2 Min Market Summary: 20 Feb 2019

• New York Fed President Williams (FOMC voter) said mixed economic data has been a strong argument for a pause for further rate hikes, although he added that he expects to be drawing down the balance sheet for some time. Cleveland Fed President Mester (non-FOMC voter) for her part reportedly said she favors slowing the Fed’s balance sheet normalization effort, but said the fed funds rate may need to move a bit higher than current levels if the economy evolves as she expects. The market took the good and ignored the bad, which is all it has done so far in 2019.
• U.S. and China resumed trade negotiations in Washington. Trump said he believes China is intent on working quickly toward a deal to avoid a tariff hike on March 2. Trump reiterated a possible extension to the trade deadline, telling reporters that the March 1 deadline was “not a magical date.”
• U.S. Treasuries saw continued buying interest, driving yields lower across the curve. The 2-yr yield and 10-yr yield decreased two basis points each to 2.50% and 2.65%, respectively. The U.S. Dollar Index declined -0.4% to 96.52 amid strength in the euro. WTI crude rose 1.6% to $56.45/bbl.
• The best performing currency today was Sterling, which jumped more than 1% ahead of today’s meeting between May and Juncker. Although the European Commission continues to say they will not accept a time limit to the backstop, investors remain hopeful that a deal will be reached or an extension will be requested before the March 29th deadline. Juncker expects the talks to be friendly but the EU has been firm on denying changes to the withdrawal agreement and its wishful thinking to assume he will budge today. The EU’s strategy from day 1 is to run down the clock and force the government to accept the current deal or hold a second referendum.

• The S&P 500 increased 0.15% on Tuesday, as strong earnings results from Wal-Mart (WMT 102.20, +2.21, +2.2%) helped ease some concerns about consumer spending. Investors also remained optimistic about U.S.-China trade talks and a market-friendly Fed.
• Nine of the 11 S&P 500 sectors finished higher with materials (+0.6%), utilities (+0.5%), consumer staples (+0.5%), and consumer discretionary (+0.5%) outperforming. Conversely, the health care (-0.3%) and industrial (-0.1%) sectors were the lone groups to finish in the red.
• Wal-Mart’s earnings report was definitely good news for investors. An earnings beat and healthy same-store sales growth from the Dow component helped spur gains in the consumer staples (+0.5%) and consumer discretionary (+0.5%) sectors. Its strong earnings report helped temper concerns about a slowdown in consumer spending that were fueled by the lousy Retail Sales report for December released last week. The SPDR S&P Retail ETF (XRT 45.58, +0.24) increased 0.5%.

BLOCKCHAIN & CRYPTOCURRENCY WRAP

Waste Management Firm Launches Blockchain Platform in UAE City

A blockchain-enabled waste permit portal will be launched in Sharjah, the United Arab Emirates (UAE). The blockchain-based waste permit portal will be jointly developed by environmental, recycling and waste management company Bee’ah and the Hamriyah Free Zone Authority (HFZA) — the city of Sharjah’s free trade zone. T he platform is the first in the city to employ blockchain technology to validate, process and store transactions. The platform will cut costs for customers applying for permits within HFZA as well as reduce permit-issuing time from several days to only a few hours. Khaled Al Huraimel, CEO of Bee’ah, said that he expects the technology “will not only facilitate seamless operations, but also increase trust between customers and operators.”

Japan: E-Commerce Giant Rakuten’s New Payment App Appears to Support Crypto

Japanese e-commerce firm Rakuten announced that a major update of its Rakuten Pay mobile app will be released on March 18, according to the firm’s 2018 earnings release. The app’s new structure appears to indicate that it will support cryptocurrency payments in addition to fiat. Rakuten — known informally as “Japan’s Amazon” includes the firm’s cryptocurrency exchange “Everybody’s Bitcoin” as part of a newly established payments subsidiary, Rakuten Payment. Though the app update does not explicitly note crypto support, the company’s specification that “all payment solutions” will be supported on the platform implies support for crypto payments as a part of its subsidiary, Rakuten Payment. Rakuten acquired Japanese crypto exchange Everybody’s Bitcoin in August 2018 in a $2.4 million deal. In its earnings release, Rakuten reported a net income for 2018 of about 141.9 billion yen (about $1.3 billion), a 28.4 percent year-over-year increase from 2017.

Japan’s Number Two Bank by Assets Completes R3 Blockchain-Based Trade Finance Trial

Japan’s second-largest bank by assets, Sumitomo Mitsui Banking Corporation (SMBC), has completed a proof-of-concept (PoC) using blockchain consortium R3’s Marco Polo trade finance platform. SMBC, which is the only Japanese bank participating in Marco Polo, said it had partnered with Japanese multinational Mitsui & Co. to enhance efficiency in trade processes. “[The] PoC was conducted between SMBC and Mitsui & Co. which aims to improve productivity in its trade operations, by testing modules such as Receivable Finance and Payment Commitment (Payment Undertaking).” Launched in 2017, Marco Polo is a joint venture between R3 and Irish tech firm TradeIX targeting trade finance utility using distributed ledger technology. Leveraging R3’s Corda technology, a total of 15 consortium member banks are currently participating in the Marco Polo consortium, including ING, NatWest and BNP Paribas.