Stock Markets

Stocks managed to extend their recent gains, even with a shortened holiday week; the S&P 500 closed near its record high. All investors felt relief after the U.S. and China agreed to suspend new tariffs and resume negotiations with no specifics. While that was the expected course, the fact that the leaders were able to avoid further escalation of trade tensions and move away from heightened tensions was still viewed as very positive. Another positive emerged as 10-year government bond yields fell to their lowest levels in more than two years based on signs of slower U.S. growth and expectations of additional easing by the central bank.

U.S. stocks may have been the beacon that is leading the way, however international equities are also up double-digits this year, as well as small-cap stocks. Analysts suggest that as the cycle advances, well-diversified portfolios will be better positioned to navigate the swings and keep investors on track toward positive momentum. 

U.S. Economy

Markets seem convinced that there is room for 2019 to continue to its end with a positive outlook. But they caution that there’s more bumps in the road ahead. The first half of the year’s highs in stocks and low interest rates, combined with last week’s data provide key takeaways: last week’s employment report showed that the U.S. economy added 224,000 new jobs in June, the strongest month this year and solidly above the 161,000 average so far in 2019. Monthly payroll gains averaged 223,000 for all of 2018, so the current slowdown in hiring raises fears that the U.S. economy is heading toward recession. The Fed’s apparent willingness to consider rate cuts in an effort to extend the economic expansion lends strong support.

The S&P 500 rose by a strong 17.4% (18.5% including dividends) in the first six months of 2019. Again, that’s the single best first half year since 1997. There has been a total of 10 years during the last 60 when the stock market returned more than 15% in the first half. For a full seven of those 10 years (70%), the market also posted a positive return in the second half of the year. The stock market finished positive for the full year in all 10 of those years averaging a 27% return. 

Metals and Mining

Gold investors have to be enjoying this run as gold remains one of the strongest precious metals and continues on track for its seventh straight week of gains. As the week ended,

gold dipped over 1 percent on Friday, precipitated by the US dollar strengthening ahead of the release of US jobs data.

Analysts say they see the dollar a tad stronger and the euro weak, which usually holds gold back. Unfortunately, the readiness to push prices higher by speculators is also pretty limited.

Silver was down over 1 percent on Friday but could make a rebound based on indications that the Fed will cut interest rates later this month. Market watchers seem to remain positive about the silver, despite its current relatively stagnant nature. Analysts forecast that the silver price will average US$16.20 per ounce in Q4 of this year before rising to an average of US$17 in the fourth quarter of 2020. The other precious metals were mixed with platinum down nearly 2 percent for the week and palladium tracking as the only precious metal to make gains early in the session on Friday, ticking up 0.06 percent. As of 9:00 a.m. EDT, the metal headed for its fifth straight week of gains, trading at US$1,557 per ounce.

Energy and Oil

OPEC and allies gathered this week in what most felt was one of the least heated meetings in recent years, rolling over their production cuts into March 2020. This send signals that the oil market is still over supplied, and demand growth looks weaker for the balance of 2019.

If successful, OPEC’s mission to draw down excess inventories would lead to higher oil prices. Its cartel members need this action to balance their budgets, which are overly reliant on oil exports.

At the same time, higher oil prices are helping U.S. shale production to continue growing which is directly offsetting a lot of supply that OPEC is withholding from the market. OPEC and its Russia-led non-OPEC partners in the production cut deal are focused on reducing inventories and boosting prices. OPEC’s ‘free pass’ to U.S. shale is not expected to last long, according to JP Morgan. The cartel and its largest producer, Saudi Arabia will reclaim market share from U.S. shale, JP Morgan’s head of EMEA oil and gas research Christyan Malek reported to the media this week. 

Natural gas spot prices fell at most locations this week. Henry Hub spot prices fell from $2.36 per million British thermal units last Wednesday to $2.32/MMBtu Friday. At the New York Mercantile Exchange, the July 2019 contract expired Friday at $2.291/MMBtu, up 2¢/MMBtu from last Wednesday. The August 2019 contract remained unchanged Wednesday to Wednesday at $2.268/MMBtu.

