• GLOBAL CAPITAL MARKETS OVERVIEW:

The three major U.S. stock indexes closed low due to various factors, including concerns about corporate tax increases, the spread of the Delta variant virus, and the Fed's possible change in the timetable for reducing debt purchases. The Dow Jones index opened narrowly and then fell repeatedly by more than 200 points at most and closing at 34,584 points, down 166 points, or 0.48%. The Standard & Poor's 500 indexes closed at 4,432 points, down 40 points, or 0.91%. U.S. Treasury yields rose, and the Nasdaq index, led by technology stocks, fell more than 1% to close at 15043 points, down 137 points, or 0.91%. Large technology stocks were under pressure. Facebook fell more than 2%, Apple and Microsoft fell nearly 2%. Among the 11 major sectors of the S&P 500 index, all sectors except healthcare fell, with materials and utility stocks experiencing the largest declines. U.S. Steel fell 8%, and the company announced a $3 billion investment in small steel plants. For the entire week, the Dow fell nearly 0.1%, the third consecutive week of decline. The Nasdaq fell about 0.5%. The S&P 500 index fell about 0.6%, the biggest bi-weekly decline since February. Inflation in the United States remains high, which means a slightly slower reduction in asset purchase programs, which the Fed may intend to do as early as Wednesday, September 22nd. European stocks lost in price on Friday. The pan-European index fell to its lowest level since July 30, the third consecutive week of decline - the longest series since October 2020. The mining sector was an outsider, as iron ore prices fell below $ 100 per ton for the first time in 14 months. Iron ore has fallen 55 percent since its peak in May as China, the world's largest steelmaker, struggles to reduce carbon emissions, putting pressure on production and reducing demand for ore. The tourism sector has been a growth leader amid rumors that the UK will ease the demands on returning citizens. Already after the market closed, the Minister of Transport of the United Kingdom announced on Twitter that from October 4, a new simplified system of requirements for international travel would be introduced. From that date, fully vaccinated people arriving in the UK will not take the test if they arrive from a country not on the red list. At the same time, it will be allowed to replace the PCR test "Day 2" with a cheaper test from October. From September 22, the red list will be eight states smaller. According to EPFR Global statistics released by Bank of America on Friday, funds focused on investing in European assets raised $ 100 million in the week to September 15, the highest amount in four weeks. The shares of Commerzbank AG rose 1.2% after Cerberus Capital announced its readiness to increase its stake if the German government was ready to sell its stake in the credit institution after the election. Shares of Biotest rose 25% on news that Spanish pharmaceutical company Grifols has agreed to buy a German plasma maker for 1.6 billion euros. Grifols shares jumped 5.8%. Retail sales in the UK fell by 0.9% from August to July, although the consensus forecast of economists meant an increase of 0.5% m / m. At the same time, the retail sales volume in July was revised from -2.5% m / m to -2.8% m / m. As a result, retail sales are declining on an m / m basis for the 4th month in a row. This is the longest negative series since 1996. In Japan, the campaign for the election of the Liberal Democratic Party (LDP) chairman, who will also become the new prime minister, started on Friday, September 17. The candidates are former Foreign Minister and former Defense Minister Taro Kono (now in charge of coronavirus vaccination), former Foreign Minister Fumio Kisida, former Justice Minister Sanae Takaiti, and former Minister of Administrative Affairs and Communications Seiko Noda. Last year, Abenomics frontman Shinzo Abe abruptly announced his resignation, with LDP chairman Yoshihide Suga taking office. Yoshihide Suga supported the candidacy of Taro Kono, popular with foreign investors. Survey data show that he is currently the preferred candidate among the general public. Kono is a proponent of digitization and remote work opportunities for young employees. Companies offering appropriate digital digitization and off-office workflow solutions are expected to benefit from Taro Kono's election victory. He has also been an opponent of nuclear energy in the past. Accordingly, renewable energy companies could also benefit if Kono becomes the new prime minister. Yoshihide Suga announced on September 3 that he would not run in the upcoming LDP presidential election. Since then, the Topix index has risen by 7%, and since the beginning of 2021 - by 17% and has reached its highest since 1990. The upcoming elections without the previous prime minister are a driver of stock market growth. The new government is expected to increase spending in the future and launch reforms that will positively impact business. Therefore, foreign investors began to look with interest at Japanese securities. For the first time since 2017, in 2021, foreigners will buy more Japanese shares than sell, and the balanced position will reflect the net long-term foreigners in Japan, according to Japan Exchange Group. Japanese shares look cheap relative to competitors. The S&P 500's Forward P / E is almost 21x against the 16.5x average for the past 15 years. for the index Euro Stoxx 600 - 16 [against an average of 14x. Meanwhile, for the Topix index, the forward P / E is 15x relative to the standard of 18x. Japanese stocks look cheap relative to competitors. The S&P 500's Forward P / E is almost 21x against the 16.5x average for the past 15 years. for the index Euro Stoxx 600 - 16 [against an average of 14x. Meanwhile, for the Topix index, the forward P / E is 15x relative to the standard of 18x. Accordingly, even though Japanese stocks are at their highest since 1990, they are still cheaper than competitors, further illustrated by the difference between forwarding P / E for Topix and forward P / E for the global MSCI AC World index excluding Japan. This indicator in dynamics can be compared with a similar spread of delivering P / E for the S&P 500 index and forward P / E index MSCI AC World except for the USA. The same for Europe. As you can see, the discount between Japan and Europe has decreased recently, but Japanese stocks still look cheap. On Friday (17th), the KOSPI index rose slightly by 0.33% (10.42 points) to close at 3,140.51 points. BusinessKorea reported that industry sources pointed out that Apple will release its first folding machine in 2023. Apple is rumored to work with the panel supplier LG Display (LGD) to develop a foldable OLED panel. This in-folding panel uses etching technology to reduce the thickness. It may use a 7.5-inch display and Apple’s first folding machine. It may be a shell machine that opens up and down. LGD rose 1.01%. On Friday, global shipbuilding leader Hyundai Heavy Industries (HHI) conducted an IPO (stock initial public offering). The company's IPO price was 60,000 won, and it went straight to 111,000 won at the opening; compared with the IPO price, it was up 85%. HHI closed at 111,500 won. The parent company Korea Shipbuilding & Offshore Engineering (KSOE), plunged 10.97%. After obtaining the IPO funds, Hyundai Heavy Industries plans to spend 1 trillion won in the next three years to develop ships powered by ammonia or hydrogen energy, develop self-driving ships, and plan to acquire hydrogen fuel cell plants.LG Energy Solution, a major electric vehicle battery manufacturer, spent 35 billion won (US$29.7 million) to acquire a 4.8% stake in Shanghai Greatpower Nickel & Cobalt Materials to ensure a stable supply of battery raw materials. LG Chem, the parent company of LG New Energy, fell 2.09%. South Korean blue-chip stocks Samsung Electronics surged 1.45%, and SK Hynix surged 2.88

