29-7-2019 – Johnson meets with Resistance

Asia

Chinese indexes begin the week in the red, led by the Hang Seng’s 1.5% loss, as police crash with protesters in Hong Kong over the weekend, trying to access the homes of Triad members who had attacked protesters the week before. In China, with neither side making any goodwill gestures (China buying US agricultural products or the US relaxing Huawei chip sales restrictions), talks this week between trade-war sides will open in Shanghai. And on the Japan/Korea front, Japanese sources are reporting that their PM Shinzo Abe has no plans to meet his South Korean counterpart at the UN’s General Assembly meeting this week. Meanwhile, good news on the economic front, as retail sales in Japan add half a percent in June YoY.

Europe

The pound lost 80 pips over the weekend, hitting a 2-year low after new ministers in Boris Johnson’s cabinet launch a media blitz preparing for a no-deal Brexit. As Johnson prepares to visit Scotland, that nation’s leaders, Nicola Sturgeon has notified the PM that she is preparing for a second independence referendum, since Scotland is being removed from the EU against its will. On Friday, European Commission President Jean-Claude Juncker told the new PM that there would be no change to the Brexit agreement, especially not to the Irish backstop clause, which Johnson demands be scrapped. In other European news, Spain this morning produced a disappointing preliminary CPI for July – -0.6%MoM, but a less-worse-than-expected 2.4% increase in retail sales for June (YoY).

US

As the US Federal Reserve prepares to cut interest rates Wednesday, data ending last week show excellent results on the jobs front – a 10K drop in initial jobless claims and a 13K drop in continuous claims, trade– a less-than-hoped-for billion and a ½ dollar drop in the goods trade deficit, and a 3.1% increase in durable goods orders. The preliminary Q2 GDP reading was downgraded to 2.1% from 3.1%, rather than the expected 1.9%, and personal consumption prices (also a preliminary reading) rose 2.3% from 0.4% the quarter before.

Commodities

Oil continues to consolidate towards the $56 level (WTI), even as Friday’s Baker Hughes count shows a further 3-rig reduction in active oil wells and the US economy slowed less than expected in Q2. Both Denmark and the US are joining Britain’s proposal for a naval mission to secure shipping through the Straits of Hormuz, as the British tanker seized by Iran last week remains captive. Over the weekend, a second UK warship entered the Gulf.

Corporate

The S&P 500 and Nasdaq on Friday closed at all time highs on surges in Coca Cola (up 2%) and Google (up 10.45%). McDonald’s reported a 4% increase in EPS, Intel saw EPS fall 12% YoY on revenues that fell 3%, and Twitter reported a 1000% increase in EPS from 13 cents for Q2 last year to $1.43 this past quarter – this on an 18% increase in revenues. Amazon shares on Thursday lost 2% after the company reported a miss on earnings but beating sales expectations. In Europe, the FTSE was up on Vodafone (+10.23%), the Dax on Adidas (2.51%) and the CAC40 on Vivendi (+5.18%). This week expect earnings reports from Apple, Proctor & Gamble, Barclays, BMW, GM, Exxon and Chevron.

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