deutsche Bank, failed. Commerzbank shares traded 2.9% on Wednesday afternoon.

Germany announced a return to economic growth in the first quarter.

The UK government announced that Theresa May will take her agreement on Brexit back to Parliament in the week of June 3. Talks with the main opposition party continue despite an apparent lack of progress.

Selling U.S. Treasury Bonds is China’s most self-defeating option

In China’s trade war with the United States, China’s ability to start getting rid of its massive amount of U.S. Treasury bonds could trigger an increase in interest rates and substantially damage the U.S. economy.

China currently has $1.13 trillion in bonds. It is a fraction of the total $22 trillion issued by the United States. 17.7% of the various securities are held by foreign governments.

If the Chinese decide to reduce their role in this market, at least in theory, it could create a substantial problem for a country like the United States that depends on both sovereign entities and buyers of its debt.

At the moment, markets are not worried that China could take such a drastic step, because the move would also be a self-destructive option.

In fact, it appears that a Chinese bond cut could weaken the dollar and make U.S. multinationals more competitive.

On the other hand, Treasury yields would rise and the value of China’s portfolio would be badly hurt.

Oil prices rise after Saudi energy minister reports attack on facilities

Oil prices rose sharply on Tuesday, due to reports of a drone attack on oil pumping stations in Saudi Arabia.

The incident is an act of terrorism, Saudi Energy Minister Khalid al-Falih said.

This act of terrorism and sabotage, in addition to the recent incidents in the Arabian Gulf, affects not only the Saudi Kingdom, but also the security of oil supplies and the global economy.

No one has been directly accused of carrying out the attack, but a Yemeni television channel announced Tuesday morning that it had launched drone attacks on several Saudi facilities.

White House reviews military plans against Iran

At a meeting of President Trump’s top national security aides, interim Defense Secretary Patrick Shanahan presented an updated military plan that calls for up to 120,000 troops to be sent to the Middle East.

The military contingent will be sent in the event Iran attacks U.S. forces or accelerates work on nuclear weapons.

The hard line led by national security adviser John R. Bolton is not calling for a ground invasion of Iran, but for an increase in the number of U.S. troops in the region.

The measure reflects Bolton’s influence, whose push for confrontation with Tehran was ignored more than a decade ago by President George W. Bush.

It is not clear whether the president has been informed about the number of troops or other details included in the plans.

There are strong divisions within the Administration over how to respond to Iran at a time when tensions over Iran’s nuclear policy and intentions in the Middle East are mounting.

WhatsApp confirms it has been attacked by spyware

Since WhatsApp was acquired by Facebook in 2014, users of the messaging application have long speculated about the security of the platform. Now the fear of their customers is confirmed.

However, what users did not expect was that their conversations could be intercepted by a third party with the means to create a powerful malware that could intercept protected conversations.

A Financial Times report describes allegations that an Israel-based company was able to successfully install malware on the WhatsApp. Facebook confirmed the news, but did not name the author.

WhatsApp now encourages users to upgrade to the latest version of the application to ensure security.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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exactly. it would be one of the dumbest moves in recent history. which is why it won’t happen

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May 17, 2019

Shares in Asia rise but China falls amid trade tensions

Asian markets were mostly bullish on Friday, May 17, following Wall Street. U.S. investors applauded strong corporate earnings and economic data.

The Nikkei 225 in Japan rose 1.06% at the end of the session, with most sectors in positive territory. Sony shares appreciated more than 10% after the company announced a $1.83 billion share buyback and a new partnership with competitor Microsoft.

In South Korea, Kospi was slightly up. Australia’s ASX 200 also rose slightly. However, China’s shares fell amid continuing tensions between Beijing and Washington. Asian markets could try to build on Thursday’s positive momentum, after China has not announced any retaliation for US action against Huawei, beyond verbal protests.

US equities rose on Thursday, as sentiment was boosted by solid earnings from Walmart and Cisco Systems, while banks rose with higher interest rates. On the other hand, the European Commission revealed on Thursday that Barclays, Citigroup, JP Morgan, MUFG and Royal Bank of Scotland have been fined a total of 1,070 million euros by EU antitrust regulators for manipulating the eleven-currency market.

The U.S. dollar reached a two-week high when U.S. housing data and weekly jobless claims were released, indicating the strength of the labour market in the world’s largest economy.

Meanwhile, the EUR and GBP were affected by bearish factors. The euro is affected by weak economic fundamentals and European policies. Italy’s attitude continues to weigh on the markets and Brexit weighs on the pound. On the other hand, the Japanese yen benefited from problems in Europe and the rest of the world.

Oil prices rose again on Friday. They are on track for their first weekly gains. Rising tensions in the Middle East fueled fears of supply disruptions. The Brent has risen 3.4% during the week, for the first time in three weeks. A military coalition led by Saudi Arabia carried out several air strikes on Yemen’s capital on Thursday, after a movement of that country claimed responsibility for the drone attacks on two Saudi oil pumping stations earlier in the week. Regarding the United States, Trump has indicated to his top advisers that he does not want his country to get involved in a war with Iran.

The market is also waiting for a decision from the Organization of Petroleum Exporting Countries, and other producers, on whether to continue with the supply cuts that have pushed up prices by more than 30% so far this year. When tensions are so high, with the United States deploying considerable military force, simply a tactical error by Iran could ignite the powder keg in the Middle East.

During Friday’s Asian trading session, gold continued to lose ground after recording last month’s biggest daily losses in the previous session. U.S. economic data was encouraging, boosting investors’ appetite for riskier assets.

European markets are expected to open higher on Friday.

Risk sentiment was boosted by strong earnings

Dow jumps over 200 points with a 3-day winning streak.

U.S. markets rose on Thursday, May 16, as risk sentiment was boosted by strong earnings from Walmart and Cisco Systems, while banks rose at higher interest rates.

The Dow Jones Industrial Average closed higher, led by Walmart and Cisco. The S&P 500 rose slightly, while the Nasdaq Composite was up 1%. The main indices closed higher for the third day in a row.

Walmart shares rose 1.4% after the retailer announced first-quarter earnings that exceeded analysts’ expectations. The company said it is in a good position to reach its targets for 2019.

Shares of Citigroup, JP Morgan Chase, Bank of America and Goldman Sachs gained more than 1%. Banks rose as the 10-year Treasury’s benchmark yield surpassed 2.4% again with stronger-than-expected data. Housing construction for April outperformed expectations, while weekly jobless claims fell more than expected.

Profits in Cisco, Walmart and banks offset concerns about the US-China trade dispute. It seems that the market is already taking bad news from trade disputes for granted.

European shares rise as trade fears diminish

European stocks were up on Thursday, May 16, as markets recovered from a blow caused by the renewed interest of the U.S. president in banning the operations of Chinese technology firm Huawei.

The pan-European STOXX 600 reached its highest level just as the session closed. It closed with a rise of around 1.2%, while the chemical sector led the rise with 2.54% and with the automobile sector struggling to move forward.

The European Commission revealed on Thursday that Barclays, Citigroup, JP Morgan, MUFG and Royal Bank of Scotland have been fined a total of 1.07 billion euros by EU antitrust regulators for manipulating eleven-currency market.

Two of President Trump’s priorities are a strong stock exchange and a trade agreement

Both options are in conflict. Wall Street is frustrated as it tries to figure out what Trump sees as most important.

If tweets are an indication, the president’s approach is changing. In the last two weeks, his Twitter mentions of trade-related terms were twice as much as references to the economy and stocks.

On the one hand, Trump is betting on a tough stance on trade before the 2020 elections. But on the other hand, that is negatively affecting expectations of global growth and a strong economy.

Analysts say the president’s tone changes and surprise tweets make it impossible to advise his clients.