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- US: The latest U.S. economic data is mixed. Aftershocks, the Wall Street stock market closed with mixed but not significant gains. At present, investors are still worried about the COVID-19 epidemic and the authorities' possible adjustment of monetary policy. US retail sales fell in July, but unexpectedly rose 0.7% in August, but auto sales fell sharply. However, in the week ending on the 11th, the number of people applying for unemployment benefits for the first time reached 332,000, which was higher than analysts’ expectations and 20,000 more than before.

- US: The initial value of the Consumer Sentiment Index of the University of Michigan in September was 71, which rebounded from the low level in the past ten years last month, but it was lower than market expectations. The data shows that the initial value of the consumer current index is 77.1, which is 1.4 lower than the final value in August; the initial value of the expectation index is 67.1, which is two higher than the final value in August.

- US: The University of Michigan Consumer Sentiment Index previously rose 0.7p in September. up to 71p. (against a consensus forecast of 72.0 points) Furthermore, it remained in the area of minimum signs for the last ten years. From extreme inflation sub-index conditions for the purchase of goods long consumers, homes, and vehicles, released to record lows since 1980. US consumers will consist of 4.7% in the nearest annual period of inflation, which is the maximum value of 2008.

- US: According to the monthly report of the US Department of Agriculture, Australia will remain the fourth-largest wheat exporter this year, after Russia (35 million tons), the United States (23.8 million tons), and Ukraine (23.5 million tons). However, if the prospects for Australian wheat production continue to improve and the production and export estimates are raised, Australia will have a good chance of surpassing the United States and Ukraine to become the second-largest wheat exporter. The U.S. Department of Agriculture announced on September 16 export sales data for the week from September 3 to September 9, showing that the contracted net sales of wheat exports from the United States increased by 59% from the previous week to 617,100 metric tons in 2021/22 fiscal year beginning in June. Since this marketing year, the new high is the largest export market in Nigeria (328,900 metric tons). Since September, the contract net sales volume of soybean exports in the United States is 1,264,200 metric tons in the 2021/22 season, of which 945,200 metric tons are sold to mainland China, and 163,000 metric tons are sold to regions with unknown destinations. Soybean exports during the week were 244,400 metric tons, of which 139,800 metric tons and 68,700 metric tons were exported to China and Mexico, respectively. Last year, US soybean exports increased 35% annually to 60.6 million tons.

- AU: The Australian Bureau of Agricultural Resources Economics and Technology (Abares) reported that the output of Australian wheat in the 2021/22 season from July is estimated to reach 32.6 million tons, second only to the previous year. The output of 33 million tons will be the second-highest in history. The U.S. Department of Agriculture report this month also raised its forecast for Australian wheat production by 1.5 million tons to 31.5 million tons, and its export forecast was also raised by 1 million tons to 23 million tons. Australian wheat production is closely related to the weather. Before this, Australia experienced three consecutive years of drought. The relatively mild weather in the previous year caused Australian wheat production to hit a record high. However, Gary Northover, executive director of the Australian Agricultural Machinery Association, pointed out that the bumper harvest of Australian wheat production this year will also face a new challenge: the delay in the global supply chain. Australia is expected to sell more than 16,000 tractors this year, but some agricultural machinery orders may be prolonged for up to 12 months.

- AU: The export shipment of wheat that week was 514,100 metric tons, an increase of 32% from the previous week and a decrease of 1% from the average of the past four weeks. The main export markets were Mexico (172,800 metric tons) and the Philippines (111,100 metric tons). So far this marketing year, U.S. wheat exports have fallen by 17% annually to 6.33 million tons. Since September, corn exports' contracted net sales volume has been 246,600 metric tons, less than half of market expectations. The largest export market is Mexico (154,300 metric tons). For the week, corn’s export shipment volume was 192,000 metric tons, and the primary export market was Mexico (177,500 metric tons). Last year, U.S. corn exports increased 55% to 67 million tons.

- AU: According to a report by the Australian Department of Industry, after global mineral gold production fell by 3.9% to 3,401 metric tons in 2020, production is expected to increase by 5.5% annually to 3,588 metric tons in 2021, and that in 2022, production will increase by 3.0% annually to 3,696 metric tons, and production will increase annually in 2023. 2.0% to 3,769 metric tons. According to the report, the growth of global mineral gold production this year was mainly driven by the growth of output in Central and South America and Africa, which suffered a significant decline in output last year due to the epidemic's impact. Among them, Mexico's gold production is estimated to increase by 24% to 128 metric tons, Peru's gold production is estimated to increase by 35% to 136 metric tons, and South Africa's gold production is estimated to increase by 24% to 124 metric tons.

