LCG: Dow hits record on Disney rally..investors lose appetite amid Hong Kong paralysis, soft Chinese data.

 

06:00am GMT | November 14th 2019

Hong Kong continues boiling as protests ratcheted up another notch with a complete paralysis of the city amid fear and uncertainty about when and how the unrest would ease. Subway and roads are blocked, schools are closed.

Stocks in Hong Kong fell as much as 1.82% to a month low, as the social unrest has been taking a toll on city’s businesses since twenty-three consecutive weeks and no one is able to tell what is next, other than that there is a stronger case for a Chinese intervention.

Meanwhile investors are worried that the US and China may not seal a trade deal next month, as there appears to be some misunderstanding regarding the farm product purchases. Donald Trump claims that China agreed to buy up to $50 billion worth of US farm products including soybean and pork, but China doesn’t want to sign off on an explicit number to give itself the freedom to stop purchases if things go wrong, again. At this point, we can only rely on Donald Trump’s unilateral announcement that a deal could happen ‘soon’. How soon is anybody’s guess. The leading risk for the market is that stretched negotiations could bring along renewed tariff threats and spoil the mood.

On the other hand, the Chinese industrial production slowed to 4.7% in October from 5.8% printed a month earlier. A seasonal slowdown in October production is normal due to the Golden Week break, but this year’s decline has been well above the 5.4% expected by analysts. Likewise, retail sales declined to 7.2% during the same month from 7.8% expected and printed a month earlier. Fixed asset growth slowed from 5.4% to 5.2% and property investment eased from 10.5% to 10.3% hinting that the slowdown is now felt in every layer of the economic data.

Shanghai’s Composite traded flat, as weak economic data revived the expectation of further support from the People’s Bank of China.

Nikkei (-0.74%) and Topix (-0.89%) edged lower in Tokyo, as yen strengthened on safe-haven demand.

Gold remained capped at $1465 an ounce, as risk averse investors preferred buying sovereign bonds. Australian 10-year yield eased 8.3 points, as Japan’s 10-year yield fell 1.1 points.

Oil extended gains on lower US inventories after the API reported a 541’000-barrel weekly decline on Tuesday. The more official EIA data is due today. The expectation is a 1.5-million-barrel rise in US stockpiles versus 7.9-million-barrel increase a week earlier. WTI and Brent crude gained in Asia despite gloomy Chinese data and mounting fear that the US and China may not sign a much-expected deal before the end of this year.

 

Disney+ picks up 10 million subscribers since Tuesday launch

 

US stock indices treaded water following a lackluster session in New York, except for the Dow.

The Dow Jones hit a new record on Wednesday, boosted by a 7.32% rally in Walt Disney shares as the family-friendly company’s new video-streaming service Disney+ attracted 10 million subscribers after its Tuesday launch. As such, the remarkable inauguration of Disney+ dropped a bombshell in the video-streaming industry. Netflix plunged 3.05%, Discovery erased 2.80%, as CBS and Viacom declined 2.41% and 2.24% respectively.

 

USD consolidates gains as Jay Powell sticks to a neutral policy stance, euro falls

 

The consumer price inflation in the US advanced to 1.8% y-o-y in October from 1.7% printed a month earlier, but the core inflation unexpectedly eased on cooling rent costs. Mixed data combined with Jay Powell’s neutral policy stance kept the doves unalert.

The US dollar gained against most G10 currencies, the Aussie and the Kiwi softened on fading risk appetite.

The euro dipped below the 1.10 mark against the greenback, despite a better-than-expected industrial production performance in October. The 1.10 handle is where the bears fight the weakening bulls.

Due today, the Eurozone GDP is expected to have grown 0.2% in the third quarter, which sums up to a meager 1.1% growth on yearly basis. We are at a point where even a better-than-expected figure is too low to boost enthusiasm. Therefore, it is just a matter of time before the 1.10 turns into a stronger resistance. Put options should give a hand to the bears below the 1.1020 mark at today’s expiry.

 

Pound traders rely on a strong sales data to boost purchases

 

Across the channel, cable holds on to its gains above the 1.2820 mark. Released yesterday, the softer-than-expected inflation read revived the Bank of England (BoE) doves and intensified the selling pressure on the pound amid the forthcoming snap election uncertainties.

But there is a solid support into the 1.28-handle, which factors in the rising likelihood of a Conservative victory and an orderly Brexit in the coming months.

Due today, solid retail sales data could lend a further support to the buy-side, if the October figures confirm a 3.4% increase in British retail sales excluding automobiles, and a 3.7% rise including automobiles versus 3.0% and 3.1% printed a month earlier. Resistance is eyed prior to 1.29 against the US dollar, stops are eyed above.

In the derivatives market, call options trail above the 1.29 mark and a large 1.30 call option will expire today.

In other words, a move above the 1.29-resistance against the greenback should encourage a further advance toward the 1.30 mark.

 

FTSE set for a soft open.

 

The FTSE had the support of a softer pound on Wednesday, but financials and real estate sectors weighed on gains as HSBC alone shred 11 points off the index after the S&P downgraded its outlook to negative.

FTSE futures hint at a soft start on Thursday. The rise in oil prices could lend some support to the energy-heavy British blue-chip index near the 7300p support.

 

Opening calls

FTSE to open 12 points lower at 7339

DAX to open 14 points higher at 13244

 

Contact: Ipek Ozkardeskaya, Senior Market Analyst

Twitter: @IpekOzkardeskay

Email: ipek.ozkardeskaya@lcg.com

Skype: Ipek.ozkardeskaya

 

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Jasper delivers regular commentary, seminars and webinars on market news, trading analysis, strategy and psychology. He is regularly interviewed by BBC News, Bloomberg, CNBC and Sky News, and has featured in The Times, Guardian and Daily Telegraph. Jasper hosts a weekly charting analysis webinar. He is qualified as a Chartered Market Technician (CMT) with the Market Technician Association, and has a degree in Finance and Economics.