Daily Briefing – Wednesday, June 21, 2017
US equities closed down across the board yesterday as oil entered a bear market. The US first quarter current account deficit was up 2.5% to $117bn. The number, however, was not as bad as the -$124bn tag in foreign debt analysts had expected. The Redbook index also came in at 2.8% Yoy – a 0.7% increase on May. And Boston Fed Pres Eric Rosengren joined his colleagues concern over low interest rates yesterday. Speaking in Amsterdam he told European central bankers that rates may continue to be a permanent threat to financial stability.
UK equities suffered from low oil prices, the FTSE ending down 0.7% also on the banking sector after Bank of England governor Mark Carney supported continuing low interest rates. Carney pointed towards low consumer spending, business investments and wage growth, putting further judgements on hold until mid-August and pressuring the GBP down to a 2-month low. Still, the usual consensus was broken by a vote of 3 to 5 last week – the largest vote for a hike since July 2007! Other European benchmarks also lost recent gains, with the DAX down 0.6% and the Eurostoxx – 0.4% after the zone’s April current accounts surplus narrowed to 22bn Euros.
China is once again trying to get over 200 A-shares quoted by MSCI, the US provider of equity, fixed income, hedge fund stock market indexes. Goldman Sachs believes that following 3 failures, there is now a 60% chance of success. In response to the firm’s reservations regarding regulatory liberalization of foreign a-share ownership and capital repatriation, China introduced the Shenzhen-Hong Kong stock connect, which enables foreigners to purchase shares on the Shenzhen market through Hong Kong. The Bank of Japan’s policy meeting minutes last night show concern over inflation but optimism regarding exports and industrial production. Japan’s overnight all-industry activity index this morning showed an impressive surge from March’s minus 0.7% to a positive 2.1% increase. And Australia’s Westpac Leading Index also increase from a negative 0.1% to a flat zero in May.
Saudi Arabia’s oil minister, 31 year old Mohamed Bin Salman was yesterday appointed crown prince, replacing Washington ally and counter-terrorism minister Mohamed Bin Nayef. The move comes as WTI enters a bear market, having lost 22% in 3 months – evidence that OPEC cuts are insufficient in balancing the market against US production and added output from Nigeria and Libya. API data yesterday showed a 2.7mB drawdown in inventories… Gold also ended down for a second session in a row, hitting a one-month record low after FED officials seemed to be unanimous in expectations of further interest rate hikes this year. And Bitcoin is back above 2700 again, regaining last week’s 30% loss, after India accepted the coin overnight as legal tender – increasing demand dramatically. Finally, corn is staging a comeback, with futures up 2.36% after some rough drops at the beginning of the week.
|8:30 AM GMT||UK: Public sector net borrowing|
|11 AM GMT||US: Mortgage applications, followed at 2PM by existing home sales.|
|9 PM GMT||NZ: Interest rates|
|11:50 PM GMT||Japan: Foreign investments in stocks & bonds.|