- HK: As of the end of the second quarter, the total number of credit cards in circulation in Hong Kong was 19.22 million, a decrease of 0.5% quarter-to-quarter and 1.5% year-on-year. The total credit card transaction volume in the second quarter was approximately 236 million, an increase of 7% quarter-to-quarter and an increase of 15.3% year-on-year; the total transaction volume was HK$172.1 billion, a decrease of 1.1% quarter-to-quarter, and an increase of 19.4% year-on-year, of which nearly 83% were spent in Hong Kong. About 12% of overseas consumption, the rest is cash loans. The HKMA figures also show that the total transaction volume of debit cards involving retail sales and bill payment in the previous quarter increased by 6.2% quarter-to-quarter, while the total transaction volume decreased by 8.1% quarter-to-quarter and increased by 18.8% and 4.6% year-on-year, respectively.

- EU: Consumer inflation in the euro area rose to 3% in August from 2.2% in July, according to updated data, which corresponded to the figures in the preliminary reading. The main driver of rising prices was clothing. In addition, the growth rate of prices for household goods (furniture, household appliances) accelerated. As a result, core inflation rose to 1.6% in August from 0.7% in July. The last time the figure was at such high levels was in 2008-2009. At the same time, stock prices for gas and electricity rose sharply in August. This inflation will seep into electricity prices in the coming months, and the corresponding household bills will rise throughout the euro area.

- GB: Retail sales in the UK fell by 0.9% from August to July, although the consensus forecast of economists meant an increase of 0.5% m / m. At the same time, the retail sales volume in July was revised from -2.5% m / m to -2.8% m / m. As a result, retail sales are declining on an m / m basis for the 4th month in a row. This is the most extended negative series since 1996.

 

• LOOKING AHEAD:

Today, investors will receive:

- GBP: Rightmove HPI m/m.

- JPY: Bank Holiday.

- CNY: Bank Holiday and Foreign Direct Investment ytd/y.

- EUR: German PPI m/m, and German Buba Monthly Report.

- USD: NAHB Housing Market Index.

- CAD: Federal Election.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- The main event in the financial market this week will be the Federal Reserve (Fed) meeting scheduled for Wednesday at 20:00 Central European Time. According to analysts at the National Bank of Canada (NFB), this meeting may surprise many investors. Although they do not expect the Fed to announce a reduction in its asset purchase plan officially, they expect it to start "shrinking" later this year. In turn, according to Rabobank experts, the U.S. dollar (USD) should remain firm against the G10 currency in the coming months. Its index (DXY) rose sharply last weekend and closed at 93.25. The Fed is unlikely to announce a reduction in scale this week-NFB. In the United States, the Fed meeting will be the focus of the following week. However, experts said that after the disappointing August employment report, the Fed officially announced that it is unlikely to reduce the scale of asset purchases.

- In the first half of the trading session on Friday, September 17, the US stock market declined on the eve of the expiration of quarterly options and stock futures. Goldman Sachs estimates the expiration of quarterly stock options at $ 3.4 trillion, which could be a record high for any September in history. In addition, yields on 10-year US government bonds have risen to record levels since mid-July, and preliminary data on US consumer confidence in September fell short of forecasts and remained at a record low for the last ten years.

- Shares of the travel and hospitality sector are rising again in Europe. This is because the UK plans to ease restrictive measures for tourists.

- Shares of luxury goods manufacturers also showed positive dynamics. Papers such as LVMH, Kering, Hermes, and Richemont have been significantly resold in recent days due to fears of falling demand in China amid another outbreak of COVID-19.
- The shares of the German Commerzbank rose significantly in the rumors in the financial press about the interest of one of the private American funds to buy more than 15% of the shares after the elections to the Bundestag.
- Morgan Stanley and UBS AG lowered their Anglo-American stock quotes, citing a possible drop in demand for metals from China. These recommendations also had a negative impact on other suppliers in the sector.
- Inflation in the euro area was confirmed at 3.0% in August. In the UK, retail sales fell 0.9% in August, with expectations of 0.5% growth.

- Yields on 10-year US Treasury bonds rose by two basis points to 1.33%. Published data for August on retail sales and industrial production in China. The growth in yields of American treasuries continues with mid-week. Most likely, investors react to the data declining inflation as a sign of impending decline monetary stimulus from the Fed, which will mean prospects are falling quotations of all bonds. China's retail sales growth slowed significantly from July's 8% to 2.5% against expectations of a 7% increase. The growth of industrial production in August also did not justify expectations: an increase in August was 5.3% against expectations of 5.8%. This one indicator also shows a slowdown, compared to July dynamics of 6.4%. In general, China's statistics reflect a slowdown in economic growth, which means increased risks for the global economy. Potentially this means the prospect of investors leaving safe assets, which will positively affect US quotes treasurer. Yields on 10-year US Treasury bonds rose on Thursday.2-year yield: +1 bp up to 0.223% per annum,10-year yield: +3 bp. up to 1.333% per annum, 30-year yield: +1 bp up to 1.873% per annum.

 

• STOCK MARKET SECTORS:

- High: Health Care.

- Low: Information Technology, Materials, Utilities, Communication Services, Industrials.

