World News

Breaking financial world news from 23 september, 2019.

Breaking news

German PPI decreases 0.5% in August

Germany’s PPI was down 0.5% in August 2019 compared to a 0.1% uptick in the previous month, the country’s Federal Statistical Office (Destatis) said in a report. Notably, analysts, on average, projected only -0.2%. In y-o-y terms, the PPI rose 0.3%, slowing from 1.1%, while the consensus forecast stood at 0.6%. According to the report, the PPI, excluding energy, increased 0.6% y-o-y, staying flat m-o-m. Annual inflation moderated as prices of intermediate goods and energy decreased 0.9% and 0.3%, respectively. Prices of non-durable and durable consumer goods were up 1.7% and 1.3%, while prices of capital goods rose 1.5%.

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Indian government reduces the corporate tax rate

Indian finance minister Nirmala Sitharaman said on Friday, September 20, that the Indian government decided to cut the corporate tax rate for domestic companies from the current 30% to 22%. She noted that industrial concerns established after October 1 will be eligible for the 15% tax rate if they commence output before March 2023. These measures will allow the Indian tax regime to be virtually on par with many Asian and Southeast Asian countries, the minister pointed out. Meanwhile, she noted that this decision will deprive the national budget of around INR 1.45 tn (over USD 20 bn) per year but the tax cut will give the economy a boost and will contribute to drawing new budget revenues through the expansion of the taxable base. This means bigger investment and higher employment that will result in economic growth and higher budget revenues, Nirmala Sitharaman said.

Boston Fed President objects to rate cuts

Boston Fed President Eric Rosengren delivered a speech on Friday, September 20, during which he noted that now there is no need for rate cuts because further monetary easing could substantially heighten the risk of financial instability in the country. He thinks that low rates could raise the likelihood that a next economic recession would be deeper. He pointed out that labor market supply remains limited and inflation is close to the regulator’s 2% target, so further monetary easing is not required at the moment. However, St. Louis Fed President James Bullard does not back his counterpart and, on the contrary, believes that the federal funds rate needs to be cut further down the road due to uncertainty in US-China trade relations and weak industrial output in the country. He thinks that the odds of a recession in the US economy rose from low to moderate.

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US: equities close lower

Key US equity benchmarks showed negative performance on Friday, September 20, on news that Chinese agriculture officials cancelled their scheduled visit to Montana. As a result, optimism about the resumption of US-China trade negotiations decreased substantially. The indices opened on a mixed note because Friday was a quadruple witching day when a number of contracts expire. Moreover, the week was eventful as central banks in the US, Japan, the UK, Switzerland and Norway held monetary policy meetings. In sectoral terms, eight out of 11 S&P 500 sectors closed in the red, with the underperformers led by secondary goods and services provides, and technology companies. Recapping the indices, the Dow Jones Industrial Average dipped 0.59% to 26,935.07, the S&P 500 retreated 0.49% to 2,992.07, and the tech-focused Nasdaq Composite dropped 0.8% to 8,117.67. In commodities, October NYMEX WTI ticked down 4 cents to USD 58.09/bbl, while December COMEX gold added USD 8.90 to USD 1,515.10/oz. The 10-year US government bond yield edged down 0.02% to 1.76%. Other underperformers included streaming services provider Netflix, down 5.5% after CEO Reed Hastings pointed to higher costs and tougher competition from Walt Disney, Apple and other companies. Set-top box producer Roku tanked 19.2% after Pivotal Research rated the company as a Sell. Semiconductor maker Xilinx plunged 6.8% on news CFO Lorenzo Flores will step down. As a result, Bank of America downgraded the stock to Neutral. In the blue-chip universe, two thirds of liquid names landed in the red, with the underperformers including Intel (-1.7%), Home Depot (-1.5%) and Caterpillar (-1.5%), while the list of advancers was topped by Merck (+1.4%), Dow (+1.2%) and Johnson & Johnson (+1.2%).

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S&P 500

From a technical standpoint, the daily chart shows that the S&P 500 consolidated at around 3,000 over the past week. Meanwhile, the index continues to trade within a rising wedge, with the upper line at 3,100 and the lower line at 2,900. The key support level is 2,850. Stochastic lines are on the sell side and still far from oversold territory, so we expect the index either to extend its correction or hover near the current levels.

Breaking financial world news from 23 september, 2019.

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Europe: bullish sentiment still prevails

Key European stock indices turned in predominantly positive performance on Friday, September 20, led by O&G names that tracked oil prices higher. Moreover, investors were heartened by a recent comment from Donald Trump, who reiterated that China stands ready to enter into a trade deal with the US.

The media reported, citing sources familiar with the matter, that Trump intends to cancel tariffs on hundreds of Chinese products, including pet goods, festive decorations, etc. Furthermore, the US has started preparations for a new round of talks with China, which should bring up trade matters for discussion at the summit level.

