January 23, 2019

 

Global Commentary

Asian markets headed broadly lower Tuesday as investor confidence took a hit following the International Monetary Fund announcing they had slashed their 2019 global growth forecast. Mainland China, which was still reeling from its weak fourth quarter GDP results, saw its Shanghai Composite fall 1.18% on the news. Hong Kong’s Hang Seng finished off session lows, but still lost 0.70%. In Japan the Nikkei dropped 0.47% as investors took profits after the index hit a one-month high in the previous session. South Korea’s Kospi lost 0.32% even after reporting fourth quarter GDP that was above expectations. In Australia the S&P/ASX 200 dropped 0.54%, with the big four banks leading losses.

The lowered expectations from the IMF hit European markets on Tuesday as well, with the pan-European Stoxx Europe 600 falling 0.36%. In France the CAC 40 was off by 0.42% and Germany’s DAX nearly matched that as it dropped 0.41%. Energy companies were notable losers as crude prices plunged. In London the FTSE finished 0.99% lower as losses from the banking sector combined with a stronger Pound to weigh on the British equity index.

In the U.S. global growth concerns gripped investors, sending the Nasdaq 1.91% lower, while the Dow Industrials lost 1.22% and the S&P 500 fell 1.42%.

 

Cryptocurrencies

Cryptocurrency markets reversed early losses and headed higher on Tuesday, with Bitcoin gaining 1% to remain above the psychologically important $3,500 level. EOS was the top gainer in the top ten altcoins, rising 5.4%. Bitcoin Cash and Tron also put in solid performances, adding 5% and 4.3% respectively. On a broader basis markets were higher as well, but not as strongly as just 69 of the top 100 cryptocurrencies finished the day in positive territory.

 

FOREX

USD/JPY – Rising fears of a slowdown in global growth, and rumors that the U.S. canceled a trade meeting with Chinese officials increased demand for haven assets on Tuesday. That sent this pair lower as traders parked funds in the safety of the Yen. The pair traded as low as 109.14, but bounced off the lowest levels of the day, ending around the 109.30 level.

USD/CAD – The drop in crude sent this pair higher Tuesday, breaking solidly above the 1.3300 level and snapping out of the range-bound trade seen over the past two weeks. By the end of the day the pair was trading at the 1.3350 level and looking to test the minor resistance at the 1.3400 level in the coming session.

 

Commodities

Metals – Precious metals finished mixed as gold rebounded late in the day following a report in the Financial Times that claimed the U.S. canceled a trade meeting with Chinese officials. Gold for February delivery edged up by $0.80, or less than 0.1%, to settle at $1,283.40 an ounce, while March silver gave up $0.074, or 0.5%, to finish at $15.325 an ounce.

Oil – Crude prices fell on concerns over global growth, but ended the session off their worst levels after the U.S. Energy Information Administration released data showing U.S. shale oil output growth may be slowing. West Texas Intermediate crude for February delivery fell $1.23, or 2.3%, to settle at $52.57 a barrel, while March Brent lost $1.24, or 2%, to end at $61.50 a barrel.

 

Indices

S&P500 – The benchmark U.S. equity index fell 1.42% as investor sentiment dipped on global growth concerns after the IMF lowered its global growth forecast for 2019. Ten of the eleven subsectors finished the day lower, and only the defensive utilities sector posted a small gain of 0.14%. The energy sector posted the biggest loss, falling 2.20% as crude prices were hit by the lowered growth expectations. The industrial sector also fell 2.07% on global growth worries.

S&P/ASX 200 – Australia’s benchmark equity index fell 0.54% on Tuesday, tracking losses from across the Asian region after the IMF lowered its global growth forecast for the year. The big four banks led losses, with drops in the range of 1% to 2%. Energy stocks fell broadly despite higher oil prices. Oil Search tumbled as much as 2.8% while Woodside Petroleum, Santos and Origin Energy ended down between 0.6% and 0.8%. Mining shares also took a hit after BHP Billiton reported a drop in iron ore production. BHP shares dropped 1.3% while rivals Rio Tinto and Fortescue Metals Group fell 0.6% and 1.7%, respectively.

 

Stocks

UBS – Shares of the Swiss banking giant fell 4.5% on Tuesday following their report that clients pulled $13 billion from the bank in the fourth quarter of 2018. The market meltdown during that quarter saw withdrawals at the banks key wealth management unit nearly reach $8 billion, while the other $5 billion came from the asset management unit. The company blamed the withdrawals on geopolitical tensions, rising protectionism and increased volatility, and warned that the worst may not be over. Profits were disappointing, with the wealth management division reporting pre-tax profits of $912 million compared with estimates of $943 million, while the investment banking unit reported a paltry $30 million in profit versus expectations of $229 million.

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