World Markets

The pan-European STOXX Europe 600 Index, the UK’s FTSE 100 Index, and exporter-heavy German DAX index all rose throughout the week surrounded by increased hopes that the European Central Bank (ECB) will continue to provide monetary stimulus to keep the region’s economies moving forward. Both stocks and bonds got a bump after International Monetary Fund (IMF) Managing Director Christine Lagarde was nominated to be the next ECB president. Markets believe that she will continue the monetary policy established by current President Mario Draghi.

In Germany, data punctuated the cost that trade tensions mixed with slowing global growth have had on its export-dependent economy. German industrial orders were reported lower in all sectors, dropping 2.2% in May and for a total of 8.6% for the year. Overall, this is sharpest year-on-year drop of industrial orders since 2009.

Chinese stocks posted a weekly gain as a reaction of relief to a temporary cease-fire on tariffs struck by President Trump and Chinese leader Xi Jinping last week. The absence of any further specifics about when or how resumption will take place tempered optimism about long term solutions. The benchmark Shanghai Composite Index added 1.1%, and the large-cap CSI 300 Index, gained 1.8%. Chinese stocks rose immediately after Trump and Xi met at the G20 summit in Japan and agreed to restart talks alongside the U.S. suspending any new tariffs on Chinese goods.

The Week Ahead

It’s a relatively quiet week on reports with a few important indicators coming out including the NFIB small business index report on Tuesday, FOMC meeting minutes released on Wednesday and inflation plus weekly jobless claims reported on Thursday. The producer price index will also come out this week.

Key Topics to Watch

–           May consumer credit report

–           NFIB small business index report

–           FOMC meeting minutes released

–           Inflation numbers issued

–           Weekly jobless claims report Thursday

–           Producer price index

Markets Index Wrap Up

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

Stock Markets

This is the third straight week that U.S. stocks finished higher. Both the S&P 500 and the Dow closed at new record highs. The clear driver for the for the rally in both bonds and stocks was the Federal Reserve releasing news that it is open to rate cuts this year – possibly as early as next month. The committee dropped its statement about being patient in setting rates, which had signaled it would hold rates steady for some time. Instead, it now states it will act as appropriate to sustain the economic expansion. Following the financial crisis of 2008, the U.S. stock market first achieved a new record high in 2013. It has now set 225 all-time highs, validating the fact that new highs can’t be viewed as a single indicator of exhaustion. It’s important to note that periodic dips in the market provide a good opportunity for long-term investors to expand diversity in their portfolios by adding high-quality assets at lower prices.

U.S. Economy

In the first quarter, the U.S. economy grew at a solid 3.1%, but showed some signs of weakness. Consumer spending dropped to half its average rate and when combined with a lackluster jobs report and slowing wage gains set the stage for potential slowdown. This week though, the Fed demonstrated to the markets its willingness to cut rates in order to head off rising risks from deflation, trade threats and a slowing global economy.  Markets reacted swiftly as the U.S. 10-year Treasury yields dropped to 2.0%, but rebounded to 2.06%. U.S. rates are low but still higher than most developed countries. So, it is likely that foreign demand for U.S. Treasuries will help keep long-term rates low and analysts expect it to prolong the bull market by providing inexpensive credit to businesses and consumers.

Metals and Mining

It looks like the patience of gold bulls has finally paid off. This week, demand for the precious metal managed to drive prices to levels we have not touched on in nearly six years. Gold climbed 2 percent on Friday morning (June 21), rising above US$1,400 per ounce to reach as high as US$1,410.78 at one point. The driver for the surge is obviously the Fed delivering its dovish opinion that the market was seeking. Essentially this has removed the ‘patience’ approach to cutting rates,” that the Fed has echoed all year. Some analysts feel gold’s major breakout could be just the start of a long-awaited rally as investors strongly expect a shifting interest rate based on a cut that could come as early as next month. Gold saw most of its gains this week following the Federal Reserve’s monetary policy meeting.

Silver followed gold’s lead once again proceeding the Fed announcement, but in the end gave up 1.2 percent of its gains. In the other precious metals group, platinum was down nearly 2 percent for the week. On Friday morning, the metal was trading at US$799 per ounce. Like the others, palladium rallied up 1.43 percent for the week, but edged down just over 1 percent on Friday. As of 9:43 a.m. EDT, palladium was trading at US$1,487 per ounce, still higher than gold.

