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Breaking financial world news from 18 july 2019.

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Beige Book: US economy remains on upward track

Economic activity continued to expand at a modest pace overall from mid-May through early July, with little change from the prior reporting period, the US Federal Reserve said in its Beige Book survey of economic conditions across Districts. The Fed maintained a generally positive outlook for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty. The regulator noted that employment grew at a slightly slower pace than that in the previous reporting period, while contacts across the country still experienced difficulties filling open positions, with worker shortages across most sectors, especially in construction, information technology, and health care. A few reports highlighted concerns about securing and renewing work visas. Compensation grew at a modest-to-moderate pace, similar to the last reporting period. The rate of price inflation was stable to down slightly from the prior reporting period. Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs. However, firms’ ability to pass on cost increases to final prices was restrained by brisk competition. In most Districts, sales of retail goods increased slightly overall, although vehicle sales were flat. Home sales picked up somewhat, but residential construction activity was flat, while non-residential construction activity increased. Manufacturing production was generally flat, but a few Districts noted a modest pickup in activity since the last reporting period. Agricultural output declined modestly following unusually heavy rainfall in some areas, and oil and gas production fell somewhat.

Euro area annual inflation accelerates to 1.3%

According to Eurostat, consumer prices rose 1.3% y-o-y in the Eurozone in June, up from 1.2% y-o-y in the previous month. In m-o-m terms, the indicator stood at 0.2%. Consumer prices, excluding volatile energy, food and alcohol items (core CPI, watched by the ECB), were up 1.1% y-o-y, accelerating from 0.8% y-o-y in May. Food, alcohol and tobacco prices rose 1.6% y-o-y for the same month, while energy and services prices advanced 1.7% y-o-y and 1.6% y-o-y, respectively. In the 28 EU member countries, annual inflation stood at 1.6% in June, unchanged from a month earlier, and 0.1% m-o-m.

US housing starts decline in June

Housing starts, a measure of new-home construction, fell 0.9% in June from the prior month to a seasonally adjusted annual rate of 1.253 mn, the US Commerce Department. Analysts, on average, expected 1.26 mn. Single-family housing starts 3.5% to an annual rate of 847,000, while the volatile multi-family housing segment saw a decrease by 9.2% to 406,000. Permits data was weak in June, with much of the decline concentrated in the multi-family housing segment, while single-family housing starts remained strong, signaling a robust housing market amid subdued price pressure and low mortgage rates

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Markets

US: benchmarks end in the red

Key US stock indices landed in negative territory on Wednesday, July 17, as investors took to the sidelines after it became clear that the US and China are still far from reaching a trade deal, while incoming macro data and corporate earnings have been showing a mixed picture.

In particular, the US and Chinese leaders have not scheduled any meetings after the latest round of talks on the sidelines of the G20 summits, while Donald Trump claimed several days ago that the countries have a long way to go in trade negotiations. Trump also pointed out that, if necessary, he could impose additional tariffs on Chinese products worth USD 325 bn.

Meanwhile, the Fed’s Beige Book showed that the US economy expanded at a modest pace from midMay until early July, while retail sales increased slightly, and industrial output was little changed over that period. Meanwhile, inflationary pressure ranged from stable to weak, while wages increased modestly, except for entry level positions where compensation rose sharply.

Yesterday’s build permit report fell short of expectations. In particular, the indicator declined 6.1% m-o-m to 1.22 mn in June, while analysts, on average, projected an increase to 1.30 mn.

Recapping the benchmarks, the blue-chip gauge Dow Jones Industrial Average retreated 0.42% to 27,219.85, the broad market index S&P 500 slipped 0.65% to 2,984.42, and the technology index Nasdaq declined 0.46% to 8,185.21.

In commodities, August WTI shed USD 0.84% to USD 56.78/bbl on the NYMEX. On the COMEX, August gold added USD 12.10 to USD 1,423.30/oz. The 10-year UST yield narrowed 0.06% to 2.06%.

Bank of America, the second largest US lender in terms of assets, picked up 0.7% after reporting a 10% increase in Q2 profit to USD 7.11 bn, or 74 cents per share, beating 71 cents per share projected. Moreover, the lender announced plans to distribute about USD 37 bn among shareholders in dividends and share buybacks within the next 12 months.

Railroad operator CSX sank 10.3% as Q2 profit stood at USD 870 mn, or USD 1.08 per share, missing USD 1.08 per share expected.

In the blue-chip universe, most names traded in the red, with Caterpillar (-2.4%), United Technologies (-2.3%) and Walgreens Boots Alliance (-2.3%) posting the biggest losses. Among the outperformers, Boeing (+1.9%), UnitedHealth (+0.8%) and Intel (+0.5%) stood out.

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S&P 500

The daily chart shows that the S&P 500 has touched the lower end of a rising band, while Slow Stochastic Oscillator has long been in overbought territory. As a result, the benchmark will likely attempt to break through the lower line of the current formation in the short term.

Breaking financial world news from 18 july 2019.

Europe: risk-off sentiment returns

Key European stock indices turned in negative performance on Wednesday, July 17, as investors scaled back their hopes for a US-China trade deal any time soon. In particular, Donald Trump said on Tuesday that the countries have a long way to go in trade negotiations, highlighting that, if needed, he could impose additional tariffs on Chinese products valued at USD 325 bn.