Recent data show surprising slowdown in U.S. and Chinese economies

Industrial and consumer activity in both the United States and China slowed in April. The trade war could affect global growth.

The most current message is that both U.S. and Chinese economic data have been disappointing.

The latest round of tariffs announced by Trump and Xi Jinping increased the stakes and the potential economic impact on both economies.

Both China and the United States report that retail sales and industrial production in April were weaker, even before the latest escalation of the trade war.

Two of Apple’s top suppliers disappoint after iPhone sales drop

Foxconn and Japan Display reported disappointing results this week as the effects of the iPhone sales slowdown spread through Apple’s supply chain.

The global slowdown in handset sales has been attributed to rising handset price costs.

With premium phones, which now cost more than $1,000, customers are clinging to devices longer. In fact, iPhone owners keep the handsets for three or four years.

Research firm IDC said in February that 2018 was the worst year in history for smartphone sales, with a 4.1% drop.

The social weariness with taxes has gone to more

According to polls, around 60% of the population considers that they pay too much, especially in relation to what they receive in return.

If we sanction tobacco, it is so that people stop smoking. If we penalise alcohol, it is to prevent irresponsible consumption. Why do we tax job creation, investment, to the extent that an average income loses half of its wealth in taxes?

The obsession with punishing savers and entrepreneurs is surprising… Raising taxes on the rich is a mistake, a serious mistake. It is an economic error and it is a moral error.

You need a fair system that rewards effort. However, in some countries, what they are doing is quite the opposite. The taxpayer should not be punished: he should be sent flowers.

Stop mistreating those who create wealth. Friends of high taxes hate rich people, they hate successful people. But they forget the important thing: poverty.

The social challenge we face is to enrich the poor, not impoverish the rich. We must help those who are below, not overthrow those who are above.

No country thrives on punishing wealth creators.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 20, 2019

Asian Markets rise mostly despite deadlocked trade negotiations

Shares in Asia were mostly on the rise on Monday, May 20, amid geopolitical developments in the region.

In China, shares entered in negative territory at the end of the first part of the session. The Nikkei 225 in Japan rose slightly at the end, as Fast Retailing and Softbank Group advanced. These moves came after Japan’s first-quarter economic growth exceeded expectations. In South Korea, Kospi also rose slightly. Australia’s ASX 200 rose 1.58%, after Australia’s conservative coalition obtained an absolute parliamentary majority after a surprising election victory.

The timing of trade talks has been altered since the Trump Administration set its sights on Chinese technology. Nevertheless, a US delegation was invited to Beijing earlier this week. The Dow returned to negative territory in the last hour of negotiation, erasing a gain of about 30 points. The S&P 500 and Nasdaq also ended up in negative territory.

The yuan has recently been affected by the intensification of trade tensions between the United States and China.

The Organization of Petroleum Exporting Countries said it is likely to maintain production cuts, helping to stimulate demand for currencies sensitive to oil prices. The Canadian dollar gained about a quarter of a percentage point.

The Japanese yen was suffering from a slight improvement in risk appetite and Japanese economic data showed an unexpected acceleration in the last quarter.

The EUR remained stable after falling last week following comments by Matteo Salvini that European Union rules are hurting his country. Investors are focusing this week on the May 23-26 elections for the new European Parliament.

The Australian dollar gained against the U.S. dollar on Monday after the country’s conservative government won the elections and risk appetite improved slightly. The National Liberal Coalition, led by Australian Prime Minister Scott Morrison, centre-right, won a surprise election victory over the centre-left Labour Party. The election result helped stabilize Australia’s economic outlook.

Oil prices rose by as much as 1 per cent on Monday after Saudi Energy Minister Khalid al-Falih indicated that there was consensus in OPEC and allied oil producers to continue to limit supply. According to Falih, his country will continue to respond to the needs of what he called ‘a fragile market’.

During Monday’s Asian trading, gold remained stable at two week lows. It does so while U.S. economic data held steady amid geopolitical and trade tensions. The precious metal fell to its two-week low on Friday, after data showed U.S. consumer sentiment rose to a 15-year high in early May amid growing confidence in the outlook for the U.S. economy.

European markets are expected to open mixed on Monday.

Problems in trade negotiations

U.S. Markets fall at the end of the session on problems in trade negotiations.

U.S. equities closed down on Friday, May 17, after CNBC reported that trade talks between China and the United States have stalled.

The scheduling of the talks has been altered since the Trump administration sent out signals against Chinese technology companies. Nevertheless, a U.S. delegation has been invited to Beijing earlier this week.

The Dow returned to negative territory in the last hour of negotiation, erasing a gain of about 30 points. The S&P 500 and Nasdaq also ended up in negative territory.

Apple’s shares fell 0.6%, bringing its weekly losses to 4.1%. Caterpillar also closed negative.

Earlier this week, difficulties increased for Huawei, the giant Chinese telecommunications company. U.S. companies that want to do business with Huawei should now have a special license.

Some of Huawei’s U.S. suppliers such as Qualcomm, Qorvo and Micron Technology fell 1.6%, 6.1% and 3.4%, respectively.

This move is an attack on the Chinese government, which considers itself the real owner of Huawei.

European markets close down as fears over Brexit and trade negotiations persist

European shares traded lower on Friday 17 May, as trade fears increased and while talks on Brexit between the UK Conservative government and the main opposition party were halted.

The pan-European STOXX 600 fell slightly, while the automotive sector led the losses. The worst was BMW, which recorded a 5.2% decline in its shares.

The hope that the UK’s two largest political parties can come to an agreement on Brexit is over. Labour leader Jeremy Corbyn told reporters on Friday morning that the talks had gone as far as possible and that his party would finally oppose Theresa May’s Brexit proposal.

The pound fell to its lowest level in four months.

IMF expects international tensions to be reduced by six months

The Managing Director of the International Monetary Fund, Christine Lagarde, is confident that tensions between the world’s major players, particularly the US and China, will be reduced over the next six months.

The trade tensions have raised concerns and doubts about the evolution of the global economy.

In April, the IMF presented its latest global growth forecasts, which fell by two tenths to 3.3% compared to the January estimate.

The Managing Director of the IMF reiterated that this does not mean that there will be a recession, but that there will be a slowdown compared to last year.

Lagarde expressed her confidence that the global economy will recover the pace of growth to return to 3.6% next year and called for the creation of the right conditions.

She advocates boosting growth in Central Asian countries and taking advantage of the potential of the region’s economies, which now stand at 3.3% and will soon rise to 4.1%.

A military coalition led by Saudi Arabia carried out several air strikes on the capital of Houthi

Saudi Arabia was attacked at its oil facilities earlier this week by a Yemeni group.

Also earlier this week, U.S. personnel were evacuated from the U.S. embassy in Baghdad, while President Donald Trump ordered the deployment of a group of aircraft carriers, B-52 bombers and Patriot missiles to the Middle East.

When tensions are so high, with the United States deploying considerable military force, even a tactical error by Iran could ignite the powder keg in the Middle East.

There are many risks to oil supply, with tensions so high that prices could prove the 2019 highs.

Trump has told his top advisers that he does not want the United States to get involved in a war with Iran.

The market is also waiting for a decision from the Organization of Petroleum Exporting Countries, and other producers, on supply cuts that have increased prices by more than 30% so far this year.

Eurozone had trade surplus in March

International trade in goods in the euro area recorded a surplus of 22.5 billion euros in March. This is 4.5 billion less than in the same month in 2018.

The European Union as a whole achieved a trade surplus of 2.9 billion euros in March compared to 11.2 billion in the same period last year.

As for the countries of destination of exports highlighted between January and March increases with China, Norway, United States and the decline with Turkey.

China has reduced its U.S. debt holdings to the lowest level in two years

As trade tensions with the United States intensified, China sold its Treasury holdings at the fastest pace in two years.