Energy and Oil

Oil prices spiked up about 5 percent on Thursday as the U.S. announced out was considering a military strike against Iran. The U.S. military seemed poised to carry out a strike late Thursday, but the operation was called off by President Trump at the last minute. Reuters reported that Trump may have relayed a message to Iran that he was seeking to open negotiations. Friday morning Trump tweeted that he called off the strike because it would not be proportional to the shooting down of an unmanned drone. His tweet reads “I am in no hurry, our Military is rebuilt, new, and ready to go, by far the best in the world. Sanctions are biting & more added last night. Iran can NEVER have Nuclear Weapons, not against the USA, and not against the WORLD!,”.

Still, this had the whole region on alert. Iranian sources told media that the Supreme Leader was opposed to negotiations. They also said that any attack would have regional and international consequences. As the week closed oil prices were set for their largest weekly gain since February. Natural gas spot price movements were mixed this report week. Henry Hub spot prices remained flat at $2.36 per million British thermal units. At the New York Mercantile Exchange, the price of the July 2019 contract decreased 11¢, from $2.386/MMBtu last Wednesday to $2.276/MMBtu Friday. The price of the 12-month strip averaging July 2019 through June 2020 futures contracts declined 9¢/MMBtu to $2.442/MMBtu.

World Markets

Equity markets rose this week on expectations of added stimulus. European stocks rose, mostly fueled by anticipation of more central bank stimulus measures. The pan-European STOXX Europe 600 Index, UK’s FTSE 100 Index, the exporter-heavy German DAX index, and Italy’s FTSE MIB Index all gained. This followed an announcement by ECB President Mario Draghi that the bank could offer more stimulus measures as early as July. Draghi’s comments came prior the Federal Reserve’s commitment that it is ready to cut rates if the U.S. economic outlook does not improve.

The euro fell about 1% against the U.S. dollar on the week while the yield on 10-year German government bonds fell to a new all-time low of -0.315%, and the yield on the French 10-year bond hit 0%, its lowest level ever. The British pound rose almost 1% against the U.S. dollar, in part led by the Bank of England’s (BoE) decision to hold short-term rates steady at 0.75%.

With positive momentum across all markets, the Chinese stocks advanced for the week. Traders are betting that a meeting between U.S. President Trump and his Chinese counterpart Xi Jinping at this week’s G20 meeting in Japan would put the two countries back at the trade table, which halted last month. The benchmark Shanghai Composite Index gained 4.2% and the large-cap CSI 300 Index, added 4.9%. Both indexes recorded their largest weekly gains since the week ended April 5, according to Reuters.

Sentiment toward Chinese stocks also picked up after the Fed left its key rate unchanged and signaled that it was ready to lower short-term interest rates for the first time since 2008.

The Week Ahead

Important economic news to come out this week ranges from consumer confidence to global influence. The Conference Board’s consumer confidence report comes out on Tuesday followed by the important durable goods orders numbers on Wednesday. To cap off the week, the University of Michigan issues its sentiment report on Friday. The very important G20 Leader’s Summit kicks off in Japan beginning Friday. President Trump and Chinese leader Xi have said they will to meet separately in a session aimed at resolving important issues hanging up trade negotiations between the two global powers. The outcome will certainly send messages to global markets.

Key Topics to Watch

–           US – Iran military tensions

–           G20 Leader’s Summit

–           Conference Board Consumer Confidence Report

–           U of M sentiment report

–           Durable goods orders report

–           Gold entering new territory

Markets Index Wrap Up

Stock Markets

The week was pretty quiet with stocks edging higher and in a bright spot, small-cap companies outperforming. There were a number of high-profile mergers that lifted investors’ confidence this week, but indexes gave back some gains on Friday, likely due to chipmaker Broadcom’s announcement that the U.S./China trade tensions are suppressing demand. On Thursday, following attacks on two tankers near the Persian Gulf, oil attempted a brief rally, but finished out lower pressured by worries about sinking global demand for oil. Retail sales reports showed a rebound in U.S. consumer spending in May that followed a relatively slow first quarter. This is solid evidence that consumers are still well-positioned. In a snapshot, all major indexes have rebounded to near all-time highs – a very positive outlook with some expectations of higher volatility by analysts.

U.S. Economy

The real driver in the 10-year U.S. economic expansion is consumer spending. In fact, it accounts for a full two-thirds of overall GDP. Consumption spending averaged 2.6% growth in 2018 and then fell to half that rate for the first three months of 2019. That’s because seemingly strong GDP was propped up by temporary factors like inventories and imports. The release of the lackluster May jobs report and slowing wage gains last week compounded concern that consumer spending might be weaker than analysts thought.

