CURRENCY MARKET WRAP 

As of Wed Sep 18th, Singapore Time zone UTC+8

U.S. Dollar Index, -0.41%, 98.20
USDJPY, -0.04%, $108.10
EURUSD, +0.66%, $1.1075
GBPUSD, +0.58%, $1.2502
USDCAD, +0.04%, $1.3242
AUDUSD, +0.01%, $0.6866
NZDUSD, +0.24%, $0.6360

U.S. Industrial production increased 0.6% m/m in August (consensus +0.1%), which was much stronger than expected and followed an upwardly revised 0.1% decline (from -0.2%) in July. Total capacity utilisation ran at 77.9% (consensus 77.5%), up from 77.5% in the prior month.

After spiking nearly 15% yesterday, WTI crude ($59.37/bbl, -3.15) pulled back 5.0% after Saudi Arabia said it intends on restoring full oil production by the end of September. In addition, the repo rate spiked as high as 10% today on no specific catalyst.

Regarding the repo rate volatility, DoubleLine Capital founder Jeffrey Gundlach said this makes it more likely the Fed will start with asset purchases again (i.e. “QE Lite”) “pretty soon.” Presumably, this view, which was reported by Reuters late in the session, contributed to increased buying interest into the close. The New York Fed trading desk had set a target of up to $75 billion in securities. An effort Tuesday to run a 15-minute operation at 9:30 am had to be postponed due to technical difficulties but had resumed at 9:55 am, concluding at 10:10 am. The purchases involved about $40.8 billion of Treasurys, $11.7 billion in mortgage-backed securities and $600 million in agency debt. The Treasurys and MBS, which constitute the bulk of the Fed’s balance sheet, had low yields of 2.1% each, while the agency low yield was 3%. The Treasurys and MBS were within the Fed’s target range of 2%-2.25%. The midpoint of transactions in the overnight money markets hit the upper limit of the 2.00-2.25% target range. Overnight financing is the key to driving the economy.

The 2-yr yield and the 10-yr yield declined three basis points each to 1.73% and 1.81%, respectively. The U.S. Dollar Index lost 0.41% to 98.20.

RBA Minutes showed the central bank would consider additional easing if needed to support growth and achieve its 2% to 3% inflation target. Markets are fully priced for another rate cut to 0.75% by year-end, and to 0.5% by early 2020.

STOCK MARKET WRAP 

S&P500, +0.26%, 3,005.68
Nasdaq, +0.40%, 8,186.02
Nikkei Futures, +0.34%, 21,837.5

The S&P 500 (+0.26%), Dow Jones Industrial Average (+0.1%), and Nasdaq Composite (+0.4%) posted small gains, while the Russell 2000 (-0.4%) underperformed amid relative weakness in the energy space.

Nine of the 11 S&P 500 sectors finished higher, led by the real estate (+1.4%), utilities (+0.9%), and materials (+0.7%) sectors. The energy (-1.5%) and industrials (-0.04%) sectors were the lone sectors to finish in negative territory. Other laggards included Nordstrom (JWN 32.10, -3.47, -9.8%), Corning (GLW 28.23, -1.82, -6.1%), and Kraft Heinz (KHC 28.36, -1.26, -4.2%).

CURRENCY MARKET WRAP 

As of Tue Sep 17th, Singapore Time zone UTC+8

U.S. Dollar Index, +0.60%, 98.64
USDJPY, +0.37%, $108.15
EURUSD, -0.72%, $1.1004
GBPUSD, -0.56%, $1.2426
USDCAD, +0.21%, $1.3242
AUDUSD, -0.23%, $0.6862
NZDUSD, -0.69%, $0.6341

China’s industrial growth slowed to new 17-year low in August, even before new US trade war tariffs took effect. Industrial production including manufacturing, mining and utilities, grew at 4.4% (consensus 5.2%) last month, down from 4.8% in July, which in itself was the lowest rate since February 2002.

Drone attack on Saudi Arabia knocked about 5.7 million barrels per day out of production, leading to the biggest one-day gain in WTI crude ($62.88/bbl, +$8.00, +14.6%) since 2008. Saudi Arabia expected to restore about a third of lost production on Monday, while normal production might take “weeks not days,” according to sources from Reuters. Some angst revolved around a possible retaliatory attack from the U.S. and Saudi Arabia on Iran. It wasn’t confirmed if Iran was the aggressor, but the U.S. was quick to implicate Tehran while a preliminary investigation found the weapons used in the strike originated from Iran, according to al-Riyadh.

