June 26, 2019

 

Global Commentary

Markets fell across Asia on Tuesday as investors looked ahead to the G20 summit and a meeting between presidents Trump and Jinping that is expected to restart the trade negotiations between their two countries. Mainland China’s Shanghai Composite fell 0.87%, but over in Hong Kong the Hang Seng was the biggest loser as it slipped 1.15%. Japan’s Nikkei fell 0.43%, partially in response to Yen strength versus the U.S. dollar. In Australia the S&P/ASX 200 was little changed, ending the day 0.11% lower, while South Korea’s Kospi lost 0.22% for the day.

European markets ticked lower as investors there were preparing for the upcoming G20 summit as well. The pan-European Stoxx Europe 600 edged lower by 0.1%, while Germany’s DAX led losses for a second day as it slipped 0.38%, and the CAC 40 in France fell 0.13%. In London the FTSE bucked the falling trend, trading higher by 0.08%. That gain came despite U.K. retail sales falling by the most in over a decade as a weaker Pound helped support U.K. exporters.

Markets in the U.S. fell solidly after the Federal Reserve chairman removed the certainty of a July rate cut in the U.S. The Dow Industrials fell more than 150 points and notched a loss of 0.67%, the S&P 500 was 0.95% lower and the Nasdaq retreated 1.51%.

 

Cryptocurrencies

Although Bitcoin gained 4.3% and climbed back above the $11,000 level, the cryptocurrency markets ended mixed as this remains primarily a Bitcoin rally more than anything. Ethereum and Ripple made modest gains of 0.4% and 0.5% respectively, while most of the other top ten altcoins finished the day lower by 1-2%. The market was nearly evenly split at the close with 53 of the top 100 cryptocurrencies ending higher.

 

FOREX

EUR/USD – After climbing in an almost parabolic fashion for four consecutive sessions the pair reversed course Tuesday, dropping from the 1.1450 level that had been expected as resistance. The reasons were more fundamental though, with the Euro weaker in response to falling German bond yields, while the USD strengthened after Fed chair Jerome Powell indicated a July rate cut in the U.S. is not a done deal.

USD/JPY – The pair sank sharply in Asian trade, piercing the 107.00 level and continuing lower. However, the statement by the Fed chair reversed the descent and the pair closed the day back above the 107.00 level, although it was still the lowest close for the pair since April 2018. Still, the reversal makes it look as if the pair is coming off its lowest levels and might try to retake the 108.50 level in the coming days.

 

Commodities

Metals – Precious metals ended mixed, with gold giving back nearly all its earlier gains, after Federal Reserve chair Jerome Powell made comments that caused doubts a July interest rate hike was in the cards. August gold added just $0.50, or 0.04%, settling at $1,418.70 an ounce after earlier trading as high as $1,442.90 an ounce. Meanwhile July silver fell $0.077, or 0.5%, to finish at $15.30 an ounce.

Oil – Concerns over slowing global growth crept back into trader’s psyche on Tuesday, causing mixed results for crude futures. August West Texas Intermediate crude fell $0.07, or 0.1%, to settle at $57.83 a barrel, while international benchmark August Brent crude edged up by $0.19, or 0.3%, to finish at $65.05 a barrel.

 

Indices

FTSE 100 – London’s benchmark equity index rose a slight 0.08% on Tuesday, bucking weakness across the European Union thanks to weakness from the Pound. That weakness was enough to lift U.K. exporter shares and offset losses caused by U.K. retail sales posting their weakest year over year performance in a decade. CBI monthly retail sales dropped to -42 versus expectations of a reading of -10. Hit hard by the weak retail sales data were supermarket chains Tesco and William Morrison, down 1.34% and 1.33% respectively.

Nikkei – Japan’s benchmark equity index slipped lower by 0.43% as a stronger Yen versus the U.S. dollar sent Japanese exporters lower, and financial shares also fell in response to falling global bond yields. The Yen slipped below the 107.00 handle versus the U.S. dollar for the first time since the start of the year, and looks poised to head lower. This is bad for Japanese exporters who get paid in USD and have to convert those dollars to Yen. Among individual stocks Sony lost 2.10% and Inpex fell 2.61%.


Stocks

McDonald’s – Recently everyone’s been talking about Beyond Meat and plant-based meat substitutes, but McDonald’s on Monday reported that it increased its market share for the first time in five years, and said the reason was its switch to fresh beef in the Quarter Pounder burgers. During the first quarter of 2019 it sold 40 million more Quarter Pounders than in the same period a year earlier. The switch to fresh beef is just one facet of its drive to offer better quality food, despite the logistical challenges and complexity it adds in the kitchen. The switch to fresh beef took 4 years of planning to pull off. Shares of McDonald’s are up 15.9% since the start of the year, and on Tuesday the stock was initiated by Credit Suisse with an “outperform” rating. Shares closed up by 0.88% in response to the positive analyst reception, even as the Dow had its worst day of June.

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