 

• TOP CURRENCY MARKET DRIVERS:

- OIL: The New York Mercantile Exchange (NYMEX) October crude oil futures closed flat at US$72.61 per barrel on September 16. Although the US retail sales data was more substantial than expected and crude oil inventories hit a two-year low, the rise in the US dollar and the gradual recovery of production capacity in the Gulf of Mexico offset it. This is the driving force for the rise in oil prices; Brent crude oil rose by US$0.21 or 0.3% to US$75.67 per barrel in recent months on the European ICE Futures Exchange (ICE Futures Europe). US retail sales rose 0.7% in August, better than the previous month’s decline of 1.8% and a 0.8% monthly decline in market expectations. The U.S. Department of the Interior's Bureau of Security and Environmental Enforcement (BSEE) reported on September 16 that the U.S. Gulf of Mexico’s daily crude oil production capacity was shut down by 28.24% or 513,878 barrels per day (29.5% the day before), and the daily natural gas production capacity was shut down by 39.4% or 878 million. Cubic feet/day, the same as the previous day. According to data from the US Department of Energy, the capacity of offshore crude oil production platforms in the Gulf of Mexico accounts for approximately 17% of total US crude oil production and 5% of total natural gas production. The US also has more than 45% refining capacity and 51% natural gas processing capacity located in the Gulf of Mexico. The U.S. Department of Energy report stated that as of the week of September 10, U.S. commercial crude oil inventories decreased by 6.4 million barrels to 417.4 million barrels, a two-year low. Analysts initially expected a decrease of 3.9 million barrels; gasoline inventories decreased by 1.9 million barrels. To 218.1 million barrels, analysts initially expected a reduction of 2 million barrels; distilled oil inventories fell by 1.7 million barrels to 131.9 million barrels, and analysts initially expected a decrease of 1.3 million barrels. The New York crude oil futures delivery location and North America's largest crude oil transshipment center Cushing crude oil inventory decreased by 1.1 million barrels to 35.32 million barrels, the first decrease in 4 weeks. US refineries' average daily crude oil processing volume increased by 85,000 barrels from the previous week to 14.4 million barrels, and the refinery's capacity utilization rate increased to 82.1% from 81.9% the previous week. The average daily output of gasoline decreased from 10.1 million barrels the previous week to 9.3 million barrels, and the average daily output of distilled oil decreased slightly to 4.2 million barrels from the previous week.

- METALS: The New York Mercantile Exchange (COMEX) December gold futures closed down by 12.3 US dollars or 0.7% to US$1,794.8 per ounce, as the rebound in US stocks reduced the impact of safe-haven demand; the US dollar index fell 0.2%, and December silver futures fell 0.4% becomes $23.801 per ounce. New York Mercantile Exchange (NYMEX) October platinum futures fell 0.9% to US$930.5 per ounce, and December palladium futures rose 0.8% to US$1,991.6 per ounce. The world's largest gold ETF, State Street Wealth Gold Index Fund (SPDR Gold Shares, GLD), on the 15th, gold holdings decreased by 1.75 metric tons to 998.46 metric tons. The largest silver ETF, the iShares Silver Trust (SLV), had silver holdings at 16,939.71 metric tons. The World Platinum Investment Council (WPIC) report stated that platinum demand is expected to grow, mainly due to the strong growth in sales of heavy vehicles in mainland China, the substitution effect after the high palladium price, and the increase in investment demand. Trevor Raymond, the association's research director, said that with the gradual recovery of the global economy, the recovery in platinum demand is expected to continue until the end of the year. The association report said that global platinum demand increased by 23% annually to 1.907 million ounces in the second quarter of this year. It is estimated that global platinum demand will increase by 1% annually to 7.753 million ounces in 2021. In the second quarter, platinum demand for catalytic converters in the automobile market increased by 75% annually to 285,000 ounces, mainly due to the recovery of automobile production from the impact of last year's epidemic. The report also pointed out that if it were not for the continued shortage of automotive chips, platinum demand in the automotive market in the second quarter is expected to increase by about 50,000 ounces.

- AUDNZD: The bottom of the Australian dollar/New Zealand dollar may soon come; negative news will impact the Australian dollar; the policy divergence between the Bank of New Zealand and the Bank of Australia is the most likely result. After the US retail sales report was released, the AUD/USD briefly fell below 0.7300, while the Australian employment data was unsurprisingly weak under the influence of the latest lockdown measures. Therefore, my focus has shifted to AUD/ NZD, which fell to its lowest level since April 2020 yesterday. It can be said that shorting the AUD/NZD is currently the most widely agreed transaction in the market because the Bank of New Zealand is preparing to raise interest rates for the first time since 2014 next month, and the Bank of Australia continues to imply that it will not raise interest rates before 2024. This resulted in a divergence of monetary policy. However, since the data is still in favor of the New Zealand dollar, I am beginning to doubt whether this is the most likely outcome, and expect the trend of the AUD/NZD to reverse in the next few weeks.

 

• CHART OF THE DAY:

The Eurozone CPI report for August was just released, and the results showed that the Eurozone inflation data was roughly in line with market expectations. Among them, the final value of the core inflation rate is 1.6%, which is consistent with market forecasts and is better than the previous value of 0.7%. The final value of the consumer price index annual rate reached 3.0% (expected to be 3.0%), which is also better than the previous value of 2.2%; the monthly consumer price index rate was 0.4%, which is also the same as the market forecast, with the previous value of -0.1%. Euro traders seem to be not interested in this expected inflation report. The euro against the dollar did not fluctuate sharply after the data was released but rose slightly. The same is true for the euro against major currency pairs. This price trend of the euro may be related to the statement of the European Central Bank Management Committee Hernández Decos, who stated that the current situation of the European Central Bank does not allow for a rate hike in 2023. This statement made euro bulls wary of betting that the European Central Bank will gradually adopt a less dovish stance. Euro-dollar traders seem to be waiting for the September University of Michigan Consumer Confidence Report to be released later. The initial value of the University of Michigan Consumer Confidence Index is 70.3, while the market forecast is 72. If the result is in line with or even better than expected, the euro/dollar may be under pressure to go down, and vice versa.• EURUSD - D1, Resistance around ~ 1.18668, 1.21582, Support (target zone) around ~ 1.16226

 

Negative-sounding headlines: downward trend, risk aversion, fund-raising efforts

• GLOBAL CAPITAL MARKETS OVERVIEW:

The three major U.S. stock indexes closed low due to various factors, including concerns about corporate tax increases, the spread of the Delta variant virus, and the Fed's possible change in the timetable for reducing debt purchases. The Dow Jones index opened narrowly and then fell repeatedly by more than 200 points at most and closing at 34,584 points, down 166 points, or 0.48%. The Standard & Poor's 500 indexes closed at 4,432 points, down 40 points, or 0.91%. U.S. Treasury yields rose, and the Nasdaq index, led by technology stocks, fell more than 1% to close at 15043 points, down 137 points, or 0.91%. Large technology stocks were under pressure. Facebook fell more than 2%, Apple and Microsoft fell nearly 2%. Among the 11 major sectors of the S&P 500 index, all sectors except healthcare fell, with materials and utility stocks experiencing the largest declines. U.S. Steel fell 8%, and the company announced a $3 billion investment in small steel plants. For the entire week, the Dow fell nearly 0.1%, the third consecutive week of decline. The Nasdaq fell about 0.5%. The S&P 500 index fell about 0.6%, the biggest bi-weekly decline since February. Inflation in the United States remains high, which means a slightly slower reduction in asset purchase programs, which the Fed may intend to do as early as Wednesday, September 22nd. European stocks lost in price on Friday. The pan-European index fell to its lowest level since July 30, the third consecutive week of decline - the longest series since October 2020. The mining sector was an outsider, as iron ore prices fell below $ 100 per ton for the first time in 14 months. Iron ore has fallen 55 percent since its peak in May as China, the world's largest steelmaker, struggles to reduce carbon emissions, putting pressure on production and reducing demand for ore. The tourism sector has been a growth leader amid rumors that the UK will ease the demands on returning citizens. Already after the market closed, the Minister of Transport of the United Kingdom announced on Twitter that from October 4, a new simplified system of requirements for international travel would be introduced. From that date, fully vaccinated people arriving in the UK will not take the test if they arrive from a country not on the red list. At the same time, it will be allowed to replace the PCR test "Day 2" with a cheaper test from October. From September 22, the red list will be eight states smaller. According to EPFR Global statistics released by Bank of America on Friday, funds focused on investing in European assets raised $ 100 million in the week to September 15, the highest amount in four weeks. The shares of Commerzbank AG rose 1.2% after Cerberus Capital announced its readiness to increase its stake if the German government was ready to sell its stake in the credit institution after the election. Shares of Biotest rose 25% on news that Spanish pharmaceutical company Grifols has agreed to buy a German plasma maker for 1.6 billion euros. Grifols shares jumped 5.8%. Retail sales in the UK fell by 0.9% from August to July, although the consensus forecast of economists meant an increase of 0.5% m / m. At the same time, the retail sales volume in July was revised from -2.5% m / m to -2.8% m / m. As a result, retail sales are declining on an m / m basis for the 4th month in a row. This is the longest negative series since 1996. In Japan, the campaign for the election of the Liberal Democratic Party (LDP) chairman, who will also become the new prime minister, started on Friday, September 17. The candidates are former Foreign Minister and former Defense Minister Taro Kono (now in charge of coronavirus vaccination), former Foreign Minister Fumio Kisida, former Justice Minister Sanae Takaiti, and former Minister of Administrative Affairs and Communications Seiko Noda. Last year, Abenomics frontman Shinzo Abe abruptly announced his resignation, with LDP chairman Yoshihide Suga taking office. Yoshihide Suga supported the candidacy of Taro Kono, popular with foreign investors. Survey data show that he is currently the preferred candidate among the general public. Kono is a proponent of digitization and remote work opportunities for young employees. Companies offering appropriate digital digitization and off-office workflow solutions are expected to benefit from Taro Kono's election victory. He has also been an opponent of nuclear energy in the past. Accordingly, renewable energy companies could also benefit if Kono becomes the new prime minister. Yoshihide Suga announced on September 3 that he would not run in the upcoming LDP presidential election. Since then, the Topix index has risen by 7%, and since the beginning of 2021 - by 17% and has reached its highest since 1990. The upcoming elections without the previous prime minister are a driver of stock market growth. The new government is expected to increase spending in the future and launch reforms that will positively impact business. Therefore, foreign investors began to look with interest at Japanese securities. For the first time since 2017, in 2021, foreigners will buy more Japanese shares than sell, and the balanced position will reflect the net long-term foreigners in Japan, according to Japan Exchange Group. Japanese shares look cheap relative to competitors. The S&P 500's Forward P / E is almost 21x against the 16.5x average for the past 15 years. for the index Euro Stoxx 600 - 16 [against an average of 14x. Meanwhile, for the Topix index, the forward P / E is 15x relative to the standard of 18x. Japanese stocks look cheap relative to competitors. The S&P 500's Forward P / E is almost 21x against the 16.5x average for the past 15 years. for the index Euro Stoxx 600 - 16 [against an average of 14x. Meanwhile, for the Topix index, the forward P / E is 15x relative to the standard of 18x. Accordingly, even though Japanese stocks are at their highest since 1990, they are still cheaper than competitors, further illustrated by the difference between forwarding P / E for Topix and forward P / E for the global MSCI AC World index excluding Japan. This indicator in dynamics can be compared with a similar spread of delivering P / E for the S&P 500 index and forward P / E index MSCI AC World except for the USA. The same for Europe. As you can see, the discount between Japan and Europe has decreased recently, but Japanese stocks still look cheap. On Friday (17th), the KOSPI index rose slightly by 0.33% (10.42 points) to close at 3,140.51 points. BusinessKorea reported that industry sources pointed out that Apple will release its first folding machine in 2023. Apple is rumored to work with the panel supplier LG Display (LGD) to develop a foldable OLED panel. This in-folding panel uses etching technology to reduce the thickness. It may use a 7.5-inch display and Apple’s first folding machine. It may be a shell machine that opens up and down. LGD rose 1.01%. On Friday, global shipbuilding leader Hyundai Heavy Industries (HHI) conducted an IPO (stock initial public offering). The company's IPO price was 60,000 won, and it went straight to 111,000 won at the opening; compared with the IPO price, it was up 85%. HHI closed at 111,500 won. The parent company Korea Shipbuilding & Offshore Engineering (KSOE), plunged 10.97%. After obtaining the IPO funds, Hyundai Heavy Industries plans to spend 1 trillion won in the next three years to develop ships powered by ammonia or hydrogen energy, develop self-driving ships, and plan to acquire hydrogen fuel cell plants.LG Energy Solution, a major electric vehicle battery manufacturer, spent 35 billion won (US$29.7 million) to acquire a 4.8% stake in Shanghai Greatpower Nickel & Cobalt Materials to ensure a stable supply of battery raw materials. LG Chem, the parent company of LG New Energy, fell 2.09%. South Korean blue-chip stocks Samsung Electronics surged 1.45%, and SK Hynix surged 2.88