In the 12-month period ending in March, China’s reserve of U.S. Treasury bills, bonds and debentures fell by $67.2 billion, down 5.6%.

The total has fallen by some $200 billion since the 2012 peak and now represents 7% of total US outstanding debt.

The threat of the country not buying U.S. Treasury Bonds has shaken the fixed income market.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 21, 2019

Asian equities reverse as trade tensions ease slightly

Most of the shares in Asia recovered at the end of the session on Tuesday, May 21. A temporary suspension of U.S.-China trade tensions provides a slight respite.

China’s shares rose in the afternoon, after the United States said it would grant a 90-day extension of sanctions on Huawei and its subsidiaries.

Japan’s Nikkei 225 remained virtually unchanged in the end after its previous fall. In South Korea, the Kospi rose slightly, with Samsung Electronics shares rising more than 4% after news that Google was suspending business with Huawei. Australia’s ASX 200 was marginally up.

US indices fell on Monday, May 20, when US pressure against Huawei also put pressure on the rest of the technology sector. Global equities have been affected this week by falling chip prices.

On the other hand, the chairman of the Federal Reserve has said that it is premature to determine the real impact of tariffs on the trajectory of monetary policy and on the level of supply.

The dollar remained stable, reaching 2.5 week highs. It has been driven by rising U.S. bonds, their safe-haven status, and growing concerns that the trade war between China and the U.S. could worsen. The rebound in ten-year Treasury yields is a supportive factor for the dollar and may continue for a while.

The EUR remained stable after falling the day before to its lowest level since May 3. The single currency is expected to remain volatile during the May 23-26 European parliamentary elections. The Australian dollar fell after Reserve Bank of Australia Governor Philip Lowe said the central bank will consider lowering interest rates at its June monetary policy meeting.

Oil prices rose on Tuesday due to escalating tensions between the United States and Iran and signs that the OPEC producers’ club will continue to withhold supply this year. Iran said on Tuesday that it would resist pressure from the United States and would reject new talks under the current circumstances. The rises are offset by concerns that a prolonged trade war between China and the United States could lead to a global economic slowdown.

Gold fell on Tuesday, after touching a minimum of more than two weeks in the previous session. The bet that the Federal Reserve will not cut interest rates this year drives the dollar, which replaces gold as a safe haven.

European markets are expected to open lower on Tuesday.

Huawei drags technology sector

American shares plummet as Huawei drags technology sector forward.

U.S. indices fell on Monday, May 20, when U.S. pressure against Huawei also put pressure on the rest of the technology sector.

Google has suspended business with Huawei. This business involves the transfer of hardware, software and other technical services. The American search giant’s decision comes after Huawei has been included on a list that requires U.S. companies to obtain a license to do business with the Chinese company.

Other companies such as Intel, Qualcomm and Broadcom will not supply components to Huawei either until further notice. Huawei has its tentacles in many parts of the technology sector, so this is not a one-day event.

Other manufacturers such as Chipmaker, Nvidia, Advanced Micro Devices and Lam Research dropped more than 1.5%.

Micron Technology’s shares fell 3% and Qualcomm’s 4.7%.

Telecom provider Lumentum Holdings fell more than 1% after cutting its quarterly forecasts.

Apple added to the decline, dropping more than 3% after HSBC lowered its target price.

European equities close down due to technology downturn

European markets closed down on Monday 20 May, while US repression against Chinese telecommunications giant Huawei weighed heavily on the technology sector.

The pan-European Stoxx 600 closed around 1.2% down, while technology stocks led losses with a drop of almost 3%.

In Germany, Infineon suspended shipments to Huawei, which led to the sale of shares in major European chip manufacturers. AMS was the biggest loser among semiconductor stocks in Europe, with a 13% drop.

Travel and leisure stocks were down 1.5% as a result of Ryanair’s disappointing results. Europe’s largest low-cost airline recorded its lowest annual profit for four years. It announces that profits could fall further next year because of overcapacity, Brexit and delays in the delivery of the Boeing 737 Max.

Deutsche Bank shares fell after the New York Times reported that anti-money laundering specialists recommended in 2016 and 2017 that Deutsche Bank transactions involving President Trump and his son-in-law be reported to a federal financial crime watchdog.

The Chinese currency is sending an alarm signal

The Chinese currency has been an important barometer of progress in U.S.-China trade talks. Right now it is indicating that things are not going well.

The question is whether Chinese officials will intervene to prevent the yuan from reaching a key psychological minimum of 7 yuan per dollar. That level has become a line for markets around the world and, if broken, could trigger a negative reaction globally in risk markets.

Since Trump first announced the new tariffs on May 5, the yuan has lost 2.7% against the dollar and now falls to a psychological level that, if reached, could cause turbulence in global financial markets.

Japan’s GDP grows in the first quarter

Japan’s gross domestic product grew by 2.1% between January and March, compared to the same quarter last year.

In the first quarter of the year, the world’s third largest economy expanded by 0.5% compared to the October-December 2018 period.

Progress was driven by a strong increase in public spending of 6.2%, which offset the 9.4% drop in exports and reversals in household spending and corporate capital investment.

The fall in exports was mitigated by an even greater decline in imports, which left a positive net contribution to GDP.

This positive data contrasts with worrying symptoms that foreshadowed a slowdown. The current context of concern about trade tensions and, above all, the slowdown in China, Japan’s main trading partner.

The fall in global demand is a worrying trend for the Japanese economy, which is highly dependent on the industrial sector and its foreign sales.

OECD warns of cut in forecasts

Uncertainty over trade tensions between the United States and China, and the contagion effect on other economies, have transformed the recovery of the global economy into a generalized slowdown.

The Organization for Economic Cooperation and Development cuts its global GDP growth forecast to 3.1%.

Trade disputes not only stifle the recovery, they also slow it down. In addition, the potential for greater damage is present.

Uncertainty is the greatest enemy of growth. There is currently a very bad scenario, accompanied by high doses of investor concern.

Apple is not innovating despite its spending on R&D and patents

Apple’s research and development spending has increased from $1 billion in 2009 to $13 billion this year. Stock-based compensation is not included here.

The amount of money spent on R&D at Cupertino shows that Apple is spending more and more. It intends to defend itself against new technologies, as they could threaten its dominance in smartphones and tablets.

It is currently getting involved in new product categories such as apparel, fitness and health.

Apparel patents suggest that Apple may be targeting AirPods with biometric sensors, Apple Watch with UV monitoring, gesture recognition for AR/VR applications, machine learning projects to enable autonomous driving and the integration of various existing devices in cars.

Apple had 2,160 patents granted in 2018, 3% less than in 2017. Eight companies had more patents granted during that year, including Samsung, Qualcomm, Microsoft and IBM, which topped the table with 9,100 patents granted in 2018.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 22, 2019

Asia’s stocks rises as U.S.-China trade tensions persist

On Wednesday, May 22, Asian markets were weakened as trade tensions between the United States and China continue.

Stocks in China remained broadly stable at the end of the first part of the session. Shares in Chinese surveillance technology company Hikvision fell more than 4% after the United States is considering restricting the company’s ability to buy U.S. technology.

Japan’s Nikkei 225 rose slightly in the end, with Fast Retailing and Softbank Group shares strengthening. Japan’s exports fell by 2.4% in April, for the fifth consecutive month, from the previous year. It is a sign of weak external demand that contrasts with the expected 1.8% drop.

In South Korea, Kospi recovered from its previous fall, while Samsung Electronics shares rose more than 1%. In Australia, the ASX 200 showed no change.

US stock exchanges are reacting to the easing of trade tensions with Huawei, as the US government has granted a 90-day grace period on sanctions imposed on the Chinese technology group and 68 other entities.

