Weekly Market Review – June 29, 2019

Weekly Market Review – June 29, 2019

Stock Markets

Stocks finished mixed this week as markets took in the strong gains from the month of June. Investors were in a wait-and-see mode anticipating Friday’s G20 Summit in Japan. The big takeaway would be a trade truce and resumption of negotiations between the U.S. and China, which stalled last month. The week also marked the end the quarter and the first half of 2019. At the year’s midpoint, we reached an important milestone: the 10-year anniversary of the current economic expansion. Of course, some volatility crept in during the second quarter 2019, but the markets remained strong with rising bonds and stocks adding to gains. While this expansion might be the longest, analysts still believe that there is room to run for some time.

Two large mergers of note happened this week. Eldorado Resorts says it will acquire Caesars Entertainment in a deal worth about $17 billion, making the pair the largest U.S. gaming company. Drug maker AbbVie has agreed to acquire rival Allergan for around $63 billion in cash and stock.

U.S. Economy

As we end the 2nd quarter, the current U.S. economic expansion logs in as the longest-running one on record, going back to 2009 and surpassing the 1991-2001 expansion. Obviously, the quality and characteristics of the economy have evolved over time, but can this expansion continue even further? Most analysts are in agreement that it can, but they caution that they don’t believe the next stage will look the same as this current phase. Expansions have typically finished with the end of a bubble, such as housing or tech, from an external shock or based on poorly conceived monetary policies. None of these are at play at the moment. The good news for investors is that bull markets rarely end without an accompanying recession. This expansion is by most estimates performing well enough continue to offer support to the stock market going forward.

Metals and Mining

Gold has been on a tear this month and now gold markets are testing if the precious metal can hold support above $1,400. There is continued and persistent selling pressure after hitting its six-year high this week.

Market sentiment is clearly bullish as prices pushed to a six-year high, but by week’s end, sentiment took a more reserved stance since analysts are questioning aggressive expectations for lower U.S. interest rates that came out of last week’s Fed meeting. Gold’s gains have also been largely supported by expectations of an interest rate cut in July by the Federal Reserve.

So, although Gold is off its highs, it is still experiencing its best month in three years. Gold prices are up almost 1% for the week and up nearly 8% for the month. Silver was also on track for a monthly gain, but then moved down slightly on Friday. As of 12:30 p.m. EDT, silver was trading at US$15.25 per ounce. The other precious metals remain strong, with platinum inching up to US$838 per ounce and palladium closing out the week US$1,518.50 per ounce.

Energy and Oil

Oil prices moved higher at the end of this week, like other markets anticipating the meeting between Donald Trump and Xi Jingping. The sentiment is of course that talks could result in a breakthrough in trade negotiations, an agreement to resume talks, or a collapse and subsequent increase in tariffs. All of these will affect oil prices. OPEC kicks off its meeting in Vienna on Monday. Market bulls will be hoping that the G20 summit will provide a trade breakthrough while the supply side of oil continues to show bullish signals, according to market insiders.

Natural gas spot prices fell at most locations this report week. Henry Hub spot prices fell from $2.36 per million British thermal units (MMBtu) last Wednesday to $2.32/MMBtu yesterday. According to data from PointLogic Energy, total U.S. consumption of natural gas rose by 4% compared with the previous week. Natural gas consumed for power generation climbed by 8% week over week based on slightly warmer than normal temperatures in the US southeast.

European governments are reported to be “doubling down” on efforts to keep economic ties with Iran, in an effort to keep their nuclear deal alive. The EU has tried to develop a financing mechanism to bypass U.S. sanctions, but most foreign companies are unwilling to do business in Iran under the current heated climate.

World Markets

The pan-European STOXX Europe 600 Index, the UK’s FTSE 100 Index, and the exporter-heavy German DAX Index all rose slightly throughout the week based on expectations that the Group of 20 summit would help ease global trade tensions. One soft spot was the yield on the 10-year German bond, which fell to -0.34% as European economic indicators were disappointing.

Chinese stocks were off slightly for the week as traders were moving cautiously in advance of a much-anticipated meeting between President Trump and his Chinese leader Xi Jinping at the G20 summit. The benchmark Shanghai Composite Index declined 0.8% and the large-cap CSI 300 Index lost 0.2%. However, for the month of June both indexes rose off of positive signals on trade earlier in the month. The Shanghai benchmark rose 2.8% and the CSI 300 Index gained 5.4% in June based on optimistic investors expecting the G20 meeting between both leaders would, at least lead to the resumption of trade talks that halted last month.

The Week Ahead

It’s a shortened week for U.S. financial markets with banks and markets closed on Thursday for the U.S Independence Day holiday. Canada will close its banks and markets on Monday for their Independence Day celebrated July 1st. Major economic news includes the ISM manufacturing Purchasing Managers’ Index, May factory order numbers, auto sales reported on Tuesday and June’s jobs report released on Friday.

Key Topics to Watch

–           Post G20 summit trade news

–           ADP employment report

–           ISM nonmanufacturing index report

–           May Factory orders report

–           Nonfarm payrolls June report

–           June unemployment rate report

–           Gold pricing post G20

Markets Index Wrap Up

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