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TradeFred Daily Briefing
Wed 15-05-2019 12:00

In Brief:

  • Aussie brushes 4-month low over TradeWar concerns
  • Gold loses its shine as Dollar bulls take over
  • Walmart announces plans for Asda IPO
  • Bitcoin hits highest level for 10 months giving cryto traders hope
The US Dollar was firmer in early Asian trade on Wednesday while the Australian Dollar brushed a more than four-month low as traders eyed Chinese and European data for clues on whether the worst is over for the global economy. The Greenback was supported as trade issues remained front-and-centre of investors' minds after US and Chinese officials had said the two countries would continue to negotiate on trade. US President Donald Trump insisted on Tuesday that trade talks with China had not collapsed and called the US-China trade war "a little squabble". China may be reluctant to commit to a deal with the US that limits its flexibility on foreign-exchange rates if officials in Beijing draw lessons from previous trade clashes between America and Japan. That’s the view of Deutsche Bank AG strategists Oliver Harvey and Shreyas Gopal, who wrote that US pressure on its biggest economic rival in the early 1990s appears to have at least indirectly contributed to an inadequate policy response from the Japanese authorities. That led to an unwanted appreciation of the yen and protracted deflation, they wrote in a note Monday. If the Yuan is the weather vane for the current mood, then bargain hunters might suddenly sense an opportunity. The Chinese currency’s six-day decline screeched to a halt today after Monday’s nerve-jangling 1% slide, as the central bank set its fixing higher than traders expected. It strengthened offshore by as much as 0.4% before drifting back a bit later. Oil eased on Wednesday after closely watched data showed a surprise rise in US crude stockpiles, but prices were supported by mounting tensions in the Middle East. Brent Crude futures were at $70.90 a barrel at 01:00 GMT, down 41 cents, or 0.7%, from their last close. Brent closed up 1.4% on Tuesday. US West Texas Intermediate (WTI) Crude futures were at $61.39 per barrel, down 24 cents, or 0.3%, from their previous settlement. WTI closed up 1.2% in the previous session. US crude stockpiles unexpectedly rose last week, while gasoline and distillate inventories increased, data from industry group the American Petroleum Institute showed on Tuesday. Saudi Arabia reported attacks against its oil industry for a second day in a row Tuesday, but instead of heightened trade war fears to depress the market, US President Donald Trump said he could have a "very fruitful meeting" at the G20 next month with his Chinese counterpart Xi Jinping. Trump's assuring words, and a triple-digit rebound for Wall Street's Dow after Monday's shock selloff, were enough to put the bulls in charge of Tuesday's action in Oil. Mexico is closing in on a deal to repeal US President Donald Trump's punitive tariffs on steel and aluminium, a senior Mexican official said on Tuesday, potentially moving a step nearer to the ratification of a major trade deal struck last year. "We are, I think, close to negotiating the lifting of the tariffs," Mexican Economy Minister Graciela Marquez told Canadian broadcaster CBC after meeting with Canadian Foreign Minister Chrystia Freeland in Toronto. "We're having very fruitful conversations on lifting the tariffs not only in the US but also here in Toronto." Gold has had its shot at $1,300. Now USD bulls want some time in the sun too. President Donald Trump's remarks that he looked forward to a "very fruitful meeting" at the G20 next month with his Chinese counterpart Xi Jinping eased trade war tensions, sending the Greenback to its best performance in two weeks. As a result, Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $5.50, or 0.4%, at $1,296.30 per ounce. Spot Gold, reflective of trades in bullion, was down $3.28, or 0.3%, at $1,296.56 per ounce by 3:30 PM ET (19:30 GMT). Asian Markets rise in morning trade on Wednesday, recovering from an earlier slump this week amid intensifying trade tension between the US and China. China’s Shanghai Composite and the Shenzhen Component gained 1% and 1.1% respectively by 10:30 AM ET (02:30 GMT). Hong Kong’s Hang Seng Index rose 0.7%. Walmart, the world's biggest retailer, said it is considering a stock market listing for its British supermarket arm Asda, whose attempt to combine with rival Sainsbury's was blocked by the UK regulator last month. Judith McKenna, the Walmart International CEO, told Asda managers at an event in Leeds, northern England, on Tuesday: "While we are not rushing into anything, I want you to know that we are seriously considering a path to an IPO - a public listing - to strengthen your long-term success." But she cautioned that any preparations for an IPO would "take years", according to comments released by Asda afterwards. Britain's competition regulator ruled Sainsbury's £7.3 billion ($9.4 billion) takeover of Asda could not proceed, blocking one potential exit route for