Defensive positioning was taken, though, with traditional safe-haven assets like U.S. Treasuries and gold finishing higher. The 2-yr yield declined three basis points to 1.76%, and the 10-yr yield declined six basis points to 1.84%. The U.S. Dollar Index advanced 0.6% to 98.64.

STOCK MARKET WRAP 

S&P500, -0.31%, 2,997.96
Nasdaq, -0.28%, 8,153.54
Nikkei Futures, +0.31%, 21,762.5

The S&P 500 declined 0.31% on Monday after an attack on Saudi Arabia’s oil refineries sent oil prices up nearly 15% and escalated geopolitical tensions. The Dow Jones Industrial Average lost 0.5%, and the Nasdaq Composite lost 0.28%. The Russell 2000 increased 0.4%, helped by big gains in the oil-sensitive stocks.

Yesterday’s winning groups included the S&P 500 energy sector (+3.3%) and iShares Dow Jones US Aerospace & Defense ETF (ITA 229.87, +2.35, +1.0%). The S&P 500 real estate (+1.0%) and utilities (+0.1%) sectors also finished higher, helping ease the losses from the materials (-1.6%), consumer discretionary (-1.3%), and consumer staples (-1.0%) sectors.

CURRENCY MARKET WRAP 

As of Mon Sep 16th, Singapore Time zone UTC+8

U.S. Dollar Index, -0.05%, 98.26
USDJPY, -0.03%, $108.08
EURUSD, +0.11%, $1.1075
GBPUSD, +1.36%, $1.2502
USDCAD, +0.56%, $1.3285
AUDUSD, +0.16%, $0.6878
NZDUSD, -0.44%, $0.6377

U.S. Retail sales for August were up 0.4% m/m in August (consensus +0.2%). The report could further allay financial market concerns of a recession, which have been fuelled by a year-long trade war between the United States and China as well as slowing global growth. The preliminary reading for the University of Michigan’s Index of Consumer Sentiment was 92.0 (consensus 90.2), up from the final reading of 89.8 for August.

In trade, China will exempt some agricultural products from additional tariffs on U.S. goods, including pork and soybeans, China’s official Xinhua News Agency said Friday, in the latest sign of easing Sino-U.S. tensions before a new round of talks aimed at curbing a bruising trade war. The United States and China have both made conciliatory gestures, with China renewing purchases of U.S. farm goods and U.S. President Donald Trump delaying a tariff increase on certain Chinese goods.

The 2-yr yield increased seven basis points to 1.79%, and the 10-yr yield increased 11 basis points to 1.90%. The U.S. Dollar Index declined 0.05% to 98.26. WTI crude lost 0.5%, or $0.25, to $54.88/bbl.

Saudi Arabia grappled with weekend attacks on the heart of its oil production facilities in Abqaiq and Khurais. Abqaiq is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Saturday’s attack is the biggest on Saudi oil infrastructure since Saddam Hussein’s invasion of Kuwait in 1990, when Iraq’s military fired scud missiles into the kingdom. While Yemen’s Houthi rebels, who have been at war with the Saudis since 2015, claimed the attack, numerous officials and analysts point to Tehran. U.S. Secretary of State Mike Pompeo via Twitter blamed Iran for the attack, saying “Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.” Iran responded by calling the allegations “pointless.” Security experts say the attack likely came from an Iranian-backed militant group in Iraq. Baghdad on Sunday afternoon denied its territory was involved in any way.

On Today’s Open, U.S. oil futures advanced about 11% to $60.98 a barrel, maintaining gains from just after trading opened at 6 p.m. ET. Brent crude, the global gauge of oil prices, soared 13% to $68.13 a barrel. If those moves held, they would mark some of the biggest intraday for crude in years and put oil at its highest level in months. Analysts cautioned that prices likely will be volatile as trading volumes increase throughout the session and more details emerge about the disruption in Saudi Arabia, where attacks over the weekend knocked out 5.7 million barrels a day of production, or roughly 5% of the globe’s output.