The dollar remains at a four-week high. The U.S. currency advanced after the U.S. reduced trade restrictions on Huawei Technologies. The move was a relief for markets affected by increased U.S.-China trade tensions. However, investor sentiment remains fragile, as tariff negotiations between the world’s two largest economies have yet to reach a lasting solution.

The euro, which has fallen 0.9% from its peak in early May, has been under pressure in recent weeks from the strength of the dollar and concerns that the upcoming European parliamentary elections may strengthen Eurosceptic parties.

The pound strengthened briefly after Theresa May offered a new deal for Britain’s exit from the European Union. She would now be ready to vote on holding a second referendum. However, analysts doubt that a very divided Parliament will support any new referendum.

Oil prices fell, after data showed an increase in US oil inventories. The American Petroleum Institute (API) reported that reserves rose to 480.2 billion barrels last week, compared to analysts’ expectations of a decline of 599,000 barrels.

Gold fell during Wednesday’s Asian session to a two-week low. It does so as the dollar gains strongly and as indications that friction between China and the U.S. may reduce demand for gold bullion increase. On the other hand, Washington’s 3-month extension to Huawei runs counter to safe assets such as gold.

European markets are expected to open up on Wednesday.

US stocks react to the easing of tensions

Wall Street bounces after Trump Administration’s extension of Huawei veto.

Wall Street recorded a slight rebound on Tuesday, May 21, after Monday’s losses of 1.5% in the case of the Nasdaq.

US stock exchanges react to the easing of trade tensions with Huawei, as the US government has granted a 90-day grace period on sanctions imposed on the Chinese technology group and 68 other entities. The measures against Huawei will not enter into force until 19 August, with the aim of enabling their suppliers to take actions that will make the transition easier.

Chip manufacturers are rising sharply after this rectification. The Philadelphia Semiconductor Index, which plummeted 4% on Monday, is up 2% and is one of the most bullish of the day.

The weekly Redbook index of retail sales has been published, which has advanced to 5.2% year-on-year. Second-hand home sales were 5.19 million, slightly below the 5.21 million expected.

The yield on the US 10-year bond rose to 2.42%, that on the 2-year bond to 2.23% and that on the 3-month bond fell to 2.39%.

European shares recover as technology sector improves

European equities rose on Tuesday, May 21, as tensions eased slightly in the growing U.S.-China trade war.

The pan-European STOXX 600 rose slightly in the afternoon, with most sectors in positive territory. Technology stocks led the gains with an increase of more than 1%.

On Monday, markets closed down after U.S. repression of Chinese telecommunications giant Huawei weighed on the technology sector. Europe’s top chip manufacturers suffered sales after a report indicated that Infineon had suspended shipments to Huawei.

However, markets rebounded on Tuesday after the U.S. government temporarily eased some of the company’s trade restrictions. It is a measure aimed at minimizing the consequences of closing that route of business. Google confirmed on Tuesday that it had revoked the decision to cut ties with Huawei after the postponement.

As for economic news, the OECD published its forecasts. It projects world economic growth of 3.2% in 2019. It is 0.1% less than its March forecast.

Hedge funds bet that sales are over

Most American hedge funds do not expect large declines in the stock market, as more and more companies are holding back bets on stock volatility.

Despite the deterioration in US-China trade relations and the sale of stocks since early May, many US hedge funds have closed positions betting on a rise in the Cboe volatility index.

The decline in volatility bets suggests that some of the major Wall Street traders believe that the equity slump is finally over.

According to El-Erian Trump has the opportunity to create a new world economic order

El-Erian has contemplated three scenarios: Possibility, at 65%, of a short-term trade agreement between the United States and China. It gives a 15% chance of a ‘Reagan moment’. A fully-fledged trade war has only a 20% chance.

If the United States does all it can, in terms of trade relations with third countries, it can change economic dynamics on a global scale.

Chipmaker’s stock plummets

Technology companies are abandoning business with the big client Huawei.

Chip sales intensified on Monday after the announcement that semiconductor manufacturers are severing ties with Huawei because of restrictions imposed by the Trump Administration.

U.S. chip suppliers are losing a big customer. Huawei, the world’s largest supplier of telecommunications equipment, buys $20 billion in semiconductors each year.

The impact can be tens of billions of dollars. The restrictions could particularly hurt companies that have significant exposure to 5G revenue and the Chinese market.

Other Huawei suppliers, including Qualcomm, Broadcomm and Intel, told employees they will not sell to the Chinese company until further notice.

The risk of a global shock is increasing

Luis de Guindos, vice-president of the European Central Bank, said that the current economic slowdown increases the risk of unexpected events or, in other words, shocks that could have a significant impact.

Although he did not cite the possible triggers of that crisis, the market fears mainly the effect that the trade war between the United States and China may have on the economy and markets.

Faced with that risk, banks must continue to strengthen their level of capital reserves, especially in those countries where a long period of upside might have led to an underestimation of credit risk. Or where private debt is particularly high. Higher capital reserves help restore confidence in the sector.

Improving banks’ profitability in a sustainable way, for example by adjusting their business models, would help them to improve their capital generation.

One of the challenges for the European Central Bank is to begin to control non-bank debt, most of which is channelled through investment funds that lend directly to companies and individuals.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 23, 2019

Asian markets fall on nerves over the state of trade negotiations

Asian markets fell on Thursday, May 23, with investors worried about continued U.S.-China trade tensions.

China’s shares fell at the end of the session, while proposed restrictions against Chinese telecommunications giant Huawei have prompted China to rethink its economic relationship with the United States.

Japan’s Nikkei 225 fell slightly, with Softbank Group shares dropping more than 5% after the U.S. Department of Justice recommended blocking a deal between T-Mobile and its rival Sprint. Australia’s Kospi and ASX 200 dropped slightly.

U.S. Treasury Secretary Steven Mnuchin said a trip to Beijing to resume trade negotiations has not yet been scheduled. That fact reduces hopes of a speedy resolution to the U.S.-China trade war. U.S. equities receded on Wednesday, May 22, as trade concerns grew and the fall in Qualcomm and retailer equities also weakened investor confidence. Qualcomm leads the downturns in the technology sector.

The yen appreciated, while fears about the US-China relationship and concerns about Brexit drove risk aversion. The Japanese yen made strong gains against the euro, the British pound and the Australian dollar.

The deepening of the Brexit crisis also undermined investors’ risk sentiment. Pressure on Theresa May to resign increased after her new Brexit tactic failed. The possibility of someone like Boris Johnson replacing May increases the prospects of a Brexit without agreement. The mood in the market is darkening as Brexit-related events add to concerns about the US-China relationship.

During Thursday’s Asian trading session, oil prices fell, amid rising US oil inventories and weak demand from refineries. In these circumstances, further pressure on prices is expected.

Gold remained stable, while trade tensions between China and the US supported the dollar. Investors are now looking for a signal, following the release of the minutes of the Federal Reserve meeting which indicated that there is no rush to cut interest rates.

European markets are expected to open lower on Thursday.

U.S. indices fall amid trade concerns

U.S. equities were down on Wednesday, May 22, as commercial concerns increased and as Qualcomm’s and retailers’ share declines also weakened investor confidence. Qualcomm leads the downturns in the technology sector.

A few weeks ago, a trade agreement seemed imminent. Markets were 3% higher than today. If a real trade war progresses, then even greater falls could be expected.

If the problems increase, making the negative factors outweigh the positive, then it is prudent to remain in a neutral position.

Treasury Secretary Steven Mnuchin said a trip to Beijing to resume trade negotiations is not yet scheduled. This reduces hope for a speedy resolution of the U.S.-China trade war.

European markets close down as technology companies worsen and Brexit becomes more complicated

European markets were trading lower on Wednesday, May 22, as investors observed the growing participation of technology giants in the U.S.-China trade war.