Walmart from the UK. Nelson Peltzs' Trian Fund Management LP may push Legg Mason Inc to implement changes to boost returns, a person familiar with the matter said on Tuesday, the second time in 10 years that Trian has targeted the mutual fund company. The two sides have discussed cutting costs, the source said, and Legg Mason chairman, president and chief executive officer Joseph Sullivan said on an earnings call on Monday that the company plans to manage costs more effectively to improve profitability. Legg Mason's share price has fallen 15.5% in the last year. Ranked as one of the country's 30 biggest mutual fund firms, the company reported $758 billion in assets under management at the end of the fiscal year, which ended in March, up from $754.1 billion a year earlier. China on Wednesday reported surprisingly weaker growth in industrial output and retail sales for April, reinforcing expectations that Beijing needs to roll out more stimulus measures as the trade war with the United States escalates. Investment also stumbled unexpectedly, suggesting China's economy is still struggling for better footing even as a sharp hike in US tariffs on Friday ratcheted up pressure on its exporters. Growth in industrial output slowed more than expected to 5.4% in April from a year earlier, pulling back from a surprising strong 4.5-year high of 8.5% in March, which some analysts had suspected was boosted by seasonal and temporary factors. US import prices rose less than expected in April as increases in the cost of petroleum and food were tempered by the largest decrease in the price of capital goods in 10 years, suggesting inflation could remain tame for a while. The report from the Labor Department on Tuesday came on the heels of data last week that showed moderate producer and consumer price gains in April, which underscored the Federal Reserve's projection of no more interest rate hikes this year. Economists said while inflation was not too low for the US central bank to cut rates this year, the Trump administration's escalating trade war with China, if it starts to impact economic and job growth, could force the Fed's hand The Bank of England said it was carefully monitoring falling capital levels at insurers that use their own computer models for calculating capital requirements. David Rule, executive director of insurance supervision at the Bank of England's Prudential Regulation Authority, also warned insurers that ending use of the tarnished Libor interest rate benchmark was a top priority. Large insurers are allowed to use their own models, while smaller firms must use the so-called standard approach set out by regulators. Rule said he has not seen a general fall in standards. San Francisco Federal Reserve Bank President Mary Daly said on Tuesday that she wants to create inclusive growth that can expand potential employment in the future, not just to maximize how many people have jobs now. Daly said at an event Northwestern University in Illinois that - while US economic growth does not look as sluggish as it otherwise might appear, given an aging population and the scars of the 2008 financial crisis - people participate in the US labour market at rates lower than in other industrialized countries. US growth appears to be based "exclusively" on government, corporate and mortgage debt and the economy would have contracted if the United States had not added trillions in debt, Jeffrey Gundlach, chief executive of DoubleLine Capital, said in an investor webcast on Tuesday. "Nominal GDP growth over the past five years would have been negative if US public debt had not increased," said Gundlach. "One thing everybody seems to miss when they look at these GDP numbers ... they seem to not understand that the growth in the GDP it looks pretty good on the screen is really based exclusively on debt - government debt, also corporate debt and even now some growth in mortgage debt." Federal Reserve officials are sticking with their pledge for patience on interest rates, shrugging off President Donald Trump’s escalating trade war and his pressure for a cut. New York Fed President John Williams and his Kansas City colleague Esther George, who vote on policy this year, acknowledged that new tariffs on Chinese imports could affect the outlook for US inflation and growth. But both saw no need for the central bank to react. Bitcoin hit its highest level in 10 months on Tuesday, raising hopes among cryptocurrency enthusiasts of greater mainstream acceptance as an escalating US-China trade war roiled global markets, but others urged investor caution. Bitcoin, which lost three-quarters of its value in 2018, has soared by 24% since Friday and more than doubled in price so far this year. At 1612 GMT it was up 0.8% at $7,874. There was no obvious reason for the sudden rise with the opacity of cryptocurrency markets rendering it virtually impossible to prove or disprove any theories. Elsewhere, FOIN was trading at $1,703.50 by 23:26 (03:26 GMT) on the Synthetic exchange on Wednesday, up 12.20% on the day. It was the largest one-day percentage gain since May 13.