STOCK MARKET WRAP 

S&P500, -0.07%, 3,007.39
Nasdaq, -0.22%, 8,176.71
Nikkei Futures, -0.09%, 21,800.0

The S&P 500 declined 0.07% on Friday, as losses in crowded areas like technology and real estate offset gains in value-oriented spaces like financials and energy. The Nasdaq Composite lost 0.22%. The Dow Jones Industrial Average (+0.1%) rose for the eighth straight day, and the Russell 2000 (+0.2%) finished the week up 4.9%.

Apple’s price target was cut to $165 from $187 at Goldman Sachs on concerns that its streaming service will adversely affect its income statement. Apple responded, saying the introduction of Apple TV+ will not have a material impact on its financial results, which helped temper selling pressure in the afternoon.

Trade-sensitive groups like the S&P 500 materials (+1.1%) and industrials (+0.5%) sectors showed relative strength while the energy (+0.8%) and financials (+0.8%) sectors capped off an impressive week on a high note. Financial stocks benefited from another rise in yields, and curve-steepening, as Treasuries sold off following an uptick in retail sales and a rebound in consumer sentiment.

CURRENCY MARKET WRAP 

As of Fri Sep 13th, Singapore Time zone UTC+8

U.S. Dollar Index, -0.22%, 98.43
USDJPY, +0.33%, $108.18
EURUSD, +0.42%, $1.1056
GBPUSD, +0.01%, $1.2329
USDCAD, +0.13%, $1.3210
AUDUSD, +0.02%, $0.6863
NZDUSD, -0.19%, $0.6401

U.S. Total CPI for August increased 0.1% m/m, as expected, while core CPI, which excludes food and energy, rose a stronger-than-expected 0.3% (consensus +0.2%). The monthly changes left total CPI up 1.7% yr/yr, versus 1.8% in July, and core CPI up 2.4% (largest 12-month increase since July 2018), versus 2.2% in July.

In trade, Trump said he will delay the tariff rate increase on $250 billion of Chinese imports to Oct. 15 from Oct. 1. Those goods remain taxed at 25%, but the new 30% rate will be delayed at China’s request, as Oct. 1 marks the 70th anniversary of the People’s Republic of China. Trump also remarked that China is expected to buy large amounts of U.S. agricultural goods. Trump’s “gesture of good will” was followed up by a report from Bloomberg that the Trump’s advisers were considering an interim trade deal with China. This report was later refuted by sources from CNBC, which dampened an early rally effort in the stock market.

The U.S. Treasury market experienced some noticeable price swings on Thursday. Yields fell in unison with the 10-yr German bund yield following the ECB policy decision. Some factors that helped lift yields back up included a turnaround in the German bund yield, weekly jobless claims that remained at historically low levels, and a stronger-than-expected 0.3% increase in core CPI for August. The 2-yr yield increased five basis points to 1.72%, and the 10-yr yield increased six basis points to 1.79%. The U.S. Dollar Index lost 0.22% to 98.43, pressured by a rebound in the euro.

The ECB rolled out a massive stimulus package on Draghi’s last meeting as head of the central bank. Their actions reflect their resolve to boost the Eurozone economy and mitigate the risk of recession. These are the 5 Parts of the ECB September Stimulus Package 1. Interest rates cut by 10bp to -0.5% (as expected). 2. ECB dropped their calendar guidance. 3. Restarted bond purchases. 4. Changed their TLTRO rate to eliminate 10bp spread and provide more favourable bank lending conditions. 5. Introduced a 2 tier reserve system that would exempt part of bank holdings from negative rates. Instead of extending its losses below 1.09, Euro reversed sharply after Draghi’s press conference to trade well above 1.10. One of the reasons for a rebound in Euro was due to Draghi’s call on governments to go big with fiscal stimulus. He said “reform implementation must be stepped but substantially” to raise long term growth potential. The central bank has long felt that monetary stimulus alone won’t be enough and by doubling down on a massive stimulus package, he’s put the ball in their court. In addition, ECB tiering boosts Euro and 2y yields as tiering absorbs Euro liquidity from the interbank market by increasing the relative ECB deposit return. A tiered deposit rate suggests that policy rates have approached the effective lower bound.

STOCK MARKET WRAP 

S&P500, +0.29%, 3,009.57
Nasdaq, +0.30%, 8,194.47
Nikkei Futures, +0.78%, 21,727.5
 
The S&P 500 advanced 0.29% on Thursday, as positive-sounding trade developments and stimulus measures from the ECB helped extend the market’s September rally. The Dow Jones Industrial Average increased 0.2%, and the Nasdaq Composite increased 0.3%. The Russell 2000 (-0.04%), however, finished just below its flat line.