This week the UK prime minister tried to break the deadlock on the Brexit agreement by presenting a new proposal that includes a new referendum if they support her project.

However, the Labour Party spokesman suggested that the prime minister should admit defeat, rather than resubmitting the divorce settlement to a fourth vote.

The pound sterling fell, as May’s last-minute plan faced opposition from all sectors and also from her party.

The Austrian extreme right of the FPO comes out of the country’s coalition government after the president sided with conservative chancellor Sebastian Kurz and fired his interior minister.

As Stock Exchanges recover, the Bond Market shows a dire warning

Stocks are resisting the latest attacks from growing fears of trade war, but the bond market indicates that there will be more problems in the future.

Major indices rose again at the beginning of the week, but bond yields have not been as resilient.

The 10-year Treasury yield is trading at 2.4%. They are about 40 basis points below their 2019 high and within 10 basis points of their year-to-date low. Yields move inversely to prices.

Bonds are considered a safer investment relative to stocks, as they are usually not as volatile. Therefore, money normally flows into bonds when investors see downward economic or political risks on the horizon.

Current events helped the 10-year Treasury yield fall by about 15 basis points since May 3.

Concerns about the trade war are likely to remain a negative influence on bond yields and stock prices until a shift towards trade agreements becomes evident.

Corporate debt is increasing but does not represent a threat to the system

Federal Reserve Chairman Jerome Powell said rising levels of corporate debt should be monitored, but so far they pose no threat to the financial system.

Corporate debt does not represent a high type of risk to the stability of the system. If conditions worsened, they certainly would not hurt households and businesses.

However, the level of debt could stress borrowers if the economy weakens.

Powell focuses on companies whose bonds are rated as next to garbage. Those companies would have trouble refinancing their debt if interest rates continued to rise.

Theresa May offers legislators second referendum if they approve her agreement

The Prime Minister of the United Kingdom has offered legislators the possibility of holding a second referendum on Brexit, if they approve its withdrawal agreement.

Theresa May’s new bill also includes new guarantees on workers’ rights, Irish backing and a customs undertaking.

The new proposal is seen as a last desperate attempt to get its agreement passed by Parliament.

The pound jumped on Tuesday afternoon just before her speech.

Environmental Protection Agency plans to change calculation of pollution risks

The EPA predicted that removing the Obama rule, its Clean Energy Plan, and replacing it with a new measure would have resulted in 1,400 additional premature deaths per year. The new calculation model would significantly reduce that number.

The proposed change is yet another example that the Trump Administration has lowered estimates of environmental damage. It now aims to get new numbers that will lead to the rejection of environmental control.

The proposed methodology would assume that there is little or no health benefit from making the air cleaner.

This is a very important issue and there has been a lot of debate about which approach is the right one.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 24, 2019

Asian markets fall mostly as trade tensions continue

Most Asia-Pacific markets were in negative territory on Friday, May 24, as investors remained concerned about trade tensions between the United States and China.

China is willing to support its private companies, rather than give in to the financial pressures applied by the United States. Since both sides will only negotiate on their own terms, it could be years before the two powers can find sufficient common ground.

The MSCI index for Asia and the Pacific outside Japan fell by 0.18%. Mainland Chinese markets weakened for the most part. In Japan, the Nikkei 225 has outperformed some of the previous losses. South Korean Kospi dropped slightly. Australia’s ASX 200 lost ground at the same time as the financial sub-index.

In India, Prime Minister Narendra Modi and his Bharatiya Janata Party won a landslide victory in re-election.

Wall Street recorded falls of more than 1% on Thursday, May 23, as the trade war between China and the United States deepens and after the weak macroeconomic data in Europe and new complications over Brexit became known. British Prime Minister Theresa May may announce her resignation in the next few days, according to the media, as she faces pressure from members of her own party to resign. May has faced a violent reaction in the last 48 hours after she announced her new plan for Brexit.

On Friday, the dollar remained stable after reaching a two-year high against most of its currency counterparts. It is feared that the trade war with China will hurt the U.S. economy more than previously thought. Global risk aversion is causing the yen to appreciate.

The Australian dollar has remained stable and is well on its way to ending the week bullish. It is its first positive week of the last six. In the rest of the Forex market, the EUR remained stable.

Oil prices rose during the Asian session, recovering from Thursday’s losses. Brent Crude Oil futures rose 0.96% and West Texas Crude Oil futures soared around 1%.

Gold prices rose by 1 percent on Thursday, while the US dollar fell back from a two-year high and global equities plummeted as trade tensions between China and the US escalated. The dollar’s bearish engulfing has helped boost the price of gold.

European markets are expected to open down on Friday.

Featured sales on Wall Street

Wall Street recorded falls of more than 1% on Thursday, May 23, as the trade war between China and the U.S. deepens and after knowing the weak macroeconomic data in Europe and new complications over Brexit.

The electric car manufacturer Tesla continues with its stock market collapse by chaining its seventh day of falls. In addition, Apple shares are down more than 1% after UBS experts have cut their valuation due to lower forecasts for the sale of iPhones.

U.S. weekly unemployment data has been below expectations and continues to indicate strength in the labour market. Unemployment claims have dropped to 211,000 from 212,000. They are below the expected 215,000.

However, both the Manufacturing PMI and the May Services PMI have been well below expectations. The manufacturing PMI has dropped to 50.6 below the 52.5 expected. PMI services are down to 50.93 below the anticipated 53.2.

European stock market falls with automotive sector leading losses

On Thursday 23 May, European markets fell sharply amid concerns over trade negotiations.

The Stoxx 600 pan-European index fell by 1.5%, with almost all sectors in the red. Major stock exchanges were down, with the French CAC and German DAX losing 1.8% and 1.6% respectively. The FTSE 100 in London also fell sharply, with a decline of around 1.6%.

Automobile companies led the losses, with a decline of more than 3%. This is due to renewed concerns about the US-China trade relationship.

Deutsche Bank shareholders met on Thursday for their annual general meeting. The points of the day focused on their strategy and the bank’s leadership. Deutsche has been a source of much negative publicity in recent years, from agreements with the U.S. Department of Justice to weak results. German bank shares are down 3%.

ECB moves rate hike further away and doesn’t believe the economy will recover

After a few months of slow growth, the European Central Bank needs to confirm whether the loss of momentum is temporary, or destined to last, before considering new measures to support the economy.

The ECB has less hope that the economy will recover in the second half of the year and believes that growth may be weaker than expected in Europe.

Confidence in the economic scenario is somewhat lower. It is acknowledged that some recent data proved to be even weaker than expected and the conditions for future Long-Term Refinancing Operations will be decided at a future monetary policy meeting.

The ECB maintains that TLTRO-III operations should be seen as a potential tool for adjusting monetary policy.

The Agency asserts that inflation is below its targets, which also reflects a weaker economy.

The trade war is forcing China to rethink its economic ties with the U.S.

The trade war and the measures against Huawei push China to rethink its economic ties with the United States.

For example, the idea that China should buy large quantities of natural gas from the United States needs to be revised, says Wang Yongzhong, a member of the Chinese Academy of Social Sciences.

China threatens to stop funding an industry in which the two countries have done important business. In 2017, China agreed to fund a $43 billion natural gas project in Alaska.

According to the Fed there will be no interest rate movements for some time even if the economy improves

The minutes of the May 1 and 2 Federal Open Market Committee meeting say members maintain a patient approach to determining future adjustments.

Participants continue to observe in detail the sustained expansion of economic activity. There are good labour market conditions and inflation close to the 2 percent target.

Job creation in the euro area slowing down in the face of weakening growth

The hesitant growth of private sector activity in the eurozone in May caused the lowest growth in hiring in almost three years.

