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Market Talk – May 31, 2022


ASIA:

China’s factory activity fell at a slower pace in May as COVID-19 curbs in major manufacturing hubs eased, but movement controls continued to weigh on demand and production, raising concerns about economic growth in the second quarter. The official manufacturing purchasing managers’ index (PMI) rose to 49.6 in May from 47.4 in April, the National Bureau of Statistics (NBS) said on Tuesday. Reuters poll forecasted 48.6. China’s factory slowdown is affecting production lines in other major Asian economies with both Japan and South Korea reporting sharp declines in output. Declines in China’s midstream and downstream production were larger than they were upstream and small firms were hit harder than large firms, chief economists at Huaxing Securities said. The sub-index for production rose to 49.7 in May from 44.4 in April, while the new orders subindex rose to 48.2 from 42.6.

India’s economic growth slowed to the lowest in a year in the first three months of 2022, hit by weakening consumer demand amid soaring prices that could make the central bank’s task of taming inflation without harming growth more difficult. Gross domestic product grew 4.1% year-on-year in January-March, government data released on Tuesday showed, in line with a 4% forecast by economists in a Reuters poll, and below 5.4% growth in Oct-December and growth of 8.4% in July-Sept. The economy’s near-term prospects have darkened due to a spike in retail inflation, which hit an eight-year high of 7.8% in April. The surge in energy and commodity prices caused partly by the Ukraine crisis is also squeezing economic activity.

Japan’s economy will grow at a weaker rate than previously thought this quarter despite hopes for a strong rebound in consumption after showing resilience in the three months through March, a Reuters poll of economists showed. The world’s third-largest economy is at risk of being hobbled by slowing economic growth in China and a surge in global raw material prices – both issues that could hurt Japan’s key manufacturing sector, the poll showed. The economy was projected to expand an annualized 4.5% this quarter, below April’s estimate for 5.1% growth, according to the median forecast of 36 analysts in the May 18-27 poll.

 

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 89.63 points or -0.33% to 27,279.80
  • Shanghai increased 37.37 points or 1.19% to 3,186.43
  • Hang Seng increased 291.27 points or 1.38% to 21,415.20
  • ASX 200 decreased 75.40 points or -1.03% to 7,211.20
  • Kospi increased 16.24 points or 0.61% to 2,685.90
  • SENSEX decreased 359.33 points or -0.64% to 55,566.41
  • Nifty50 decreased 76.85 points or -0.46% to 16,584.55

 

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.00075 or -0.10% to 0.71862
  • NZDUSD decreased 0.00363 or -0.55% to 0.65190
  • USDJPY increased 0.728 or 0.57% to 128.560
  • USDCNY increased 0.00477 or 0.07% to 6.67693

 

Precious Metals:

  • Gold decreased 13.32 USD/t oz. or -0.72% to 1,842.89
  • Silver decreased 0.2 USD/t. oz or -0.91% to 21.746

 

 

Some economic news from last night:

China:

Chinese Composite PMI (May) increased from 42.7 to 48.4

Manufacturing PMI (May) increased from 47.4 to 49.6

Non-Manufacturing PMI (May) increased from 41.9 to 47.8

Japan:

Jobs/applications ratio (Apr) increased from 1.22 to 1.23

Unemployment Rate (Apr) decreased from 2.6% to 2.5%

Industrial Production (MoM) (Apr) decreased from 0.3% to -1.3%

Industrial Production forecast 1m ahead (MoM) (May) decreased from 5.8% to 4.8%

Industrial Production forecast 2m ahead (MoM) (Jun) increased from -0.8% to 8.9%

Large Retailers’ Sales (MoM) decreased from 1.7% to 0.8%

Retail Sales (YoY) (Apr) increased from 0.7% to 2.9%

South Korea:

Industrial Production (MoM) (Apr) decreased from 1.1% to -3.3%

Industrial Production (YoY) (Apr) decreased from 3.7% to 3.3%

Service Sector Output (MoM) (Apr) decreased from 1.5% to 1.4%

Australia:

