ICBC Financial Market Daily Review-August 9, 2017-Home-ICBC China

I. Yesterday’s News
International News
1. North Korea said on Wednesday it is “carefully examining” plans for a missile strike on the U.S. Pacific territory of Guam, just hours after U.S. President Donald Trump told the North that any threat to the United States would be met with “fire and fury”. The strike plan would be put into practice at any moment once leader Kim Jong Un makes a decision, a spokesman for the Korean People’s Army (KPA) said in a statement carried by the North’s state-run KCNA news agency. U.S. President Donald Trump on Tuesday warned North Korea it would be met with “fire and fury” if it threatens the United States, ratcheting up the rhetoric with the nuclear-armed nation. Washington has warned it is ready to use force if need be to stop North Korea’s ballistic missile and nuclear programs but that it prefers global diplomatic action, including sanctions. “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen,” Trump told reporters. U.S. stocks closed slightly lower after a late afternoon selling spree.

2. U.S. job openings jumped to a record high in June, outpacing hiring, the latest indication that companies are having trouble finding qualified workers. The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday also underscored labor market strength that will likely encourage the Federal Reserve to continue tightening monetary policy despite benign inflation and concerns about consumer spending. Job openings, a measure of labor demand, increased by 461,000 to a seasonally adjusted 6.2 million. That was the highest level since the data series started in December 2000 and pushed the job openings rate up two-tenths of a percentage point to a near one-year high of 4.0 percent. The dollar shook off early weakness to rise on Tuesday after the data.

3. OPEC expects greater adherence to its pact with non-OPEC producers to cut oil output after two days of meetings in Abu Dhabi aimed at boosting compliance with the accord. OPEC producers Iraq and the UAE have shown relatively low compliance with the deal based on figures from secondary sources OPEC uses to monitor its supply. Meanwhile, non-OPEC Kazakhstan and Malaysia have been boosting output in the last few months, according to the International Energy Agency.

4. The Bank of Japan should dial back its massive stimulus before inflation hits its 2 percent target, a leading candidate to become the next governor said, raising questions about the efficacy of the BOJ’s radical approach to snuff out deflation in the world’s third-largest economy. Former BOJ Deputy Governor Kazumasa Iwata criticised the central bank’s price forecasts as too optimistic and warned that even hitting 1 percent inflation could be challenging given a recent batch of weak price data. His comments underscore growing concern over the strains the BOJ’s prolonged ultra-easy policy is putting on the country’s banks and financial market.

5. German exports fell more than expected in June and imports sank even more sharply, widening the trade surplus in Europe’s biggest economy, data showed on Tuesday. Seasonally adjusted exports dropped by 2.8 percent, the sharpest fall since August 2015 that ended five consecutive months of growth. Imports were down 4.5 percent, the biggest drop since January 2009, data from the Federal Statistics Office showed. Both figures confounded expectations in a Reuters poll that had pointed to exports edging down 0.3 percent and imports rising by 0.2 percent.

Domestic News
6. An earthquake measuring 6.5 in magnitude struck a remote and mountainous part of the southwestern province of Sichuan on Tuesday, the U.S. Geological Survey said, killing seven people and trapping 100 tourists in a popular scenic spot. The quake hit a sparsely populated area 200 km (120 miles) west-northwest of the city of Guangyuan at a depth of 10 km (6 miles), the USGS said. It had earlier put the quake at magnitude 6.6 and 32 km deep. The Sichuan earthquake administration said the epicentre of the tremor was in Ngawa prefecture. It was also close to the Jiuzhaigou nature reserve, a tourist destination. State television said seven people had been killed and 88 were injured, 21 of them seriously. The official People’s Daily said five of the dead were tourists.

7. The pace of growth of China’s exports and imports weakened in dollar terms in July, in a discouraging sign for its growth in the second half of this year despite that China’s overall trade continued to grow at a healthy clip in the first half of 2017. The figure was well below economists’ forecast, suggesting a downtrend in from July to December due to base and prices.

8. The company-China Xiongan Construction & Investment Group Co Ltd-was set up on July 18 with a registered capital of 10 billion yuan. It was approved by Hebei provincial government, which is also the only shareholder of the company.

9. Marriott International Inc said on Monday it would partner with China’s Alibaba Group Holding Ltd to tap into the growing number of Chinese citizens who travel abroad. The world’s biggest hotel chain said the joint venture with Alibaba would allow Chinese travelers to book rooms at Marriott hotels via Alibaba’s travel service platform, Fliggy. Shares of Marriott closed up 1.1 percent on Nasdaq on Monday. Shares of Alibaba ended up 3.6 percent at $158.84 on Nasdaq.