The region’s PMI index stood at 51.6 points, compared to 51.5 the previous month. This suggests an expansion of 0.2% for the second quarter of the year. That’s half the rate for the first three months of 2019.

The euro-area economy remained stagnant in May, with indications that only modest growth will be achieved in the second quarter.

The near halt in the level of new orders and deteriorating optimism prompted companies to revise their hiring plans, leading to the weakest employment growth since September 2016.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

May 27, 2019

Asian Markets mixed as Trump begins official visit to Japan

On Monday, May 27, Asian stock markets were mixed, with investors watching the US president’s visit to Japan and the results of the European parliamentary elections.

Mainland Chinese equities rose at the end of the session. In Japan, the Nikkei 225 rose slightly while Fast Retailing stocks supported the rally. In South Korea, the Kospi traded lower, while Australia’s ASX 200 did the same.

In Europe, early results showed greater fragmentation in the European Parliament over the next five years. The vote was particularly relevant due to the rise of anti-European and nationalist parties across the region. Britain’s newly formed Brexit Party appears poised to beat the country’s two main parties in the European parliamentary elections, according to early results. The results have dashed hopes for a national anti-immigration and anti-Brussels rally led by Marine Le Pen in France. In Italy the hopes of Italian Deputy Prime Minister Matteo Salvini, and those who have opposed attempts to forge further integration into the EU, have also been dashed. In the end it seems that the pro-European parties seem to have resisted to a large extent in many countries.

US equities rose on Friday, May 24, but recorded weekly losses as investors fear that the US-China trade war is affecting economic growth in both countries. Investors are now betting on safe haven securities, such as treasury bonds. On Thursday, U.S. 10-year Treasury yields fell to their lowest level since October 2017.

The euro stood firm after pro-European parties kept two-thirds of the House in an increasingly fragmented European Parliament.

Oil prices rose during Monday’s Asian session amid cuts in OPEC supply. However, concerns about trade disputes weigh heavily and global oil demand may be negatively affected.

Gold continued to rise during Monday’s Asian session, while fears of a trade war between China and the U.S. hurt risk appetite and discouraging economic data from the U.S. reinforced bets on a cut in U.S. Federal Reserve interest rates. Gold has reversed previous losses.

European markets are expected to open up on Monday.

U.S.-China trade war affects economic growth

Dow climbs nearly 100 points but records longest weekly loss streak since 2011.

U.S. equities rose on Friday, May 24, but recorded weekly losses as investors fear that the U.S.-China trade war is affecting economic growth in both countries.

Friday’s gains were not enough to compensate for the weekly losses. The weekly losses come at a time when investors are increasingly convinced that the trade war will take longer than expected to end and could hurt the economies of both countries as well as globally.

Durable goods orders in the US fell by 2.1% last month, amid a slowdown in exports and an increase in inventories. In addition, IHS Markit said Thursday that U.S. manufacturing activity fell to its lowest level in nine years. This is the latest economic data set to show cracks in the U.S. economy.

The indices rebounded slightly after Thursday’s heavy losses after President Donald Trump said the ongoing trade war could end quickly. According to Trump, negotiators will reach agreements, although it looks like it will take much longer than expected. Now any sign of progress will help markets recover.

British prime minister to resign over Brexit

On Friday, May 24, the European stock market closed higher and investors returned to risky assets. Fears about the U.S.-China trade battle affected the Old Continent somewhat less.

The Stoxx 600 pan-European index closed slightly higher, with most sectors and all major exchanges in positive territory. Mining stocks, with their large exposure to China, are among the winners with a rise of more than 1%.

Politics remains a central issue in Europe. Elections across the European Union continue, but the big political news came from the UK.

Theresa May announced on Friday that she will resign as party leader on June 7, giving way to a new prime minister to continue negotiations on Brexit.

Looks like the U.S.-China trade war is here to stay

Goldman Sachs economists say they’re still waiting for an agreement. But if it doesn’t, the blow to the U.S. and Chinese economies would be worse than they originally thought.

Bank of America said a resolution seems unrealistic at the moment.

Technology is the last battlefield. The American attacks on Huawei and the growing concern that China will attack Apple, increase the concern.

Now there are no scheduled talks, and China’s Commerce Ministry on Thursday warned the United States to act sincerely and change its wrong actions.

Crude Oil stabilizes in support zone

At the moment the fundamentals are not favourable, so the technical aspect is the one that directs the quotation.

Oil prices recovered around 1% on Friday, but were on track to their biggest weekly loss this year. There are still multiple supply risks as the tension between Iran and the US continues.

The forward price curve for Brent crude futures remains in decline. It means that spot prices are higher than subsequent shipments. This implies tight market conditions and makes it profitable to produce and sell oil immediately instead of storing it for later sale.

The Organization of Petroleum Exporting Countries has been making supply cuts since the beginning of the year. The aim was to adjust the market and keep prices high, but the increase in American inventories did not help the rises.

On the other hand, the fall in U.S. manufacturing activity raises concerns about the level of global demand.

U.S. tariffs on China have been paid almost entirely by U.S. importers

U.S. tariffs on Chinese products are having unintended consequences, according to a study by the International Monetary Fund.

The study said that tariff revenues collected from taxes on Chinese products have been borne almost entirely by U.S. importers.

U.S. and Chinese consumers are unequivocally the losers because of trade tensions.

The IMF report adds that higher tariffs could also hurt economic growth.

While the impact on global growth is relatively modest at this time, the latest escalation could significantly erode sentiment in business and financial markets, disrupt global supply chains, and jeopardize the projected growth recovery by 2019.

Theresa May announces her resignation as Prime Minister of the United Kingdom

The British Prime Minister announced her departure schedule, abruptly ending her turbulent three-year term.

In a moving speech at 10 Downing Street, May said she had done everything she could to convince MEPs to support her agreement to withdraw from the European Union.

She believes it is best for the country if a new prime minister leads that effort.

The British pound rose 0.5% at first and then fell back, with investors taking profits.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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May 28, 2019

Asian stocks rise as Trump concludes visit to Japan amid hopes of a trade deal

Shares in Asia rose on Tuesday, May 28. The U.S. president concluded his state visit to Japan. Trump pressured Tokyo to reduce Japan’s large trade surplus with the United States.

China’s shares rose at the end of the session. The Nikkei 225 in Japan appreciated by 0.42%. In South Korea, the Kospi won slightly. In Australia, the ASX 200 rose 0.48%.

American markets were closed on Monday 27 May for Memorial Day.

The dollar rose against most of its major currency pairs as investors eagerly awaited the release of the highly polarized European Union (EU) parliamentary elections. The Yen remained stable after Trump’s visit to Japan. Many currency pairs have remained in range at the beginning of the week, as activity has slowed due to the holidays in the U.S. and Britain.

The euro struggled because the European Commission is likely to initiate disciplinary action against Italy on June 5, due to rising debt levels and the country’s structural deficit. Both data violate European Union rules. With regard to the elections, the pro-European parties maintained firm control over the parliament, although the Eurosceptic opponents made strong progress. There is a polarisation of the European Parliament, which reflects the European political situation in general, and this is negative for the euro.

Brent prices consolidated above $70 a barrel on Tuesday, while cuts in OPEC supply and US sanctions on Iran and Venezuela added to concerns about an economic slowdown. OPEC and some allies, including Russia, will meet on 25 and 26 June to discuss production policy in the future.

On Tuesday gold fell for the first time in four sessions, while the dollar rebounded after European Union parliamentary elections and amid trade tensions between China and the United States. In the previous session, the UK and US financial markets were closed for holidays. The evolution of the price of gold has been quite negative lately.

Some of the money flows are moving again towards bitcoin. It seems that crypto currencies are beating gold for the moment. Specifically, Bitcoin reached its highest level in over a year last Monday.

