Archives of “May 2019” month

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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.

Pakistani clerics have issued a fatwa against USD buying

  
  Analysis

So there you go, obviously the dollar top is in 😀

  • Religious scholars in Pakistan have declared that hoarding dollars is a “grave sin”
  • “We have issued a fatwa which says that people must not hoard dollars as hoarding creates chaos,” said Maulana Tahir Ashrafi, the head of the Pakistan Ulema Council, a network of Sunni Muslim clerics.
  • “Unnecessary purchases of dollars must be avoided till such time as Pakistan comes out of the prevailing crisis that we face today”
Mr Ashrafi was speaking with the Financial Times. Link for more (may be gated, oh, heads up – perhaps a fatwa will be issued against you if you try to bypass the paywall).
Good for a giggle. Having said that though, there are plenty of views about the market that border on religious fervour. My latest technical analysis on the AUD, for example:
So there you go, obviously the dollar top is in :-D

FOREX : AUD/USD forecasts from 2 banks, 0.68 tipped by both

  
Analysis, Forex

Scanning some of the projections for the Australian dollar issued over past days.

Via CBA and Westpac. neither are overly bearish on the AUD.
Westpac, in summary:
On what sent the AUD lower:
  • weak Q1 CPI …, stoked RBA easing expectations
  • rise in the unemployment rate in April appeared to seal the case for RBA action
WPAC note the limited follow-through below 0.6900
Support for AUD from:
  • commodity price basket has rebounded sharply since early April
Ahead:
  • A$ rallies should be capped by RBA rate cuts in June and August and by the deterioration in US-China trade relations
  • but with OIS markets already priced for a sub-1% cash rate by 2020, we see AUD/USD only down to 0.68 by September
CBA:
  • expect AUD to fall towards 0.68 by the end of September
  • expect the RBA to cut the cash rate by 25bps  at the june June meeting (next week, Tuesday June 4)
Similar to Westpac CBA reason the downside for the AUD is limited by the market already pricing the rate cut
  • CBA see another RBA cut in August
CBA point out positives for the economy (and AUD):
  • The APRA proposing easing bank lending restrictions – will help stabilise Australian house prices
  • Election out the way reduces political uncertainty, positive for capex and job growth
  • US Fed likely to cut rates this year and next (likely US dollar fall, AUD to benefit)

China Global Times: US tries to suppress China, steal away interests, wants to rob China

  
Analysis, Economy

A very strongly worded opinion piece in the Chinese press, Global Times

When I say strongly worded, this (bolding mine, very confrontational):
  • What on earth does the US want with China? … Does it … seek to break the Chinese economy as its ultimate goal? 
  • For the sake of …  world peace … 
  • Washington rudely tries to use a tariff war to suppress China. US vice president and US secretary of state issued fierce speeches recently. The US is also opposing almost all of China’s actions on the international stage and is suppressing Huawei savagely. This behavior makes most Chinese believe the US is against China’s development, and the real purpose of the US is to deprive China of its development ability and the so-called fair trade is just an excuse for stealing away interests. In other words, the US wants to rob China of not only its money but also its future.
Media in China is not free of state control (cough) – this opinion piece won’t be too far out of line with official thinking.
Not a risk positive.
Chinese press, Global Times Xi at war with the US 

Kuwait oil minister says it’s premature to say if output curbs will be extended in June

  
Analysis, Crude

Comments from Kuwait’s oil minister

  • OECD commercial oil inventories are falling towards last 5-year average but “we still have more work to do”
  • Believes oil market expected to be balanced during the second half of the year “more towards the end of the year”
It would be a shock to the oil market if OPEC didn’t extend the production cut.

Holidays in the UK and US will keep a lid on things but here are 5 things to watch

  
  Analysis

It’s Memorial Day

Not all holidays are created equally. Some are widely observed while others pull people into the office (or the market) anyway.
Memorial Day is one of the holidays where offices shut down. Moreover, nothing happened on the weekend that would have pulled anyone in. So it’s likely going to be a quiet one, especially with the UK on holiday as well.
However there are a few things I will be watching today:
  1. Fallout and analysis from the EU elections.
  2. Bitcoin is up 10% today to $8812
  3. Tomorrow’s European meetings will set the stage for a new ECB President
  4. Greek yields fall to record lows after Syriza struggled in EU elections
  5. Trump said in Japan (on China): “They would like to make a deal. We’re not ready to make a deal” and that tariffs “could go up very, very substantially, very easily.”

Euro dips on brewing EU-Italy budget battle

  
Analysis, Forex

Euro edges lower

Euro edges lower
If you’re wondering what the latest dip down in the euro is about, it’s because the EU is considering starting disciplinary procedures against Italy for its failure to meet budget rules, according to a Bloomberg report.
This goes back to the extended battle over the budget in 2018 and the inability of Italy to grow its way out of high spending.
The report cites unnamed officials and says the next steps could come on June 5 and start a process that could lead to a 3.5 billion euro fine. That would be an unprecedented move and would need to be approved by EU finance ministers after a months-long process.
In short, it’s not going to happen but the process could inflame tensions and stoke more populism in Italy.
What’s especially notable is that this moves comes after a resounding win for Salvini in EU elections. With that, coalition partner 5-Star has said it will support his push for tax cuts — something that could further undermine the budget.
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