Building Approvals (MoM) (Apr) increased from -19.2% to -2.4%

Business inventories (MoM) (Q1) increased from 1.5% to 3.2%

Company Gross Operating Profits (QoQ) (Q1)increased from 4.6% to 10.2%

Company Profits Pre-Tax (QoQ) (Q1) decreased from 7.6% to 2.2%

Current Account (Q1) decreased from 13.2B to 7.5B

Housing Credit (Apr) remain the same at 0.6%

Net Exports Contribution (Q1) decreased from -0.2% to -1.7%

Private House Approvals (Apr) increased from -3.0% to 0.5%

Private Sector Credit (MoM) (Apr) increased from 0.6% to 0.8%

New Zealand:

Building Consents (MoM) (Apr) decreased from 6.2% to -8.5%

ANZ Business Confidence (May) decreased from -42.0 to -55.6

NBNZ Own Activity (May) decreased from 8.0% to -4.7%

 

Some economic news from today

Japan:

Construction Orders (YoY) (Apr) increased from -21.2% to 30.5%

Household Confidence (May) increased from 33.0 to 34.1

Housing Starts (YoY) (Apr) decreased from 6.0% to 2.2%

Hong Kong:

M3 Money Supply (Apr) increased from 1.0% to 1.2%

India:

Federal Fiscal Deficit decreased from 748.46B to -15,865.00B

Federal Fiscal Deficit (Apr) decreased from 13,165.95B to -748.46B

GDP Annual increased from -6.6% to 8.7%

GDP Quarterly (YoY) (Q4) decreased from 5.4% to 4.1%

Infrastructure Output (YoY) (Apr) increased from 4.9% to 8.4%

 

EUROPE/EMEA:

Credit card borrowing in Britain rose last month at the fastest annual rate since 2005, possibly reflecting a worsening cost-of-living squeeze that may now be starting to slow the housing market, Bank of England data suggested on Tuesday. The BoE said credit card borrowing was 11.6% higher than in April 2021, marking the biggest increase since November 2005. Overall consumer credit, which includes personal loans and car finance deals, rose by 5.7% in annual terms, the fastest growth since February 2020. The data also pointed to a possible slowing of Britain’s housing market, which has seen rapid increases in house prices over the past two years.

European Central Bank policymakers sparred over the size of their upcoming rate increases on Tuesday as data showed eurozone inflation rising to another record high in May. Prices have risen sharply across Europe in the past year, with the ECB initially blaming lingering supply chain problems following the COVID-19 pandemic, then the Ukraine war which has caused the cost of energy and some foods to surge. Inflation in the 19 countries sharing the euro accelerated to 8.1% this month from 7.4% in April, while price pressures continued to broaden, indicating that it is not just energy pushing up the headline figure. Looking at the current inflation rate at least one ECB rate setter doubt that hikes worth 25 basis points planned in July and September each will be enough to tame fast price growth.

 

The major Europe stock markets had a mixed day:

  • CAC 40 decreased 93.59 points or -1.43% to 6,468.80
  • FTSE 100 increased 7.60 points or 0.10% to 7,607.66
  • DAX 30 decreased 187.63 points or -1.29% to 14,388.35

 

The major Europe currency markets had a negative day today:

  • EURUSD decreased 0.00413 or -0.38% to 1.07304
  • GBPUSD decreased 0.00316 or -0.25% to 1.26135
  • USDCHF decreased 0.00068 or -0.07% to 0.95756

 

Some economic news from Europe today:

Swiss:

Trade Balance (Apr) increased from 2.977B to 4.126B

Retail Sales (YoY) (Apr) increased from -6.6% to -6.0%

GDP (QoQ) (Q1) increased from 0.2% to 0.5%

GDP (YoY) (Q1) increased from 3.6% to 4.4%

France:

French Consumer Spending (MoM) (Apr) increased from -1.4% to -0.4%

French CPI (MoM) increased from 0.4% to 0.6%

French GDP (YoY) decreased from 4.9% to 4.5%

French GDP (QoQ) (Q1) decreased from 0.7% to -0.2%

French HICP (MoM) increased from 0.5% to 0.7%

Italy:

