The S&P 500 winter clearance sale is now over
Archives of “February 2019” month
rssNikkei 225 closes lower by 0.79% at 21,385.16
Tokyo’s main index closes lower as Asian stocks fall in light of fading trade optimism and poor Chinese data
Japanese stocks performed poorly on the session as optimism from trade talks between US and China are put into question following comments by Lighthizer yesterday. Poor Chinese PMI data earlier in the day also isn’t helping with sentiment and as a result, markets are leaning towards a more softer risk tone as we gear towards European trading.
Of note, Chinese stocks are lower with the Shanghai Composite trading 0.5% down in the final hour of trading now. Some questionable rhetoric on the Trump-Kim summit is also something that could potentially meddle with risk sentiment later, so just be wary of that.
Japan Industrial production for January, preliminary:-3.7 % m/m (expected -2.5%)
Trade tensions weighing on output in Japan
-3.7% m/m for a big miss – terrible data for Japan output
- expected -2.5% m/m, prior -0.1%
0.0% y/y
- expected 1.3% y/y, prior -1.9%
Outlooks for Japanese manufacturers from the METI:
- see Feb output +5.0% m/m
- see March output at -1.6% m/m
January IP falling its hardest since the same month in 2018
- this is the third consecutive monthly decline
As noted in the preview (link below), there can be distortions in Jan and Feb data due to the Lunar New Year celebrations in China.
To the extent this impacts BOJ thinking it further distances the prospect of any exit from easy monetary policy. Thus a yen negative.
Nikkei reports Chinese companies are starting to curb hiring in 2019
Japanese press reports on a small survey (30 firms present at job fairs in the neighbouring cities of Shanghai, Kunshan and Suzhou last week)
- 10 plan to cut back or freeze hiring in 2019 from a year earlier
Bear in mind that is a very small sample, but the Nikkei does add:
- Late February is normally the busiest season for job hunting and hiring in China
More:
- a job fair at a Kunshan career center last Thursday was nearly half empty
- Only 80 companies, mostly manufacturers, participated as many gave up on hiring or left booths unattended with only their names displayed.
- Suffering from trade tensions, suppliers of liquid-crystal displays and smartphone components in particular plan to cut back on hiring.
US says will suspend scheduled March 1 tariff increase on Chinese goods ‘until further notice’
US Trade Representative’s office says will publish federal register notice this week to suspend scheduled March 1 tariff increase on Chinese goods ‘until further notice’
Headlines via Reuters
Thought For A Day
Bitcoin: Has a Future as a Medium of Exchange ?
It was interesting to hear Mr. Buffett’s take on Bitcoin in the extended CNBC interview with Becky Quick this week. That single interview on CNBC is probably the best 3 hours of financial media that viewers get a few times a year.
Mr. Buffett’s comment on Bitcoin: “If you sit there and watch it, it doesn’t do anything, it doesn’t reproduce”, which is actually pretty humorous. (I couldn’t help but think that Mr. Buffett was thinking about farmland, which he as always said he would prefer to own, rather than a similar quantity of gold.)
One important lesson learned from Economics 101 I still remember from freshman year of college, 1978, is that in economics, a currency or money is either a “store of value” or “a medium of exchange”. (It was surprising to read Wikipedia’s “store of value” definition since it seems very similar to Investopedia’s “medium of exchange” definition.)
Are the the “store of value” versus “medium of exchange” terms really all that different ? On their face, it doesn’t appear to be the case, but my own definition of store of value was that it was intended to mean “intrinsic value”, which paper currency, gold and bitcoin lack.
As JP Morgan demonstrated this week, cryptocurrency likely has a future as a medium of exchange (in my opinion). It seems like a product looking for a market, the last few years, and that market needs to develop around the cryptocurrency and Bitcoin over time.
Trump says ‘maybe’ he will get a China deal
The usual stuff from Trump
- China trade deal may happen soon, may not happen at all
The stock market is euphoric today on hopes for a deal. The Shanghai Composite was up 5.6%.
The cold war – Barron’s
Thai baht soars to post-coup high, threatening local business
The Thai baht has soared to its highest level against the dollar since the current junta government seized power in a coup in 2014, jeopardizing the nation’s exports and tourism-dependent economic growth just a month before the country’s long-awaited election in March.
The baht traded at 31.19 to the U.S. dollar on Friday, up 4% since the start of the year, as one point reaching its highest level since November 2013.
The appreciation of the Thai currency was steeper compared to regional peers. The Indonesian rupiah and Philippine peso have risen by 2% and 1%, respectively, since the start of the year. The baht was the strongest performer of all regional currencies in 2018.
While the risk appetite of investors around the world turned positive since U.S. Federal Reserve Chairman Jerome Powell signaled a halt in rate rises in January, the Bank of Thailand has maintained its hawkish stance. The country’s central bank held rates at its policy meeting in early February, although two out of six committee members present voted for a rise, even though the bank had already raised rates for the first time in seven years in December.
The difference in policy direction of the U.S. and Thai central banks drew money to the latter market, causing the baht’s rise. A constant current account surplus since late 2014 has also contributed to the currency’s rise.
Yoichiro Yamaguchi, chief economist at Sumitomo Mitsui Banking Corp., said that while currencies of countries with a current-account deficit tend to be vulnerable to market shocks, “Thai baht-based assets are considered safer in the Southeast Asia region.”