Archives of “May 28, 2019” day

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$72 billion fund thinks worse is yet to come on trade war and is betting against USD

  
  Analysis

Brandywine Global makes contrarian bet against the dollar

All the speculative data shows a crowded trade in the US dollar and at least one fund is leaning the other way.
Singapore-based Brandywine Global is betting against the dollar, a Bloomberg reporthighlights.
“The tariffs are essentially a tax on the U.S. consumer,” Richard Lawrence, a money manager at Brandywine Global, said in an interview in Singapore. “We keep replaying this and come to the conclusion that we think Trump is motivated to do a deal. All of the traditional support pillars for U.S. dollar outperformance seems to be eroding — or they’re gone already.”
The firm likes the Australian dollar and also favors higher-yielding emerging market currencies including Indonesia, Brazil, South Africa, Malaysia, Mexico and Colombia.

European shares end the session lower, erasing earlier gains

  
Analysis, Global Indices

US stocks are clinging to gains

The European shares are ending the session lower, erasing earlier gains:
  • German DAX, -0.43%
  • France’s CAC, -0.44%
  • UK’s FTSE, -0.27%
  • Spain’s Ibex, -0.34%
  • Italy’s FTSE MIB, -0.55%
In the 10 year note sector, yields are mostly lower. The German 10 year is trading further away from the 0.0% level at -0.157%. Below for the day except the to -0.162%.
US stocks are clinging to gainsIn other markets London/European traders look toward the exits, a snapshot shows
  • spot gold, $-9.50 or -0.74% in $1279.40
  • WTI crude oil futures are trading up $.24 or 0.43% at $58.87
In the US, major stock indices are hanging onto gains, but off session highs
  • S&P index +3.42 points or 0.12%  at 2829.24. The session high reach to a 40.51
  • The NASDAQ index is up 28 points or 0.37% at 7665. The session high reach 7693
  • The Dow industrial average is up 22 points or 0.09% at 25608.8. The session high reach 25717.63

US-China trade talks reportedly hit a snag because US ‘kept adding new demands’ to negotiations

  
  Analysis

Latest report by the SCMP

China US

The report cites two separate sources in saying that the breakdown in US-China trade talks arose as China’s Liu He met up with US’ Lighthizer and Mnuchin only for the US side to make additional demands in the late stages of the negotiations.

Adding that those demands would’ve “directly affect China’s political and social stability”, and that Beijing was particularly angered by the additional tariffs and what it saw as the US’ attempt to shift the blame to China.

For me, the remark in bold stands out the most as if China strongly feels that way about the situation – which wouldn’t be the most surprising thing – then it basically would mean that we may not see either side return to the negotiating table unless egos give way.
The full report can be found here, and details further issues on currency manipulation and a supposedly monitoring mechanism. But the crux of it is that China just cannot accept making such commitments as it would compromise their own principles.

Eurozone May final consumer confidence -6.5 vs -6.5 prelim

  
Analysis, Economy

Latest data released by Eurostat – 28 May 2019

  • Economic confidence 105.1 vs 104.0 expected
  • Business climate indicator 0.30 vs 0.40 expected
  • Industrial confidence -2.9 vs -4.3 expected
  • Services confidence 12.2 vs 11.0 expected
Prior month’s release can be found here. The notable thing in the release here is that economic confidence improves slightly to 105.1 in May from 103.9 in April. However, sentiment remains weak as the euro area economy continues to limp this year and the outlook remains cloudy amid ongoing US-China trade tensions.

US 10-year Treasury yields fall to lowest level since October 2017

  
  Analysis

Treasury yields extend decline as risk sentiment grows softer

USGG10YR

That is keeping further pressure on yen pairs today with USD/JPY trading at session lows currently at 109.25. Despite the slight optimism among equities in Asia Pacific trading, bonds/Treasuries did not buy it for a second and we’re seeing market sentiment start to favour bond traders on the session now.
European equities are posting notable declines while US equity futures are down by 0.2% now after having been up by 0.2% at the start of the European morning.
There isn’t any fresh headlines that is driving the move here but lingering trade tensions is surely the major culprit. As highlighted yesterday, China’s April data is far from convincing of any near-term relief for the global economy and with trade tensions left unresolved, the worst could be yet to come.

Nikkei 225 closes higher by 0.37% at 21,260.14

  
Analysis, Global Indices

Tokyo’s main index closes higher on slight recovery in Asian stocks

Nikkei 28-05

Equities continue to take a bit of a breather from US-China trade tensions as Japanese stocks inch higher after seeing European equities fare better in overnight trading. Chinese stocks are also performing better today but there’s a feeling that this is more of a relief rather than any risk-on mood amid lingering trade tensions.

Treasury yields are not as optimistic, sitting slightly weaker on the day and that’s putting a floor on yen weakness with USD/JPY trading near flat levels around 109.53 currently. European equity futures should open with mild gains but there isn’t much to really shout about for the time being with sentiment still slightly cautious as well.
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