II. Market Overview
1. Global Market
The dollar shook off early weakness to rise to more than a one-week high on Tuesday, after data showing U.S. job openings surging to a record in June reinforced Friday’s robust payrolls data. The dollar index, which tracks the greenback against six major rival currencies, was up 0.28 percent to 93.698, after rising as high as 93.876. The euro was down 0.42 percent to $1.1743, but not far from last week’s 2-1/2-year high of $1.1909. Sterling hit a 10-month low against the euro. China’s yuan strengthened to a 10-month high against the dollar on Tuesday, breaching a key psychological level, after the central bank set a firmer guidance rate and data showed a larger-than-expected increase in he country’s foreign exchange reserves.

2. Home Market
Spot yuan crossed over a key mark of 6.7 to an almost 10-month peak against the dollar, while the midpoint rates also slightly rebounded. Forex settlement demand was brisk with half-day trading volume nearing $16 billion. Yuan’s market prices were 185 points higher than the guidance rates, resulting in a consolidating dollar index and rising yuan. The Chinese currency is expected to firm in the near term.

Precious Metals
Gold fell to a two-week low on Tuesday after U.S. jobs data came in better than expected and the dollar turned positive, while investors awaited U.S. inflation figures later this week for further clues about the pace of interest rate rises. Spot gold ended at $1,260.24 an ounce, after falling to $1,251.01, the lowest since July 26 and just above the 50-day moving average. U.S. gold futures settled at $1,267.

1.Crude Oil
Oil prices slipped on Tuesday, pulling back from recent gains as exports from key OPEC producers rose and despite news of lower crude shipments from Saudi Arabia. Benchmark Brent crude settled down 23 cents a barrel at $52.14 a barrel. U.S. light crude ended down 22 cents at $49.17 a barrel.

2.Base Metals
Aluminium hit a 2-1/2 year peak above $2,000 a tonne on Tuesday, lifted by growing concerns over supply cuts in top producer China and an upbeat assessment of China’s demand growth prospects. Three-month London Metal Exchange aluminium ended up 3.4 percent at $2,030 a tonne, its highest since early December 2014. Copper closed up 1 percent at $6,480, after soaring to a 2-1/2 year peak of $6,484 earlier. Chinese steel futures dropped marginally after a seven-day rally that lifted prices to the highest level since 2013.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury yields rose on Tuesday, bolstered by strong demand for three-year notes in an overall quiet market as investors awaited the sale of more debt securities this week and the expected reduction of the Federal Reserve’s balance sheet next month. In late trading, U.S. 10-year yields rose to 2.274 percent , from 2.257 percent late on Monday. U.S. 30-year bonds yielded 2.858 percent. Yields earlier hit a one-week high. After the auction, U.S. three-year yields were at 1.510 percent, up from Monday’s 1.505 percent.

2. Chinese bonds
China’s central bank will inject 140 billion yuan into money markets on Tuesday, traders said. The People’s Bank of China is injecting 70 billion yuan through seven-day reverse bond repurchase agreements and 70 billion yuan through 14-day reverse repos, they said. On a net basis, the PBOC will neither inject nor drain any funds from the market via its open market operations for the day.

Stock Market
1. U.S. Equities
U.S. stocks closed lower on Tuesday after a late afternoon selling spree as investors fled for safety after U.S. President Donald Trump vowed to respond aggressively to any threats from North Korea. After scaling back from record highs earlier in the session, Wall Street’s three major indexes dipped. The Dow Jones Industrial Average ended down 33.08 points, or 0.15 percent, at 22,085.34, snapping a 9-day streak of closing records. The S&P 500 lost 5.99 points, or 0.24 percent, to close at 2,474.92 and the Nasdaq Composite dropped 13.31 points, or 0.21 percent, to 6,370.46. The CBOE Volatility Index closed at 10.96, its highest in about a month.

2. Hong Kong Equities
Hong Kong shares rose on Tuesday as strong company earnings and surging prices for steel and other building materials convinced investors that China’s economy remains solid despite weaker-than-expected trade data. The Hang Seng index ended up 0.6 percent at 27,854.91 points, while the China Enterprises Index gained 0.2 percent to 11,079.79.

3. China Equities
China stocks edged slightly higher on Tuesday in quiet trading, extending gains to the second consecutive day led by agricultural sector. Consolidation can be expected in the near term. The blue-chip CSI300 index rose 0.15 percent, to 3,732.21 points, while the Shanghai Composite Index gained 2.41 points or 0.07percent, to 3,281.87 points.

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