Latest Daily Reviews

In Brief:

  • Sterling stands tall while USD nurses losses
  • Saudi Aramco IPO raises at least $25.6bn
  • Palladium stays on record-breaking spree
  • Japanese households cut spending

The US Dollar nursed a week of losses on Friday, hit by nervousness on trade and mixed signals about the local economy, while the British Pound stood tall as bets firmed that Prime Minister Boris Johnson can win a commanding electoral victory. The safe havens of the Japanese Yen and Swiss Franc were also in demand as a hedge against Sino-US trade talks collapsing, and as investors fretted that US jobs figures due later in the day may fail to deliver an expected rebound.

TradeFred Daily Briefing

In Brief:

  • Good news for the Aussie & Kiwi but Yuan slides
  • Brent Crude & WTI fall due to high stockpiles
  • Huawei sues Federal Communications Commission
  • New cryptocurrency derivatives exchange Phemex launched

Asian currencies made something of a comeback on Thursday morning in Asia as optimism about a possible trade deal between China and the US returned. The USD was lost a little ground and the Australian Dollar stopped a multi-day slide even as the Yuan continued to slide. Elsewhere, New Zealand's softer-than-expected banking reforms pushed the Kiwi to a four-month high.

TradeFred Daily Briefing

TradeFred Daily Briefing

In Brief:

  • Sterling stands tall while USD nurses losses
  • Saudi Aramco IPO raises at least $25.6bn
  • Palladium stays on record-breaking spree
  • Japanese households cut spending

The US Dollar nursed a week of losses on Friday, hit by nervousness on trade and mixed signals about the local economy, while the British Pound stood tall as bets firmed that Prime Minister Boris Johnson can win a commanding electoral victory. The safe havens of the Japanese Yen and Swiss Franc were also in demand as a hedge against Sino-US trade talks collapsing, and as investors fretted that US jobs figures due later in the day may fail to deliver an expected rebound.

Elsewhere, the Canadian Dollar will add to this year's gains over the coming 12 months as a potential easing of global economic risk reduces pressure on the Bank of Canada to provide support for Canada's commodity-linked economy, a Reuters poll showed.The poll of nearly 40 currency analysts showed they expect the Loonie to strengthen 1.5% to 1.30 per US Dollar, or 76.92 US cents, in one year, from about 1.32 on Thursday. That matches the projection in November's poll.

Oil edged up in early Asia trade on Friday, with US Crude trading near a two-month high after OPEC agreed to increase output curbs by nearly 50% in early 2020, although the cartel stopped short of promising any further steps after March. West Texas Intermediate Oil futures (CLc1) were up by 2 cents at $58.45 a barrel by 01:01 GMT. They rose to as high as $59.12 a barrel on Thursday, the highest since the end of September. Brent futures (LCOc1) were up 1 cent at $63.40. They fell 0.6% on Thursday. Meanwhile, shares of Saudi Arabian Oil Co (Saudi Aramco) sold at 32 Riyals ($8.53) apiece after its long-awaited IPO. The move raised at least $25.6 billion.

Palladium, the auto-catalyst metal in short supply, stayed on its record-breaking spree on Thursday as its shinier cousin Gold edged higher by remaining doggedly on the trail of the US-China negotiations. The spot price of Palladium was up $2.70, or 0.1%, at $1,824.70 after a record high at $1,877.98. Palladium futures for March delivery on Comex settled up just 30 cents at 1,845.70 after peaking at an all-time high of $1,848.35.

The Communications Workers of America union filed a federal labour charge against Alphabet Inc's Google on Thursday, accusing the company of unlawfully firing four employees to deter workers from engaging in union activities. The complaint, seen by Reuters, will trigger a National Labor Relations Board (NLRB) investigation into whether Google violated the four individuals' right to collectively raise concerns about working conditions.

Asian markets gained in morning trade on Friday ahead of the release of US nonfarm payrolls data for November due later in the day stateside. China’s Shanghai Composite was little changed by 10:35 PM ET (02:35 GMT), while the Shenzhen Component inched up 0.2%. Japan’s Nikkei 225 rose 0.3% after the country’s Prime Minister Shinzo Abe announced on Thursday evening stimulus measures to support growth.

Social unrest in Hong Kong contributed two percentage points to the city's economic contraction in the third quarter, Paul Chan, financial secretary of the city's government, told legislators in a televised hearing on Friday, citing "rough estimates". Hong Kong sank into recession for the first time in a decade in the third quarter, government data confirmed in November, weighed down by increasingly violent anti-government protests and the escalating US-China trade war.