European markets are expected to open mixed on Tuesday.

Chinese industrial companies fell in April

Holiday in the United States.

American markets remained closed on Monday, May 27, for the Memorial Day holiday.

Oil remained stable on Monday, trading below $69 a barrel, as concerns over the U.S.-China trade dispute and the global economic outlook offset support for tensions in the Middle East and supply cuts.

Monday’s figures showed that profits of Chinese industrial companies fell in April, while new orders for U.S.-made capital goods fell more than expected, a new sign that the economy is slowing down.

Gold peaked more than a week ago on Monday, as fears of a trade war between China and the U.S. affected risk appetite and discouraging economic data pushed bets on an interest rate cut by the U.S. Federal Reserve.

European shares close up after elections in the European Union

The DAX closed with a 0.5% rise on Monday, May 27, while the French CAC rose by 0.3%. Italy’s FTSE MIB rose 0.6% initially, but fell into negative territory during the afternoon session after a report from Brussels considered disciplinary action for Rome’s lack of control of public debt.

The UK and U.S. markets closed on Monday, meaning that trading volume was low.

Investors in Europe focused largely on the results of the EU parliamentary elections. The results showed a strong presence of the Liberal and Green parties, while the Eurosceptic groups in Britain and France maintained the gains seen in 2014.

However, it is expected that the pro-European parties will continue to constitute the majority of the Parliament, retaining around two thirds of the seats.

Sectors were mostly in positive territory, with an increase of almost 1.5% in the automobile sector. Renault is up 12% in talks about its merger with Fiat.

Three factors that could cause a second wave of sales in the markets

They are a combination of growing fears of recession, bets on a more cautious Federal Reserve and a regular rebound in volatility. Those after elements could make the situation unsustainable for investors.

According to Masanari Takada, investors should focus on the possible fall in global equities in the short term, as sentiment continues to point downwards.

Risk parity funds could balance their portfolios by selling stocks and buying bonds at the end of May.

Last week the Dow was down 1% and the S&P 500 was down 1.3%.

Markets celebrate pro-Europeans will continue to govern

The European stock markets are reacting to the results of the European elections with generalised increases.

Finally, the Europeanist parties will continue to decide the future of the European Union, although the Liberals and Greens will now be key after losing the majority of the coalition formed by the European People’s Party and the Socialists.

The influence of Eurosceptic groups will continue to be limited, with support of approximately 23% (compared to 20.6% previously).

The loss of support for the Social Democrats and Conservatives, who have lost the absolute majority for the first time since 1979, is largely offset by increased support for the Greens and Liberals, which means that overall sentiment in Parliament will remain favourable to the EU.

Oil facilities count by Baker Hughes

The number of installations falls to 983. The difference with respect to last year is negative, at -76.

The figure, under normal circumstances, should be positive for crude oil because it would speak of less production, but the current situation is special.

Now there is a loss of momentum in the price of crude oil, due to the fear of future demand problems. In addition, the United States is forcing production to lower the price and favour the economy.

The number of total oil installations has not stopped dropping since the beginning of this year, just when the price of crude oil rebounded, and it seems that the installations are producing more than normal, perhaps due to technical improvements.

United States to send military troops to Middle East

The Pentagon will send more U.S. troops, drones and fighter planes to the Middle East amid growing tensions between the United States and Iran.

The deployment will include approximately 1,500 military personnel. It will include a Patriot battalion to defend against missile threats, additional intelligence, surveillance and reconnaissance aircraft.

In addition, there will be an engineering element to provide force protection enhancements throughout the region, and a combat aircraft squadron to provide greater deterrence and depth to aviation response options.

Pentagon defense officials said they had credible information that Iran and its representatives are planning to attack U.S. forces in the Middle East.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

May 29, 2019

Asian markets fall as U.S. adds 9 countries to its blacklist

Asian equities fell on Wednesday, May 29, after losses on Wall Street where the Dow Jones Industrial Average fell more than 200 points.

China’s shares were mixed at the end of the morning session. In Japan, the Nikkei 225 fell 1.15% at the end of the session. In South Korea, the Kospi fell by 1.43% and Samsung Electronics shares lost 2%. The ASX 200 in Australia also fell slightly, with almost all sectors trading lower.

U.S. equities rose sharply on Tuesday, May 28, as investors tried to get rid of trade concerns following President Trump’s latest statements. Beijing is willing to use rare earths in its trade war with the US, saying in a very forceful remark “don’t say we didn’t warn you”.

Fears of a further escalation in the China-U.S. trade dispute left the dollar stable on Wednesday, maintaining gains previously made after investors leaned toward safe-haven assets, including U.S. Treasury bonds.

The EUR’s losses in the previous session also helped support the Dollar. Analysts warned of more risks to the single currency, in terms of the uncertainty surrounding the euro zone economy and its political future. European Union leaders are called upon to begin the process of filling a number of senior EU positions, from the head of the European Commission to the European Central Bank. The euro has also been threatened by trade concerns.

The currency market is likely to recover in the coming sessions, as safe-haven currencies such as the Japanese yen and Swiss franc are expected to be in great demand.

Oil prices fell during Wednesday’s Asian session due to concerns that the trade war between China and the United States could trigger a global economic recession. However, relatively scarce supply amid cuts in OPEC production and political tensions in the Middle East offered some support. Investors are concerned about global demand. Another concern is that currency declines in emerging markets are making oil more expensive to buy in those countries. However, despite concerns, global demand for oil remains stable so far.

Gold is stabilizing, as global economic concerns reduced risk appetite. The dollar, however, competed for preference over gold as a safe haven bet. Demand for safe-haven assets rose as Asian equities fell.

European markets are expected to open lower on Wednesday.

Dow turns negative as trade concerns persist

On Tuesday, May 28, the U.S. stock market rose sharply, as investors tried to get rid of trade concerns following President Trump’s latest statements.

Stocks of technology companies rose. Facebook, Amazon, Netflix and Alphabet traded higher. Advanced micro-devices added to the technology gains, with an increase of more than 10%.

Visa, on the other hand, rose 1.8% after being highlighted as a leader in the sector of digital payments.

Consumer confidence data also helped counter negative sentiment. The Conference Board said American consumer confidence rose in May to its highest level since November.

European equities close down amid renewed concern over Italy’s growing deficit

European equities fell on Tuesday, May 28, as uncertainties about trade and economic growth weaken investor confidence.

The Stoxx 600 pan-European index fell at the end of the session. Italy’s FTSE MIB index was one of the worst, with a decline of around 0.7% amid renewed tensions between Rome and Brussels over the Italian country’s public finances.

The European banking index recorded losses with a decline of 0.42%, at the same time that the European Commission could impose a heavy fine on Rome for not having controlled its budget. On Sunday, Italian Deputy Prime Minister Matteo Salvini said he would use all his energy to fight against what he believes are outdated and unfair European tax rules. His comments came shortly after his far-right party, the Lega Party, won the European elections.

The shares of the automotive sector led the profits, after Fiat confirmed that it was proposing a merger with Renault. The deal would create the world’s third-largest car manufacturer.

As for economic data, the German consumer sentiment indicator fell to its lowest level in two years.

Eurozone economic sentiment rebounds in May after 10 months of falls

Economic sentiment in the eurozone was better than expected in May, as it managed to break the ten-month downward spiral it was dragging along. Specifically, the index stood at 105.1 compared to 103.9 in April, thanks to greater optimism in the most important sector, services, but also in industry and among consumers.

The economic sentiment indicator is made up of data from the 19 countries that share the euro. It has even been above expectations, and experts expected no change.

However, separately, the business climate indicator, which helps to signal the phase of the economic cycle, continued to fall in the fifth month of the year.

The improvement in the index has been generalised in the main economies, although the strength registered in France stands out.

