June 19, 2019

 

Global Commentary

Asian markets got off to a slow start on Tuesday, but picked up steam as the day went on and ended mostly higher ahead of the U.S. Federal Reserve meeting. The Nikkei in Japan was the laggard of the day, falling 0.72%, primarily due to strength from the Yen. Mainland China’s Shanghai Composite bounced back and forth over unchanged levels before settling 0.09% higher. In Hong Kong the Hang Seng rose 1% as investor sentiment improved with the suspension of the controversial extradition bill. Australia’s S&P/ASX 200 climbed 0.60% higher with financial stocks leading after the Reserve Bank of Australia indicated more interest rate cuts will be needed. Finally in South Korea the Kospi closed up by 0.38%.

European markets jumped higher in afternoon trade after European Central Bank president Mario Draghi suggested in a speech that the central bank would be providing additional stimulus if inflation in the eurozone doesn’t increase. The pan-European Stoxx Europe 600 closed up by 1.67% at a one month high. In Germany the DAX surged 2.03% higher, and the CAC 40 in France jumped 2.20% higher. London’s FTSE also jumped on the news of potential ECB stimulus, finishing the day 1.17% higher.

Markets in the U.S. rose on the Trump tweets that said he would be meeting with Chinese president Xi Jinping as investors saw it as a sign of an end to U.S.-Chinese trade tensions. The S&P 500 closed within 1% of its all-time high as it added 0.97%, while the Dow Industrials closed 1.35% higher and the Nasdaq tacked on 1.39%.

 

Cryptocurrencies

Cryptocurrencies gave back some of the gains from the previous session, with leading cryptocurrency Bitcoin falling 1.7% and pulling much of the broader market lower as well. Bitcoin was holding above the $9,000 level, but had given up the $9,200 level, which was considered stronger support technically. Most of the other top ten cryptocurrencies were lower, although Binance Coin gained 1.7% and Litecoin edged higher by 0.4%. Overall 79 of the top 100 cryptocurrencies fell on the day.

 

FOREX

EUR/USD – The pair resumed its downward movement after ECB president Mario Draghi gave the indication that further monetary stimulus was on tap for later this year. It was the fourth of the past five sessions in which the pair fell, and by the end of the day it was below the 1.1200 handle. It’s almost certain the next stop for the pair will be around the 1.1125 to 1.1150 level to test the support there.

USD/CAD – Rising crude and signs that the trade war between the U.S. and China could soon improve sent this pair lower for only the second time in the past seven sessions. That move took it back below the 1.3400 level, but it’s not certain the move will hold for long as crude traders have been so bearish for so long. Much will also likely depend on the Fed meeting statement on Wednesday. An extremely dovish Fed could send the pair sharply lower, but hawkish sentiment could see the pair reaching back above the 1.3500 level.

 

Commodities

Metals – Precious metals gained after ECB president Mario Draghi’s statements had markets anticipating lower interest rates in the European Union. August gold climbed $7.80, or 0.6%, to settle at $1,350.70 an ounce, while July silver gained $0.164, or 1.1%, closing at $14.993 an ounce.

Oil – Crude surged higher following a tweet from President Trump saying he would be meeting with China’s president Xi Jinping at the G20 summit. The news had traders envisioning progress in U.S.-China trade talks, and eased concerns about demand. July West Texas Intermediate crude rose $1.97, or 3.8%, to settle at $53.90 a barrel. Meanwhile global benchmark August Brent crude added $1.20, or 2%, at $62.14 a barrel.

 

Indices

FTSE 100 – London’s benchmark equity index jumped 1.17% higher in response to news of potential stimulus measures from the ECB, notching its best one day gain in four months. Gains were broad based, with miners and oil majors playing their part in the day’s gains, while Tesco shares rose 3.7% after announcing further margin improvements once its current recovery plan ends. Drug maker AstraZeneca also posted a 2.6% gain after the European Commission approved its cancer drug Lynparza as a first line treatment for some types of advanced ovarian cancer.

Nikkei – While markets across Asia were rising, the Nikkei plunged in response to a surge in the Yen. The 0.72% loss took the Japanese benchmark index below the 21,000 level. The index had gotten off to a good start, but increasing strength for the Yen caused selling pressure for exporter shares, sending the broader market lower in afternoon trade. Shares of e-commerce giant Rakuten were down 1.41%, Fast Retailing shares fell 0.93%, but Fujitsu gained 0.89% and Nintendo shares rose 0.67%.

 

Stocks

Facebook – Shares of the social media giant jumped 1.4% in morning trade after announcing its part in the Libra cryptocurrency. The company unveiled its new digital currency which analysts believe could propel Facebook into new ecommerce and digital payments businesses. The digital currency is named Libra and will enable easy, frictionless payments and money transfers. In addition to the currency itself Facebook will also be releasing a digital currency wallet called Calibra. Analysts are saying this could be the biggest move in the history of Facebook as it gives billions of people worldwide access to financial infrastructure and cheap money transfers. The currency is expected to launch in the first half of 2020 and could revolutionize Facebook’s digital business.

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