British employers' demand for staff rose in November at the slowest rate in more than a decade, adding to signs of a waning jobs market ahead of Brexit and next week's general election, a survey of recruiters showed on Friday. Monitored by the Bank of England, the index of demand for staff from the Recruitment and Employment Confederation (REC) and accountants KPMG fell to 51.4 in November, its lowest since September 2009, from 51.6 in October. Last month, two out of nine BoE interest-rate setters unexpectedly voted to cut interest rates, citing signs that the labour market - the bright spot of Britain's economy since the Brexit vote - may now be starting to weaken.

Analysts have nudged up their forecasts for the Australian Dollar as the currency proves resilient to global trade uncertainty and poor economic news at home, though the risk of radical policy easing looms for next year. The Reuters poll sees the Aussie at $0.6800 in one and three months, up a cent from last month's poll and in line with its current $0.6830 reading. The currency was then seen rising to $0.6900 in six months and $0.7000 on a one-year horizon, again a cent higher than in November. This time last year, the call was for the Aussie to end 2019 at $0.7500, a seven cent miss due largely to the endless Sino-U.S. trade dispute and three rate cuts from the Reserve Bank of Australia (RBA).

Japanese households cut their spending for the first time in almost a year in October as a sales tax hike prompted consumers to rein in expenses and natural disasters disrupted business. Household spending dropped 5.1% in October from a year earlier, government data showed on Friday, down for the first time in 11 months and the biggest fall since March 2016 when spending fell 5.3% and weaker than the median forecast for a 3.0% decline. That marked a sharp reversal from the 9.5% jump in September, the fastest growth on record as consumers rushed to buy goods before the Oct. 1 sales tax hike from 8% to 10%.

Japanese Finance Minister Taro Aso said on Friday that he did not believe the central bank's negative interest rate policy was behind a megabank's decision to consider implementing fees on various banking services. Aso made the comment after the Nikkei business daily reported that Mitsubishi UFJ Financial Group (MUFG) was considering fees on dormant accounts and other services.

TradeFred Daily Briefing

In Brief:

  • Good news for the Aussie & Kiwi but Yuan slides
  • Brent Crude & WTI fall due to high stockpiles
  • Huawei sues Federal Communications Commission
  • New cryptocurrency derivatives exchange Phemex launched

Asian currencies made something of a comeback on Thursday morning in Asia as optimism about a possible trade deal between China and the US returned. The USD was lost a little ground and the Australian Dollar stopped a multi-day slide even as the Yuan continued to slide. Elsewhere, New Zealand's softer-than-expected banking reforms pushed the Kiwi to a four-month high.

On Wednesday US President Donald Trump said discussions between China and the US are going very well. Negotiators may be closers to an agreement on tariff relief that could help stave off the next round of US tariffs on Chinese goods that is due to take effect December 15, Bloomberg reported. These tariff relief measures would be part of a phase one deal. The flight to safety seen on Wednesday reversed after Trump said trade talks with China were going "very well," a day after floating the idea that a deal might have to wait until after the 2020 presidential election. Bloomberg also reported that the two sides are moving closer to an agreement, citing people familiar with the talks.

Oil prices traded lower on Thursday in Asia after data showed a higher-than-expected builds in crude inventories. US Crude Oil WTI Futures fell 0.3% to $58.23 by 11:54 PM ET (03:54 GMT). International Brent Oil Futures slipped 0.1% to $62.94. The Energy Information Administration (EIA) reported that US crude inventories fell by 4.9 million barrels for the week ended November 29, compared with expectations for a drop of 1.73 million barrels, according to forecasts compiled by Investing.com.

Gold prices traded higher on Thursday morning in Asia and remained above $1,480 despite a sharp decline the day before. Gold Futures contracts were up 0.03% to trade at $1,480.65 by 10:58 PM ET (02:58 GMT). The precious metal remained steady amid a softer US Dollar. The US Dollar Index Futures edged down 0.04% to 97.5 after the US released weaker-than-expected job growth data.

A slowdown in gas demand growth in China, the driver of global use over the past two years, is expected to slacken further, adding to investor concern as supply continues to build. Consumption in 2021-2025 will grow at a slower pace than it has in the current five-year period, a researcher at China’s economic planning department said at the Bloomberg NEF summit in Shanghai on Wednesday. Furthermore, a weaker economy and rising imports via pipeline could shrink the share of liquefied natural gas in the overall Chinese market, according to gas utility ENN Energy Holdings Ltd.