CURRENCY MARKET WRAP 

As of Thu Sep 12th, Singapore Time zone UTC+8

U.S. Dollar Index, +0.31%, 98.63
USDJPY, +0.43%, $108.01
EURUSD, -0.27%, $1.1013
GBPUSD, -0.11%, $1.2335
USDCAD, +0.25%, $1.3184
AUDUSD, +0.20%, $0.6874
NZDUSD, -0.06%, $0.6421

U.S. The Producer Price Index for final demand was up 0.1% m/m in August, as expected, but the index for final demand excluding food and energy, was up 0.3% (consensus +0.1%), which was hotter than expected.

There were few developments on Wednesday to interrupt the market’s placated views on trade and growth. Regarding trade, China released a list of U.S. products it will exempt from a higher tariff rate, although key farm products were not included. Central banks also appear on the market’s side, with China reportedly set to start an easing cycle later this month and the ECB expected to cut rates on Thursday.

The ECB has many options including a rate cut, stronger forward guidance, a new program of asset purchases and compensation for banks to relieve the negative effects of negative interest rates. They prefer a combination of measures because they feel that a package is “more effective than a sequence of selective actions.” The market expects a minimum of a 10bp rate cut. If the central bank combines this with rate tiering or a new Quantitative Easing program, Euro will sell off aggressively but if all they do is cut rates and strengthen their low rate pledge, Euro will soar in disappointment.

Oil took a hit on reports that President Trump was in talks to ease sanctions on Iran. OPEC also downgraded its forecasts for oil demand in 2019 and 2020. The continued rise in Treasury yields reflected some of the improved sentiment on Wall Street, as investors showed less interest for the safe-haven asset. The 2-yr yield increased one basis point to 1.67%, and the 10-yr yield increased three basis points to 1.73%. The U.S. Dollar Index advanced 0.31% to 98.63.

STOCK MARKET WRAP 

S&P500, +0.72%, 3,000.93
Nasdaq, +1.06%, 8,169.68
Nikkei Futures, +1.25%, 21,617.5

S&P 500 advanced 0.72% on this 18th anniversary of 9/11, boosted by strength in growth and value stocks alike. Apple (AAPL 223.59, +6.89, +3.2%)carried the benchmark index back to the 3000 level and helped boost the Dow Jones Industrial Average (+0.9%) and Nasdaq Composite (+1.06%) to solid gains.

Apple provided the leadership in the tech sector, and broader market, as investors and (some) analysts remained content with its product event yesterday. Needham raised its AAPL price target to $250 from $225, while Maxim Group lowered its AAPL price target to $204 from $211. Strength in Apple trickled over to the Philadelphia Semiconductor Index (+1.5%).

CURRENCY MARKET WRAP 

As of Wed Sep 11th, Singapore Time zone UTC+8

U.S. Dollar Index, +0.07%, 98.35
USDJPY, +0.33%, $107.61
EURUSD, +0.01%, $1.1049
GBPUSD, +0.08%, $1.2357
USDCAD, -0.18%, $1.3145
AUDUSD, -0.06%, $0.6858
NZDUSD, -0.16%, $0.6414

Currency markets were quiet on Tuesday with little fresh economic prints to move currencies.

UK employment numbers were better than expected with wages rising at the fastest pace since June 2008 (4.0% vs expected 3.7%). Although Brexit turmoil has affected business sentiment and spending the slowdown has not trickled down to the labor market. Nevertheless, labor data tends to be the most sticky and lagging of the macro indicators so the true impact of Brexit could surface in a few months.

Treasury yields finished noticeably higher, as the crowded Treasury market continued to see less demand. The 2-yr yield increased nine basis points to 1.66%, and the 10-yr yield increased eight basis points to 1.70%. The U.S. Dollar Index increased 0.07% to 98.35.

STOCK MARKET WRAP 

S&P500, +0.03%, 2,979.39
Nasdaq, -0.04%, 8,084.15
Nikkei Futures, -0.20%, 21,200.0

The S&P 500 (+0.03%) eked higher on Tuesday, finishing at its best levels of the day after trading with modest losses the whole day. Tuesday’s action saw investors continuing to rotate out of this year’s best-performing stocks for those perceived as having more potential value.