 

• REVIEWING ECONOMIC DATA:

Looking at the last economic data:

- US: The latest U.S. economic data is mixed. Aftershocks, the Wall Street stock market closed with mixed but not significant gains. At present, investors are still worried about the COVID-19 epidemic and the authorities' possible adjustment of monetary policy. US retail sales fell in July, but unexpectedly rose 0.7% in August, but auto sales fell sharply. However, in the week ending on the 11th, the number of people applying for unemployment benefits for the first time reached 332,000, which was higher than analysts’ expectations and 20,000 more than before.

- US: The initial value of the Consumer Sentiment Index of the University of Michigan in September was 71, which rebounded from the low level in the past ten years last month, but it was lower than market expectations. The data shows that the initial value of the consumer current index is 77.1, which is 1.4 lower than the final value in August; the initial value of the expectation index is 67.1, which is two higher than the final value in August.

- US: The University of Michigan Consumer Sentiment Index previously rose 0.7p in September. up to 71p. (against a consensus forecast of 72.0 points) Furthermore, it remained in the area of minimum signs for the last ten years. From extreme inflation sub-index conditions for the purchase of goods long consumers, homes, and vehicles, released to record lows since 1980. US consumers will consist of 4.7% in the nearest annual period of inflation, which is the maximum value of 2008.

- US: According to the monthly report of the US Department of Agriculture, Australia will remain the fourth-largest wheat exporter this year, after Russia (35 million tons), the United States (23.8 million tons), and Ukraine (23.5 million tons). However, if the prospects for Australian wheat production continue to improve and the production and export estimates are raised, Australia will have a good chance of surpassing the United States and Ukraine to become the second-largest wheat exporter. The U.S. Department of Agriculture announced on September 16 export sales data for the week from September 3 to September 9, showing that the contracted net sales of wheat exports from the United States increased by 59% from the previous week to 617,100 metric tons in 2021/22 fiscal year beginning in June. Since this marketing year, the new high is the largest export market in Nigeria (328,900 metric tons). Since September, the contract net sales volume of soybean exports in the United States is 1,264,200 metric tons in the 2021/22 season, of which 945,200 metric tons are sold to mainland China, and 163,000 metric tons are sold to regions with unknown destinations. Soybean exports during the week were 244,400 metric tons, of which 139,800 metric tons and 68,700 metric tons were exported to China and Mexico, respectively. Last year, US soybean exports increased 35% annually to 60.6 million tons.

- AU: The Australian Bureau of Agricultural Resources Economics and Technology (Abares) reported that the output of Australian wheat in the 2021/22 season from July is estimated to reach 32.6 million tons, second only to the previous year. The output of 33 million tons will be the second-highest in history. The U.S. Department of Agriculture report this month also raised its forecast for Australian wheat production by 1.5 million tons to 31.5 million tons, and its export forecast was also raised by 1 million tons to 23 million tons. Australian wheat production is closely related to the weather. Before this, Australia experienced three consecutive years of drought. The relatively mild weather in the previous year caused Australian wheat production to hit a record high. However, Gary Northover, executive director of the Australian Agricultural Machinery Association, pointed out that the bumper harvest of Australian wheat production this year will also face a new challenge: the delay in the global supply chain. Australia is expected to sell more than 16,000 tractors this year, but some agricultural machinery orders may be prolonged for up to 12 months.

- AU: The export shipment of wheat that week was 514,100 metric tons, an increase of 32% from the previous week and a decrease of 1% from the average of the past four weeks. The main export markets were Mexico (172,800 metric tons) and the Philippines (111,100 metric tons). So far this marketing year, U.S. wheat exports have fallen by 17% annually to 6.33 million tons. Since September, corn exports' contracted net sales volume has been 246,600 metric tons, less than half of market expectations. The largest export market is Mexico (154,300 metric tons). For the week, corn’s export shipment volume was 192,000 metric tons, and the primary export market was Mexico (177,500 metric tons). Last year, U.S. corn exports increased 55% to 67 million tons.

- AU: According to a report by the Australian Department of Industry, after global mineral gold production fell by 3.9% to 3,401 metric tons in 2020, production is expected to increase by 5.5% annually to 3,588 metric tons in 2021, and that in 2022, production will increase by 3.0% annually to 3,696 metric tons, and production will increase annually in 2023. 2.0% to 3,769 metric tons. According to the report, the growth of global mineral gold production this year was mainly driven by the growth of output in Central and South America and Africa, which suffered a significant decline in output last year due to the epidemic's impact. Among them, Mexico's gold production is estimated to increase by 24% to 128 metric tons, Peru's gold production is estimated to increase by 35% to 136 metric tons, and South Africa's gold production is estimated to increase by 24% to 124 metric tons.