Italian GDP (QoQ) (Q1) increased from -0.2% to 0.1%

Italian GDP (YoY) (Q1) decreased from 6.4% to 6.2%

Italian CPI (YoY) (May) increased from 6.0% to 6.9%

Italian CPI (MoM) (May) increased from -0.1% to 0.9%

Italian HICP (YoY) (May) increased from 6.3% to 7.3%

Italian HICP (MoM) (May) increased from 0.4% to 0.9%

Germany:

German Unemployment Change (May) increased from -13K to -4K

German Unemployment Rate (May) remain the same at 5.0%

Spain:

Spanish Current account (Mar) increased from 0.25B to 1.20B

UK:

BoE Consumer Credit (Apr) increased from 1.288B to 1.399B

M4 Money Supply (MoM) (Apr) decreased from 0.1% to 0.0%

Mortgage Approvals (Apr) decreased from 69.53K to 65.97K

Mortgage Lending (Apr) decreased from 6.44B to 4.12B

Net Lending to Individuals decreased from 8.3B to 5.5B

Euro Zone:

Core CPI (MoM) decreased from 1.0% to 0.5%

Core CPI (YoY) increased from 3.5% to 3.8%

CPI (MoM) (May) increased from 0.6% to 0.8%

CPI (YoY) (May) increased from 7.4% to 8.1%

CPI, n.s.a (May) increased from 115.11 to 116.07

HICP ex Energy & Food (YoY) (May) increased from 3.9% to 4.4%

HICP ex Energy and Food (MoM) decreased from 1.2% to 0.7%

 

US/AMERICAS:

Fed Chair Jerome Powell sat down with President Joe Biden today to address inflation. “My plan to address inflation starts with simple proposition: Respect the Fed, respect the Fed’s independence,” Biden said. As inflation sits at 8.3%, the Federal Reserve has made a commitment to lower inflation to the best of their ability by raising interest rates at a sustainable pace.

Home prices in the US soared 20.6% in March on an annual basis, according to S&P CoreLogic Case-Shiller Home Price Index. The 10-city composite rose 19.5% from the year prior, and was up from February’s 18.7% reading. The 20-city composite experienced a 21.2% rise, up 1.1% from February. Tampa experienced the most notable gain after rising 34.8%, while Phoenix and Miami rose 32.4% and 32%, respectively.

US Market Closings:

  • Dow declined 222.84 points or -0.67% to 32,990.12
  • S&P 500 declined 26.09 points or -0.63% to 4,132.15
  • Nasdaq declined 49.74 points or -0.41% to 12,081.39
  • Russell 2000 declined 23.85 points or -1.26% to 1,864.04

 

Canada Market Closings:

  • TSX Composite declined 190.06 points or -0.91% to 20,729.34
  • TSX 60 declined 10.57 points or -0.84% to 1,254.79

 

Brazil Market Closing:

  • Bovespa advanced 318.4 points or 0.29% to 111,350.51

 

 

ENERGY:

 

The oil markets had a mixed day today:

 

  • Crude Oil decreased 0.29 USD/BBL or -0.25% to 116.950
  • Brent decreased 0.18 USD/BBL or -0.15% to 121.49
  • Natural gas decreased 0.109 USD/MMBtu or -1.26% to 8.5700
  • Gasoline increased 0.1054 USD/GAL or 2.61% to 4.1432
  • Heating oil increased 0.1204 USD/GAL or 2.96% to 4.1886

 

The above data was collected around 12:14 EST on Tuesday

 

  • Top commodity gainers: Gasoline (2.61%), Heating Oil (2.96%), Coal (6.73%) and Cocoa (1.34%)
  • Top commodity losers: Oat (-3.70%), Steel (-5.48%), Wheat (-5.57%) and Lumber (-4.22%)

 

The above data was collected around 12:24 EST on Tuesday.

 

 

BONDS:

 

Japan 0.245%(+1.5bp), US 2’s 2.56% (-0.008%), US 10’s 2.8513% (+4.16bps); US 30’s 3.06% (+0.036%), Bunds 1.116% (+7.2bp), France 1.6360% (+7.3bp), Italy 3.115% (+12.5bp), Turkey 21.69% (+5bp), Greece 3.574% (+4.7bp), Portugal 2.265% (+9.3bp); Spain 2.228% (+10.6bp) and UK Gilts 2.1030% (+11.4bp).

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