Moreover, investors monitored incoming macro data and parsed a new batch of corporate earnings releases. Notably, the UK’s CPI came in at 2.0% y-o-y in June, unchanged from the previous month, in line with the consensus forecast. In the Eurozone, the June CPI came in at 0.2% m-o-m and 1.3% y-o-y, while analysts, on average, expected 0.1% m-o-m and 1.2% y-o-y.

Recapping the benchmarks, the UK’s FTSE 100 retreated 0.55%, the French CAC 40 slid 0.76%, and the German DAX dropped 0.72%. The regional indicator STXE 600 closed 0.37% lower at 387.66.

Insurance services provider Saga shot up 13.7% on reports that investment firm Elliott Management intends to acquire a 5.1% equity stake in the company.

Swiss watch maker Swatch Group advanced 5.91% after reporting strong sales in key markets in 1H 2019.

The list of underperformers included telecom equipment maker Ericsson, which tanked 11.5% after guiding that earnings might be negatively impacted by the rollout of 5G networks in Asia. Moreover, the company reported worse-than-expected net income for Q2.

Swedbank sank 7.1% after reporting weak quarterly earnings and cutting dividends.

Key European stock indices have been on the decline during the first half of Thursday, July 18, amid uncertainty surrounding US-China trade negotiations as well as losses in tech stocks following an earnings miss from SAP.

By 8:54 GMT, the UK’s FTSE 100 retreated 0.63%, the German DAX fell 0.95%, and the French CAC 40 eased 0.66%. The regional barometer STXE 600 was off 0.50% at 385.74.

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DAX

The daily chart shows that the German DAX has broken out of the lower line of a rising band, with the benchmark likely to head further south in the short term.
Breaking financial world news from 18 july 2019.

Asia: equities remain under pressure

Asian stock indices closed mostly in the red on Wednesday, July 18, as concerns re-ignited that the US and China might fail to reach an import tariff deal any time soon.

Key macro data included Japan’s trade surplus that stood at JPY 589.5 bn in June compared to JPY 420 bn projected. The country’s exports and imports declined 6.7% y-o-y and 5.2% y-o-y, respectively, in June vs. expectations of -5.6% y-o-y and -0.4% y-o-y.

Australia’s June unemployment rate stood at 5.2%, matching the median consensus. In other news, South Korea’s central bank held a policy meeting, at which the Board cut the key rate to 1.5% from 1.75%.

The Japanese Nikkei 225 fell 1.97%, the Chinese Shanghai Composite declined 1.40%, Hong Kong’s Hang Seng eased 0.46%, the South Korean KOSPI slipped 0.33%, while the Australian S&P/ASX 200 closed 0.36% lower.

On the S&P/ASX 200, Western Areas and Evolution Mining outperformed the broader market, soaring 5.77% and 5.53%, respectively. Among the laggards, Cimic Group and Eclipx Group tanked 18.89% and 5.99%.

The Nikkei 225 gainers were led by Dainippon Screen and Chiyoda, which added 0.69% and 0.33%, respectively. Among the decliners, Toyo Seikan Group and Idemitsu Kosan tumbled 5.15% and 5.05%.

Japanese cyclical stocks came under pressure, with Hitachi and Panasonic shedding over 1.5%.

Electronics maker Canon gave up 2.8% on reports that full-year operating profit might fall 40%.

Japan’s NOK declined 6.6% after cutting full-year operating profit guidance by 34%, citing weak demand in North America and China.

Akebono Brake Industry bolted up 43% on news that it secured additional funding from an investment fund, which will help the company restructure its debt.

In the Australian banking sector, Westpac, National Bank of Australia, and Australia & New Zealand Banking ended in the red, while Commonwealth Bank closed marginally higher.

Australian mining giant Rio Tinto dipped over 1.04%.

China’s oil major CNOOC pulled back 2.73%, tracking a decline in oil prices.

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Hang Seng

From a technical standpoint, the Hang Seng continues to trade within a side trend in the range of 28,000-28,600, with the benchmark expected to break out to the upside and head further north towards 29,100.
Breaking financial world news from 18 july 2019.

Commodity markets

Crude futures have been quite steady on Thursday after a decline the day before on the back of IEA data that showed a sharp build in US fuel inventories. Specifically, gasoline inventories rose by 3.57 mn on the week vs. a 2.40 mn bbl drawdown expected, while distillates increased by 5.69 mn, the biggest weekly gain since January. However, crude inventories decreased by 3.1 mn bbl, in line with the consensus forecast. US oil output fell by 300,000 bpd to 12 mn bpd, but this was a one-off as production was halted in the Gulf of Mexico ahead of Hurricane Barry.

Moreover, oil prices remained under pressure from global risk-off sentiment stoked by news that the US and Chine are a long way from reaching a trade deal. Furthermore, signals emerged that the US-Iran geopolitical tension might be easing as the media reported that the countries will likely start negotiations about the Iranian nuclear program before long.

Non-ferrous metals are trading range-bound on the LME, while gold is consolidating above the USD 1,420/oz mark after a rally on Wednesday.

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Breaking financial world news from 18 july 2019.

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