- HK: As of the end of the second quarter, the total number of credit cards in circulation in Hong Kong was 19.22 million, a decrease of 0.5% quarter-to-quarter and 1.5% year-on-year. The total credit card transaction volume in the second quarter was approximately 236 million, an increase of 7% quarter-to-quarter and an increase of 15.3% year-on-year; the total transaction volume was HK$172.1 billion, a decrease of 1.1% quarter-to-quarter, and an increase of 19.4% year-on-year, of which nearly 83% were spent in Hong Kong. About 12% of overseas consumption, the rest is cash loans. The HKMA figures also show that the total transaction volume of debit cards involving retail sales and bill payment in the previous quarter increased by 6.2% quarter-to-quarter, while the total transaction volume decreased by 8.1% quarter-to-quarter and increased by 18.8% and 4.6% year-on-year, respectively.

- EU: Consumer inflation in the euro area rose to 3% in August from 2.2% in July, according to updated data, which corresponded to the figures in the preliminary reading. The main driver of rising prices was clothing. In addition, the growth rate of prices for household goods (furniture, household appliances) accelerated. As a result, core inflation rose to 1.6% in August from 0.7% in July. The last time the figure was at such high levels was in 2008-2009. At the same time, stock prices for gas and electricity rose sharply in August. This inflation will seep into electricity prices in the coming months, and the corresponding household bills will rise throughout the euro area.

- GB: Retail sales in the UK fell by 0.9% from August to July, although the consensus forecast of economists meant an increase of 0.5% m / m. At the same time, the retail sales volume in July was revised from -2.5% m / m to -2.8% m / m. As a result, retail sales are declining on an m / m basis for the 4th month in a row. This is the most extended negative series since 1996.

 

• LOOKING AHEAD:

Today, investors will receive:

- GBP: Rightmove HPI m/m.

- JPY: Bank Holiday.

- CNY: Bank Holiday and Foreign Direct Investment ytd/y.

- EUR: German PPI m/m, and German Buba Monthly Report.

- USD: NAHB Housing Market Index.

- CAD: Federal Election.

 

• KEY EQUITY & BOND MARKET DRIVERS:

- The main event in the financial market this week will be the Federal Reserve (Fed) meeting scheduled for Wednesday at 20:00 Central European Time. According to analysts at the National Bank of Canada (NFB), this meeting may surprise many investors. Although they do not expect the Fed to announce a reduction in its asset purchase plan officially, they expect it to start "shrinking" later this year. In turn, according to Rabobank experts, the U.S. dollar (USD) should remain firm against the G10 currency in the coming months. Its index (DXY) rose sharply last weekend and closed at 93.25. The Fed is unlikely to announce a reduction in scale this week-NFB. In the United States, the Fed meeting will be the focus of the following week. However, experts said that after the disappointing August employment report, the Fed officially announced that it is unlikely to reduce the scale of asset purchases.

- In the first half of the trading session on Friday, September 17, the US stock market declined on the eve of the expiration of quarterly options and stock futures. Goldman Sachs estimates the expiration of quarterly stock options at $ 3.4 trillion, which could be a record high for any September in history. In addition, yields on 10-year US government bonds have risen to record levels since mid-July, and preliminary data on US consumer confidence in September fell short of forecasts and remained at a record low for the last ten years.

- Shares of the travel and hospitality sector are rising again in Europe. This is because the UK plans to ease restrictive measures for tourists.

- Shares of luxury goods manufacturers also showed positive dynamics. Papers such as LVMH, Kering, Hermes, and Richemont have been significantly resold in recent days due to fears of falling demand in China amid another outbreak of COVID-19.
- The shares of the German Commerzbank rose significantly in the rumors in the financial press about the interest of one of the private American funds to buy more than 15% of the shares after the elections to the Bundestag.
- Morgan Stanley and UBS AG lowered their Anglo-American stock quotes, citing a possible drop in demand for metals from China. These recommendations also had a negative impact on other suppliers in the sector.
- Inflation in the euro area was confirmed at 3.0% in August. In the UK, retail sales fell 0.9% in August, with expectations of 0.5% growth.

- Yields on 10-year US Treasury bonds rose by two basis points to 1.33%. Published data for August on retail sales and industrial production in China. The growth in yields of American treasuries continues with mid-week. Most likely, investors react to the data declining inflation as a sign of impending decline monetary stimulus from the Fed, which will mean prospects are falling quotations of all bonds. China's retail sales growth slowed significantly from July's 8% to 2.5% against expectations of a 7% increase. The growth of industrial production in August also did not justify expectations: an increase in August was 5.3% against expectations of 5.8%. This one indicator also shows a slowdown, compared to July dynamics of 6.4%. In general, China's statistics reflect a slowdown in economic growth, which means increased risks for the global economy. Potentially this means the prospect of investors leaving safe assets, which will positively affect US quotes treasurer. Yields on 10-year US Treasury bonds rose on Thursday.2-year yield: +1 bp up to 0.223% per annum,10-year yield: +3 bp. up to 1.333% per annum, 30-year yield: +1 bp up to 1.873% per annum.

 

• STOCK MARKET SECTORS:

- High: Health Care.

- Low: Information Technology, Materials, Utilities, Communication Services, Industrials.

