Market Update: Wednesday, June 27, 2018

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Daily Insights

  • Trade update and China in a bear market. Yesterday, President Trump signaled he might back off plans to impose sweeping new investment restrictions on China. Specifically, the White House reportedly will not look to block companies with 25% or more Chinese ownership from buying U.S. tech companies. However, the CFIUS (Committee on Foreign Investment in the U.S.) will be tasked with protecting U.S. technology. News of this less hawkish, less confrontational approach spurred a turnaround in major indexes, which moved into the green after trading well into the red overnight and this morning. In the midst of the trade concerns, mainland China equities have struggled, as the Shanghai Composite recently moved into bear market territory (20% off the highs) for the first time since early 2016. The Chinese yuan has also been suffering as a result. After gaining on the U.S. dollar most of last year, it has moved to a new six-month low against the greenback. The weakening Chinese currency has raised potential issues with companies who have been heavy dollar debt issuers in regards to paying back their loans.

  • BOJ quietly tapering asset purchases. Though the Bank of Japan’s (BOJ) monetary policy stance is expected to remain very accommodative for the foreseeable future as inflation remains stubbornly below 2%, the central bank has tempered its pace of asset purchases dramatically this year to an annualized rate of $410 billion, well below the ~$730 billion to which it officially committed. The move (quietly) comes as the supply of Japanese government bonds in the hands of private investors is diminishing, enabling the BOJ to influence bond yields with less activity. Tapering on the equity side comes on the heels of a Nikkei report that the BOJ is now a top-10 shareholder in ~40% of listed stocks in Japan, stoking concerns about potential liquidity issues–particularly in a country where insiders are more apt to hold onto their (large) stakes–as well as the likelihood for market disruption when the central bank eventually looks to unwind its massive holdings; though the exit will not be anytime soon.

  • Assessing the players and the hands they hold. As negotiations between the two largest economies in the world continue, which country likely has the upper hand as both sides look to minimize the economic damage? Today on the LPL Research blog, we take a look.

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Wednesday

Thursday

  • GDP Annualized (Q1)
  • Germany: CPI (Jun)
  • Italy: CPI (Jun)
  • Eurozone: Consumer Confidence (Jun)
  • Japan: Tokyo CPI (Jun)
  • Japan: Industrial Production (May)

Friday

  • Personal Income (May)
  • Personal Spending (May)
  • France: CPI (Jun)
  • UK: GDP (Q1)
  • Eurozone: CPI (Jun)
  • Japan: Consumer Confidence (Jun)
  • China: Mfg. & Non-Mfg. PMI (Jun)

 

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