The Dow Jones Industrial Average (+0.3%) was lifted by its highest-priced component,Boeing (BA 369.49, +10.71, +3.0%), while the Russell 2000 (+1.2%) outperformed amid big gains in energy stocks. The Nasdaq Composite (-0.04%) finished just below its flat line amid relative weakness in shares of technology companies.

Value-oriented stocks, in this case those that have underperformed amid growth concerns, have come to life this week. Improved sentiment pertaining to growth and trade has contributed to this value trade, which was made most pronounced in the outperformance in the S&P 500 energy sector (+1.3%), SPDR S&P Retail ETF (XRT 43.61, +1.18, +3.0%), and Dow Jones Transportation Average (+1.5%) on Tuesday.

In corporate news, Apple (AAPL 216.70, +2.53, +1.2%) held its annual product event where it unveiled its latest iPhone. The $4.99/month pricing for its TV+ streaming service came as a surprise to some and contributed to weakness in Netflix (NFLX 287.99, -6.35, -2.2%).

CURRENCY MARKET WRAP 

As of Mon Sep 9th, Singapore Time zone UTC+8

U.S. Dollar Index, -0.02%, 98.39
USDJPY, +0.00%, $106.92
EURUSD, -0.05%, $1.1029
GBPUSD, -0.40%, $1.2282
USDCAD, -0.43%, $1.3172
AUDUSD, +0.47%, $0.6847
NZDUSD, +0.82%, $0.6427

From a headline perspective, the U.S. employment report appeared to disappoint as jobs growth came in below expectations. Nonfarm payrolls increased by 130,000 (consensus 163,000). The positive spin, however, was that the labor participation rate, employment-population ratio, and total number of employed workers all increased from July. Average Hourly Earnings were also up at 0.4% m/m (consensus 0.3% m/m), while the unemployment rate held firm at 3.7% as expected.

The labor force participation rate increased to 63.2% from 63.0% in July (and 62.7% yr ago), the employment-population ratio rose to 60.9% from 60.7% (and 60.3% yr ago), and the total number of employed workers increased by 590,000 versus July. In sum, more people are working and earning money, which is a good recipe for increased consumer spending.

U.S. Treasuries finished slightly higher after a sharp sell-off yesterday. The 2-yr yield and the 10-yr yield declined two basis points each to 1.52% and 1.55% respectively. The U.S. Dollar Index finished relatively flat at 98.39. WTI crude increased 0.3%, or $0.14, to $56.45/bbl.

In contrast, Canada’s labor market is on fire. More than 81.1K jobs were created in August (consensus 18.9K) with a nice mix between full and part time work. This was the second strongest month of job growth this year and among the 3rd best month for the labor market in the past 5 years. Reports like this validate the central bank’s neutral outlook. At the last monetary policy meeting, the Bank of Canada said they feel the “current degree of monetary policy stimulus” is appropriate. While they recognize that the escalating trade conflict is affecting Canada’s economy, they also feel that the economy is close to potential and inflation is on target.

STOCK MARKET WRAP 

S&P500, +0.09%, 2,978.71
Nasdaq, -0.17%, 8,103.07
Nikkei Futures, +0.54%, 21,199.57

The stock market finished mixed on Friday, as it cooled off from a two-day rally amid a lackluster response to the August employment report. The S&P 500 (+0.09%) and Dow Jones Industrial Average (+0.3%) closed just above their unchanged marks, while the Nasdaq Composite (-0.17%) and Russell 2000 (-0.4%) closed slightly lower.

Today’s action didn’t reflect much enthusiasm, though, but that wasn’t out of the ordinary after a sharp two-day rally in stocks. Friday’s leaders were an eclectic group: energy (+0.5%), materials (+0.5%), and consumer staples (+0.5%). The utilities (-0.3%), communication services (-0.2%), and information technology (-0.2%) sectors finished in negative territory.

Facebook (FB 187.49, -3.41, -1.8%) dragged on the communication services sector after New York announced a formal antitrust investigation into the company. Lululemon athletica (LULU 203.14, +14.73, +7.8%)impressed investors with positive results and upbeat guidance, which may have helped buying interest trickle over into the S&P 500 consumer discretionary sector (+0.2%).

DocuSign (DOCU 56.27, +10.02, +21.7%) was another standout, rising over 20% after the software company beat revenue estimates and issued upside revenue guidance.