 

• TOP CURRENCY MARKET DRIVERS:

- OIL: The New York Mercantile Exchange (NYMEX) October crude oil futures closed flat at US$72.61 per barrel on September 16. Although the US retail sales data was more substantial than expected and crude oil inventories hit a two-year low, the rise in the US dollar and the gradual recovery of production capacity in the Gulf of Mexico offset it. This is the driving force for the rise in oil prices; Brent crude oil rose by US$0.21 or 0.3% to US$75.67 per barrel in recent months on the European ICE Futures Exchange (ICE Futures Europe). US retail sales rose 0.7% in August, better than the previous month’s decline of 1.8% and a 0.8% monthly decline in market expectations. The U.S. Department of the Interior's Bureau of Security and Environmental Enforcement (BSEE) reported on September 16 that the U.S. Gulf of Mexico’s daily crude oil production capacity was shut down by 28.24% or 513,878 barrels per day (29.5% the day before), and the daily natural gas production capacity was shut down by 39.4% or 878 million. Cubic feet/day, the same as the previous day. According to data from the US Department of Energy, the capacity of offshore crude oil production platforms in the Gulf of Mexico accounts for approximately 17% of total US crude oil production and 5% of total natural gas production. The US also has more than 45% refining capacity and 51% natural gas processing capacity located in the Gulf of Mexico. The U.S. Department of Energy report stated that as of the week of September 10, U.S. commercial crude oil inventories decreased by 6.4 million barrels to 417.4 million barrels, a two-year low. Analysts initially expected a decrease of 3.9 million barrels; gasoline inventories decreased by 1.9 million barrels. To 218.1 million barrels, analysts initially expected a reduction of 2 million barrels; distilled oil inventories fell by 1.7 million barrels to 131.9 million barrels, and analysts initially expected a decrease of 1.3 million barrels. The New York crude oil futures delivery location and North America's largest crude oil transshipment center Cushing crude oil inventory decreased by 1.1 million barrels to 35.32 million barrels, the first decrease in 4 weeks. US refineries' average daily crude oil processing volume increased by 85,000 barrels from the previous week to 14.4 million barrels, and the refinery's capacity utilization rate increased to 82.1% from 81.9% the previous week. The average daily output of gasoline decreased from 10.1 million barrels the previous week to 9.3 million barrels, and the average daily output of distilled oil decreased slightly to 4.2 million barrels from the previous week.

- METALS: The New York Mercantile Exchange (COMEX) December gold futures closed down by 12.3 US dollars or 0.7% to US$1,794.8 per ounce, as the rebound in US stocks reduced the impact of safe-haven demand; the US dollar index fell 0.2%, and December silver futures fell 0.4% becomes $23.801 per ounce. New York Mercantile Exchange (NYMEX) October platinum futures fell 0.9% to US$930.5 per ounce, and December palladium futures rose 0.8% to US$1,991.6 per ounce. The world's largest gold ETF, State Street Wealth Gold Index Fund (SPDR Gold Shares, GLD), on the 15th, gold holdings decreased by 1.75 metric tons to 998.46 metric tons. The largest silver ETF, the iShares Silver Trust (SLV), had silver holdings at 16,939.71 metric tons. The World Platinum Investment Council (WPIC) report stated that platinum demand is expected to grow, mainly due to the strong growth in sales of heavy vehicles in mainland China, the substitution effect after the high palladium price, and the increase in investment demand. Trevor Raymond, the association's research director, said that with the gradual recovery of the global economy, the recovery in platinum demand is expected to continue until the end of the year. The association report said that global platinum demand increased by 23% annually to 1.907 million ounces in the second quarter of this year. It is estimated that global platinum demand will increase by 1% annually to 7.753 million ounces in 2021. In the second quarter, platinum demand for catalytic converters in the automobile market increased by 75% annually to 285,000 ounces, mainly due to the recovery of automobile production from the impact of last year's epidemic. The report also pointed out that if it were not for the continued shortage of automotive chips, platinum demand in the automotive market in the second quarter is expected to increase by about 50,000 ounces.

- AUDNZD: The bottom of the Australian dollar/New Zealand dollar may soon come; negative news will impact the Australian dollar; the policy divergence between the Bank of New Zealand and the Bank of Australia is the most likely result. After the US retail sales report was released, the AUD/USD briefly fell below 0.7300, while the Australian employment data was unsurprisingly weak under the influence of the latest lockdown measures. Therefore, my focus has shifted to AUD/ NZD, which fell to its lowest level since April 2020 yesterday. It can be said that shorting the AUD/NZD is currently the most widely agreed transaction in the market because the Bank of New Zealand is preparing to raise interest rates for the first time since 2014 next month, and the Bank of Australia continues to imply that it will not raise interest rates before 2024. This resulted in a divergence of monetary policy. However, since the data is still in favor of the New Zealand dollar, I am beginning to doubt whether this is the most likely outcome, and expect the trend of the AUD/NZD to reverse in the next few weeks.

 

• CHART OF THE DAY:

The Eurozone CPI report for August was just released, and the results showed that the Eurozone inflation data was roughly in line with market expectations. Among them, the final value of the core inflation rate is 1.6%, which is consistent with market forecasts and is better than the previous value of 0.7%. The final value of the consumer price index annual rate reached 3.0% (expected to be 3.0%), which is also better than the previous value of 2.2%; the monthly consumer price index rate was 0.4%, which is also the same as the market forecast, with the previous value of -0.1%. Euro traders seem to be not interested in this expected inflation report. The euro against the dollar did not fluctuate sharply after the data was released but rose slightly. The same is true for the euro against major currency pairs. This price trend of the euro may be related to the statement of the European Central Bank Management Committee Hernández Decos, who stated that the current situation of the European Central Bank does not allow for a rate hike in 2023. This statement made euro bulls wary of betting that the European Central Bank will gradually adopt a less dovish stance. Euro-dollar traders seem to be waiting for the September University of Michigan Consumer Confidence Report to be released later. The initial value of the University of Michigan Consumer Confidence Index is 70.3, while the market forecast is 72. If the result is in line with or even better than expected, the euro/dollar may be under pressure to go down, and vice versa.• EURUSD - D1, Resistance around ~ 1.18668, 1.21582, Support (target zone) around ~ 1.16226

 

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