General Motors and South Korea's LG Chem are set to announce on Thursday a 50:50 joint venture in Ohio to make electric vehicle batteries, sources familiar with the matter told Reuters. The facility in Lordstown will see investment of more than $2 billion, with GM and LG Chem expected to invest more than $1 billion each, one of the sources said. The venture is likely to be signed on Thursday, the sources said.

JPMorgan Chase & Co began internal discussions that would lead to immunity from prosecution over a troubled Australian capital raising two years before two rivals were charged with criminal cartel behaviour, a court heard on Thursday. A former JPMorgan banker gave the timeline as the first witness to testify in a legal battle that is being closely watched by investment bankers around the world because it may change the way they are permitted to conduct capital raising. JPMorgan, Citigroup Inc and Deutsche Bank AG worked on a A$2.5 billion ($1.70 billion) stock issue for Australia and New Zealand Banking Group Ltd in August 2015.

Huawei Technologies Co has sued the Federal Communications Commission, seeking to overturn a regulatory decision that will hurt the Chinese corporation’s business with its last major American clients. China’s largest technology company by sales said it has filed a lawsuit with the Fifth Circuit Court of Appeals, challenging the American agency’s decision to bar the use of federal subsidies by rural carriers purchasing its equipment. Huawei complained it was not accorded due process and was unfairly labelled a national security threat.

The World Bank has urged countries of the Gulf Cooperation Council (GCC) to prioritize environmental sustainability while diversifying their economies away from a reliance on hydrocarbon revenues in an era of lower energy prices. The six GCC states – Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman – have, as part of their diversification strategies, largely been developing energy-intensive heavy industry such as the petrochemical sector. In a report published on Wednesday, the World Bank recommended the establishment of "effective" environmental management institutions and practices, in addition to scaling up investments in renewables.

Eurozone business activity stayed near stall speed last month, with manufacturing seemingly continuing to act as a drag on the bloc's dominant services industry as well as the economy as a whole, a survey showed. Despite some optimistic signs in Wednesday's survey, that picture is likely to disappoint policymakers at the European Central Bank who in September relaunched a 2.6 trillion Euro asset purchase program designed to stimulate growth and inflation. IHS Markit's final Eurozone composite Purchasing Managers' Index (PMI), seen as a good gauge of economic health, held steady last month at October's 50.6.

Emmanuel Macron’s push to transform France’s sclerotic economy is facing the ultimate test of presidents past: “la greve.” In what has been the undoing of previous French governments, unions representing everyone from transport workers to lawyers, doctors, teachers and students are going on an indefinite “greve,” or strike, starting Thursday. The strike will disrupt rail transport, flights, schools and hospitals across France. Threatening to bring the country to a standstill until the government backs down, the unions are opposing Macron’s plan for a top-to-bottom rebuilding of the pension system. While Macron has already barreled through reforms of tax and labor laws, history shows pensions won’t be nearly as easy. In 1995, Prime Minister Alain Juppe abandoned his pension-reform plan after strikes paralyzed the country for about a month.

Bank of Japan board member Yutaka Harada said on Thursday the central bank should continue its current monetary stimulus in order for prices and interest rates to eventually pick up, though he refrained from calling for further easing. "Given that current low interest rates were caused by deflationary monetary policy in the past, the only way is to wait for prices and interest rates to rise while continuing current monetary easing aimed at sustaining economic growth," Harada said in a speech to business leaders in Oita, southern Japan.

Australian retailers had it tough in October as skittish consumers chose to hoard any windfall from lower interest rates and tax rebates, likely heralding another quarter of disappointment for the economy. Data out on Thursday also showed the country's trade surplus shrank by a third in October as resource exports came off the boil, a worrying turn for what has been a vital prop to growth. Extending a spate of soft reports, retail sales were flat in October at A$27.6 billion ($18.73 billion) when analysts had looked for a 0.3% gain. Clothing, home wares and department stores all saw declines in the month.

A group of former software developers from Morgan Stanley announced on Wednesday the launch of a cryptocurrency derivatives exchange called Phemex that aims to execute trades in less than a millisecond for both retail and institutional investors. Jack Tao, an 11-year executive with Morgan Stanley where he was the global development leader of the investment bank's Electronic Trading Benchmark Execution Strategies, co-founded the company. He resigned from Morgan Staley in July.