Geopolitical risk and Trump worry European Central Bank chief economist

Peter Praet says the attack on globalization damages investment.

The outgoing ECB chief economist, who played a key role in the ECB’s response to the eurozone crisis, has criticized President Donald Trump’s ‘America First’ message.

The reaction against globalisation is damaging investment around the world. Peter Praet argues that clarity about trade rules is absolutely essential.

The ECB considers geopolitical risk to be the main threat to the eurozone economy. Uncertainty about the global environment, experienced since the second half of 2018, also explains the slowdown in growth in an export-dependent region.

The challenges of the new European Parliament

The new European Parliament born of the elections will condition the future of the European Union.

The challenges are to implement major reforms, deepen trade negotiations with the United States and shape future relations with the United Kingdom.

The elections have served as a thermometer of support for the European project, at a time when it has never been so supported and so threatened at the same time.

Europe has become the epicentre of softpower, an era in which the intimidating tactics and outsiders of political correctness triumph.

At the same time, the economic and migration crises, the collateral effects of globalisation and technological transformation, which exacerbate inequality and fertilise populism, have eroded citizens’ confidence that institutions are capable of reformulating the European project.

The viability of the institution will not depend so much on the number of seats received by populist parties, which does not seem to agree on anything beyond euroscepticism, lies in the ability to coordinate the other formations.

Federal Reserve needs to return to normal

They are aware that if the current situation stagnates, when the next crisis comes, their hands will be much tied and they will not be able to use normal weapons such as lowering interest rates or getting to buy assets in trouble.

This means that if the rates are very low they will not be able to lower them much more in the next crisis. If the balance sheet is too large, they will not be able to buy anything else.

So they have to raise interest rates and clear the balance sheet, so that the Fed can be effective again the next time it is needed.

Upon emptying the balance sheet rivers of ink are running. Many are those who believe they will not be able to get rid of everything they have bought at the speed the Federal Reserve believes. Selling all the assets they have involves flooding a market that is not interested in buying something that you know has no future possibilities.

Therefore, it is essential that inflation and economic growth accompany, to try to camouflage the reduction of the balance sheet within a situation of growth.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

May 30, 2019

Asian markets continue to weaken

On Thursday, May 30, Asian equity markets hit lows with investor sentiment severely weakened.

Mainland Chinese equities were down at the end of the session. The Nikkei 225 in Japan fell 0.61%. In Australia, the ASX 200 was down 0.83%, with most sectors trading lower. South Korean Kospi resisted the general trend and rose by 0.35%.

U.S. equities fell on Wednesday, May 29, as bond yields fell again, raising concerns about the economic outlook. The yield curve is reversed again, which normally anticipates a recession.

The dollar remained stable against its main rivals, while escalating trade tensions between China and the US forced investors to take refuge in safe assets, including government bonds. Since the clash between the world’s two largest economies has not shown signs of being resolved, fears of a blow to global growth have been unleashed through financial markets in recent sessions, with riskier assets bearing the brunt of those concerns.

The dollar remained stable at 109,565 yen, 0.5% above the May 13 high. Analysts estimate that the yen, another safe-haven asset backed by Japan’s status as the world’s largest creditor country, remains relatively weak thanks to demand for dollars from domestic investors.

The dollar was also affected by the weakness of the euro, due to new signs of political tension between Italy and the European Union. The European Commission has asked Italy to explain the deterioration in the country’s public finances.

Oil prices rose sharply on Thursday in Asia after U.S. oil inventories fell. U.S. crude oil inventories fell 5.3 million barrels during last week. That was a much greater drop than the 900,000 barrel drop expected by analysts. Crude oil prices have been backed up by cuts in production by OPEC and other major producers, as well as a drop in supplies from Iran. However, trade disputes continue to raise concerns about future demand.

Gold was down on Thursday, while bonds were up and the dollar moved close to its two-year high. Investors now seem to prefer U.S. Treasuries as a safe haven assets, this move is evidenced by the U.S. reverse yield curve. A strong dollar is also probably preventing large traders in China and India from buying gold.

European markets are expected to open lower on Thursday.

Bond Yields sink

Dow drops 300 points as Bond Yields sink.

U.S. equities fell on Wednesday, May 29, as bond yields fell again, raising concerns about the economic outlook.

10-year Treasury yields fell to their lowest level since September 2017 and traded around 2.23%. Part of the yield curve was further reversed, as 3-month Treasury bonds yielded 2.353%, well above the 10-year rate. A reversal of the yield curve is seen by traders as a potential signal that a recession is coming.

Increasing trade tensions between China and the US also affected markets.

The banking sector declined, Citigroup and Bank of America fell at least 1%, while J.P. Morgan Chase lost 0.9%. Retail companies are also down due to tariff concerns.

The market has moved from a position of thinking 100% about the possibilities of a trade agreement, to thinking now that there may not be an agreement.

Europe shuts down amid trade war and political concerns

European shares continued to fall on Wednesday, May 29, amid concerns about the US-China trade war. Concerns with Italy are also weighing heavily.

The pan-European STOXX 600 fell by 1.4% to its lowest point since March 11. Basic resources led the losses, with a decline of 2.5%, as all sectors remained in the red.

The fear of a political battle between Rome and Brussels is increasing, following reports that the EU is considering disciplinary action for the fact that the Italian government has not been able to control the debt.

Economic data has been disappointing in Europe. German consumer sentiment fell to its lowest level in two years.

There could be a radicalization of the policies used in the previous financial crisis

Future crises could see a radicalization of the types of measures taken to pull the economy out of its latest recession.

The use of Modern Monetary Theory, which uses more public debt, negative interest rates and easy money for the banking system, could be exaggerated in the future to try to strengthen economies.

The question is not whether there will be more stimuli, which will come, but how they are applied and how creative they are.

Negative interest rates are being discussed within central banks, but it looks like they will remain in place for some time.

Money called a helicopter, which involved purchases of assets that created bank reserves, will also involve direct donations of digitized money.

Chinese threat to rare earth minerals crucial to American Technology Industry

China could use its dominance in rare earth minerals as a weapon in commercial warfare.

Last week, Chinese President Xi Jinping visited rare earth extraction and processing facilities. This adds to speculation that China could make minerals more expensive or even unavailable.

Imports of rare earths are a relatively small part of the $420 billion deficit with China, yet their value far exceeds the dollar value.

The materials are critical because they are needed for the manufacture of iPhones, electric vehicles and advanced precision weapons.

The United States imported about 4,000 tons of rare earth, worth about $175 million. The problem is that most rare earths are already integrated into the technology and are difficult to do without.

Consumers have more confidence in their employment prospects

Trade tensions between China and the United States have somewhat dampened prospects for economic growth, but U.S. workers are becoming more confident about finding employment.

According to The Conference Board, 47.2% of consumers surveyed in May thought jobs were plentiful.

The positive appreciation of the surveys is an increase over the month of April and corresponds to the fact that the American labour market remains very strong.

10-year Treasury yields dropped by around 25 basis points in May

Last week’s bond declines extended after data showed U.S. manufacturing activity fell to its lowest level in nine years.

On the other hand, low interest rates may persist for a while, as trade tensions show no signs of easing.

Trade war nerves have led to a rally in fixed income, as investors bet on safe assets. When this happens, history shows that there are always some big winners.

Verizon, UnitedHealth, Coca-Cola, McDonald’s and Walmart have been the best performers in the Dow during periods of falling Treasury yields.

Drug giants Pfizer and Merck are also leaders in the 30-share Dow when yields are declining.

All of these companies generate large dividends and are relatively unaffected by economic weakness.

DISCLAIMER

The research covered in this report should not be considered as a recommendation to operate. Opinions, news, research, analysis, prices or other information are provided as general market comments and not as investment advice.

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