Stocks remain near recent highs; CAD gains after retail sales data

Summary:

• Stock markets remain close to their YTD highs

• DE30: German Minister considers tax breaks to boost R&D

• USDCAD back near 1.32 after mixed retail sales data

• Pound set for solid weekly gains

• Zuckerberg says blockchain might be used in Facebook systems

It remains a bit of a bumpy ride for stock markets, but as the end of the week draws in stock markets on the whole remain well support. The DE30.cash earlier popped above the 11500 level to make a new 2019 peak while US indices are not far off their highest levels of the year on the European close.  The recovery come rally in stock markets seen for much of this year is going from strength to strength in the Far East, with Chinese shares posting a 7th consecutive weekly gain. This marks the best run since 2016 and the gains in excess of 5% since Monday represent the biggest weekly rise in nearly 3 and a half years. Looking at the market internals, there’s also pleasing signs that are suggestive of a strength underpinning the move with all but 1 of the 10 sectors up by over 10% this year – the one sector lagging is utilities which are usually associated with defensive allocations and therefore underperformance here is in fact a good sign.

The German authorities may try to stimulate growth by taking more business-friendly approach. According to Reuters report, the German Finance Ministry is planning to grant tax breaks to domestic companies amounting up to €1.5 billion annually. Tax breaks would affect small- and medium-sized companies and would be used to boost Research & Development spending. However, the German officials declined to comment on the matter saying that talks between ministries are still being held.

The latest look at consumer spending in Canada has revealed some mixed messages with the latest retail sales figures topping estimates but the core numbers disappointed. Specifically, the headline retail sales Y/Y was +1.7% while the ex-autos (core) came in at 1.6% over the same time horizon. Both of these metrics have recovered from their recent lows when they were pretty much flat but compared to the rest of this decade they remain at depressed levels. M/M readings are more erratic but can give a better indication of short-term changes, and on this front the headline declined by 0.1% vs -0.3% expected with the previous reading still -0.9%. The core reading of -0.5% was below the 0.3% expected, while the prior was revised down by 0.1% to -0.7%. USDCAD remains below the Ichimoku cloud on D1 with a confirmed break with all lines supporting the move. The highs around the cloud at 1.3375 could be seen as important resistance while 1.3180 and 1.3070 are levels to keep an eye on below.

It’s been yet another tumultuous week for British politics with news this morning that MP Ian Austin has resigned from the Labour party, bringing the total number of ministers to leave the opposition party since Monday to 9, while a further 3 Conservative backbenchers have followed suit. Unlike the 11 MPS before him, Mr. Austin has ruled out joining the Independent party, choosing to stand alone as an independent. What this all means in the grand scheme of things remains a quandary to many, and as such there’s not been a clear reaction in the markets with the pound still on course to post a solid week of gains. The biggest appreciation in sterling can be seen against the Antipodean currencies, with the GBP/NZD higher by almost 2% and the GBP/AUD up by 1.4%.

According to CoinMarketCap, the capitalization of the whole crypto market stands a little below the $135 billion handle whereas the largest virtual currency Bitcoin accounts for roughly 51.9% of this value. The famous Facebook CEO Mark Zuckerberg participated in a talk with Jonathan Zittrain, who is a professor of the Harvard Law School. Zuckerberg said during the discussion that Facebook could use blockchain technology in some systems to make developers free from the intermediaries’ impact. In this case, developers could create their apps without concerns related to losing access (for example, in the situation of violating intermediary’s policy). In a nutshell, blockchain could allow that people using such apps would be connected directly with people serving it without any intermediaries. Moreover, it is worth noting that Facebook acquired the smart contract company called Chainspace some time ago.