August 2019 - Page 22 of 29 - Financial Occultist

PBOC will watch carefully on capital outflow dynamics in the near-term
Doesn’t want to upset traders too much on the matter
If trade tensions continue to escalate, can expect USD/CNY to rise to 7.50
PBOC may tighten capital controls if outflows start to pick up
However, doesn’t expect pace of capital outflows to be as dramatic as in the past
Markets are more prepared to deal with a weaker yuan now

This continues to feed into the narrative as mentioned at the start of the week here and here, in that we should expect a weaker yuan over time given ongoing trade tensions but certainly not any rapid depreciation in the currency.

All this means that we’re experiencing a gradual shift in markets and one that other countries and central banks have to take note of. If anything else, we’re entering a new phase not only in the US-China trade rhetoric but also towards a global currency war of sorts.

IEA says oil market outlook remains fragile

09-Aug-19 01:56 pm

Anirudh Sethi

IEA comments on the oil market

Notes that demand growth between January to May was just 520k bpd
That’s the slowest for the period since 2008
Outlook for global oil demand is fragile amid growing signs of an economic slowdown
Situation is becoming even more uncertain with a greater likelihood of a downward revision rather than an upward one

The agency trimmed its estimates for global oil demand growth this year by another 100k bpd to 1.1 mil bpd, with a 50k bpd cut to the 2020 estimate as well to just 1.3 mil bpd.

As global growth concerns continue to rise amid ongoing trade tensions, it’s not a surprise to see weakening demand in spite of Saudi Arabia trying to downplay the matter. That is going to pose a problem for oil prices moving forward considering that the global growth outlook remains bleak over the next year or so.

Japan preliminary Q2 GDP: 0.4% q/q (vs. expected 0.1%

09-Aug-19 05:28 am

Anirudh Sethi

Japanese economic growth data for the second quarter of 2019

GDP (seasonally adjusted) for Q2, preliminary, 0.4% q/q … a big beat, at least on this early indication

expected 0.1%, prior 0.6%

GDP Annualized (seasonally adjusted) for Q2, preliminary 1.8% y/y

expected 0.5%, prior 2.2%

GDP Nominal (seasonally adjusted) for Q2, preliminary 0.4% q/q

expected 0.1%, prior 0.8%

GDP Deflator y/y for Q2, preliminary 0.4%, also higher than expected 9way short of the BOJ target of course)

expected 0.3%, prior 0.1% (an inflation indicator)

GDP Consumer Spending y/y for Q2, preliminary 0.6% q/q for a miss

expected is 0.7%, prior was -0.1%
up for the third quarter in a row, albeit not as strong as fprecasts

GDP Business Spending y/y for Q2, preliminary 1.5% q/q … beat

expected 0.8%, prior was 0.3%
capex up for the third quarter in a row

OK, much better than central forecasts for growth. Which should suggest the BOJ has room to pull back on the stimulus a little …. except of course the inflation indicator is not anywhere near the 2% target.

more to come

Beijing pushes envelope with 7-yuan-to-dollar reference rate

09-Aug-19 05:22 am

Analysis

Anirudh Sethi

China’s central bank set its daily yuan reference rate at 7.0039 to the dollar Thursday, crossing the 7 line for the first time in roughly 11 years and signaling resolve even as the U.S. cries foul over the weakening currency.

Market participants speculate that Beijing may keep pushing the rate to around 7.2 to 7.3 so as to alleviate the impact of the next round of American tariffs.

But while a weaker yuan will help exporters impacted by the drawn-out trade war, the People’s Bank of China still must carefully balance these gains against the risks of runaway devaluation and capital flight.

The yuan can move only 2% in either direction from the daily reference rate on the mainland. So the rate, announced before trading starts each session, reflects the monetary authorities’ wishes.

The authorities want a gradual weakening of the yuan, said Ken Cheung, senior Asian foreign exchange strategist at Mizuho Bank.

The Trump administration just labeled China a currency manipulator Monday, after the yuan weakened past the psychological threshold of 7 in Shanghai. Setting reference rates past that line could trigger further pushback from the U.S. (more…)

US to delay Huaweii licences in response to China stopping crop buying

09-Aug-19 05:04 am

Anirudh Sethi

Another indication of still increasing tension between the US and China – Yen bullish, risk bearish

White House delaying a decision about licenses for US companies to restart business with Huawei
This comes after China said earlier this week it was halting purchases of US agricultural products

News reported via Bloomberg , citing unnamed sources.

AUD/JPY lower:

Another indication of still increasing tension between the US and China - Yen bullish, risk bearish

Indices soar. Nasdaq recoups week’s losses.

09-Aug-19 04:59 am

Anirudh Sethi

S&P and Nasdaq back above key MAs

The US stocks have staged an impressive rally today, a day after erasing steep declines yesterday and closing higher (for the broad indices at least).

The S&P and Nasdaq indices retraced back above their 100 and 50 day MAs, and are also closing above the 50% retracement of the move down from the July 26th’s highs.

For the S&P, the 100 day MA comes in at 2903.20, and the 50 day MA comes in at 2933.86. The price closed at 2938.11, up 54.13 points or 1.88%.

For the Nasdaq, the 100 day MA was broken at 7934.76 and the 50 day MA at 7992.58. The index closed at 8039.156 up 176.33 points or up 2.24%.

For the Dow, it moved back above its 100 day MA at 26287.28 (but remains below the 50 day MA at 26527.01). It closed the day up 371.12 points or 1.43% at 26378.19.

Below is a summary of the % changes and high/low ranges for the NA and European major indices. All the major indices closed near the highs for the day. Apart from the UK FTSE, the indices also traded higher from the opening bells.

Big day for stocks.