As regards macro data, Germany’s PPI decreased 0.5% m-o-m and rose 0.3% y-o-y in August vs. expectations of -0.2% m-o-m and +0.6% y-o-y projected. The Eurozone Consumer Confidence Index for September improved to -6.5 compared to -7.1 in the previous month, beating expectations of -7.0.

Recapping the benchmarks, the UK’s FTSE 100 slipped 0.16%, the French CAC 40 firmed 0.56%, and the German DAX ticked up 0.08%. The regional barometer STXE 600 closed 0.29% higher at 392.95.

As noted above, O&G stocks outperformed the broader market. Specifically, Total, BP and Eni addvancd 2.73%, 0.80% and 0.96%, respectively.

The list of best performers also included Royal Bank of Scotland Group, which picked up 2.6% on news that Alison Rose was appointed CEO.

French retailer Casino Guichard-Perrachon surged 3.8% on reports that it is in talks with German rival Aldi to sell discounter chain Leader Price.

British engine manufacturer Rolls-Royce Holdings shed 2.1% after saying it will take more time than anticipated earlier to solve Trent 1000 engine issues. European bourses have been in decline during the first half of trading on Monday, September 23, on the heels of weak macro data. Notably, Germany’s manufacturing PMI (preliminary) for September came in

at 43.6 compared to 43.5 in August and 44.0 projected, while the same indicator for the Eurozone stood at 45.6 vs. 47.0 in the previous month and the 47.3 consensus forecast. Furthermore, the September services PMIs for Germany and the Eurozone (preliminary) clocked in at 52.5 and 52.0, respectively, also missing the month-earlier readings and the median consensus. By 09:15 GMT, the UK’s FTSE 100 eased 0.70%, the German DAX slid 1.43%, and the French CAC 40 retreated 0.95%. The regional indicator STXE 600 was off 0.88% at 389.52.

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The German DAX continues to trade within a rising band, with the upper line at 13,100 and the lower line at 11,500. The nearest resistance level is still 12,657. Stochastic lines are on the buy side but will soon reach overbought territory, so upside potential is limited.

Breaking financial world news from 23 september, 2019.

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Asia: markets kick off on a positive note

Asian stock indices delivered mostly negative performance on Monday, September 23 on news that Chinese government officials unexpectedly canceled a trip to the US for a round of trade talks about agricultural products, re-igniting concerns that the broader US-China trade negotiations may be broken off indefinitely.

As regards macro data, Australia’s manufacturing and services PMIs for September came out. The manufacturing PMI stood at 49.4 vs. 50.9 projected, while the services PMI equaled 52.5, outpacing the 45.3 median consensus by a wide margin.

In Singapore, the CPI rose 0.5% y-o-y in August, matching expectations.

Notably, the Japanese stock market was offline today in observance of a national holiday.

Recapping the benchmarks, the Chinese Shanghai Composite slipped 0.98%, Hong Kong’s Hang Seng eased 0.81%, the South Korean KOSPI was fractionally lower, while the Australian S&P/ASX 200 closed 0.28% higher.

On the S&P/ASX 200, Ioof Holdings and Orocobre outperformed the broader market, spiking 12.02% and 6.51%, respectively. Nearmap and Chorus Limited were among the session’s decliners, plunging 3.74% and 3.47%.

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

Mining giants Rio Tinto and Fortescue Metals added 1.0% and 0.7%.

Australian retailer Premier Investments surged 5.8% after reporting an increase in full-year profit.

O&G names enjoyed demand, with Beach Energy and Woodside Petroleum gaining over 1%.

Chinese travel operator Fosun Tourism Group shed 1.15% on news that the UK’s oldest industry player Thomas Cook filed for bankruptcy after failing to secure a bailout.

Chinese pharmaceutical names came under pressure. As a result, Sino Biopharmaceutical and CSPC Pharmaceutical gave up over 1.7%.

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Hang Seng

From a technical standpoint, the Hang Seng has reached the lower line of a rising band near the 26,270 mark.

Breaking financial world news from 23 september, 2019.

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Commodity markets

Oil prices have headed north on Monday morning as US-Iran tensions mounted because of the recent drone strike on Saudi Arabian crude production facilities. To remind, last Friday President Donald Trump announced the introduction of sanctions against the Central Bank of Iran, thus blocking Tehran’s international transactions.

By 7:01 GMT, Brent was up 0.95% at USD 64.89/bbl, while WTI was 0.98% higher at USD 58.66/bbl.

December gold advanced 0.4% to USD 1,521.20/oz in Asian trading, while December silver rose 1.62% to USD 18.27/oz.

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Breaking financial world news from 23 september, 2019.

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