That is why this week’s retail sales numbers are being closely monitored as an indicator of consumer health and market strength. In the end, it was very good news, with May retail sales stronger than expected. That was followed by news that the previous months’ retail figures were revised higher. So, all told, retail sales suggest that consumer spending rebounded in the second quarter to a healthy 3.5%. That’s even higher than in 2018.

Tariff Concerns Linger

The ongoing elevated trade tensions between the U.S. and China have added to market concerns that economic growth could be slowed due to increasing tariffs. A clear indication of the sentiment followed news of progress towards a trade deal earlier this year, which triggered a rally in share prices. With negotiations between the U.S. and China at a kind of impasse, it seems that trade tensions are taking a toll on both countries. China’s industrial production sank to 17-year lows in May, and U.S. industrial production has also suffered in recent months, while it did manage to rebound marginally in May. 

Metals and Mining

Precious metals were fueled by ongoing trade war concerns this week between the US and China, alongside some wavering global equities.

Gold was flat on Friday after making gains in the previous session. That was pushed by the US dollar dropping from the two-year peak it hit on Wednesday and global equities declining due to increased China-US trade tensions.

Sentiment is turning bullish for gold as prices broke through critical resistance, pushing to their highest level since early-April 2018. Analysts are warning that gold could face a short-term setback this week after the Federal Reserve’s monetary policy meeting.

Gold’s continued four-week rally is seen as a result of aggressive market signals that the Federal Reserve will loosen monetary policy with a first cut coming in July. According to the contrarians, the market’s fortunes could shift if the Fed doesn’t meet the market’s expectations.

Silver followed gold’s lead on Friday and dipped slightly after climbing over 1 percent in the previous session. Industry experts still believe in the silver’s potential, however. Firms polled in a key report from FocusEconomics echoed that silver could reach as high as US$17.80 per ounce by end of year. Platinum made small gains on Friday after reaching its lowest level since February and stayed on track for its fifth straight weekly loss. Palladium made the most gains on Friday, ticking up over 1 percent and once again entering into US$1,300 per ounce territory.

Energy and Oil

The big energy news was oil prices surging early Thursday after two oil tankers were reported to have been hit by explosions in the Gulf of Oman between Iran and the United Arab Emirates (UAE). That’s just one month after a previous incident in Middle Eastern waters. The U.S. has video proof, CENTCOM says, that Iran was behind the explosions that rocked the two tankers in the Gulf of Oman.

Immediately following the event, WTI Crude was surging 3.17% at $52.76, while Brent Crude was soaring 3.42% at $62.02. However, at week’s end, oil finished its stand lower forced back down by worries of lower global demand for oil.

On the natural gas front, mild weather and record U.S. natural gas production kept prices low despite low storage levels and high exports. On June 6, the price of the Henry Hub natural gas near-month futures contract at the New York Mercantile Exchange (NYMEX) closed at a three-year low of $2.324 per million MMBtu. That is its lowest price since May 31, 2016. Following on June 11, the spot price of natural gas at the Henry Hub closed at $2.34/MMBtu, the lowest price since November 17 according to Natural Gas Intelligence.

World Markets

As was widely expected, Mexican assets rallied early in the week in response to Mexico’s immigration-related agreement with the U.S., reached late last week in order to avoid new tariffs.

European stock markets ended the week slightly higher, pushed by the rise in oil prices that stemmed from the tanker incident in the Gulf of Oman. They are under pressure from U.S.-China trade tensions and weak industrial data coming out of China. The pan-European STOXX Europe 600, the UK’s FTSE 100 Index, the exporter-heavy German DAX index, and Italy’s FTSE MIB Index were all gainers.

Japan’s GDP figures were revised upward: for the quarter ended in March, Japan’s gross domestic product annualized growth rate was increased to 2.2%. That’s up from the 2.1% estimate a month ago. Sources in the Cabinet Office say this was due to upwardly revised capital spending data.

Chinese stocks rebounded as traders’ confidence increased that Beijing will make efforts to step up stimulus measures that could help cushion the economy from any impact from U.S. tariffs. The benchmark Shanghai Composite Index ended up 1.9%, an eight-week high. The large-cap CSI 300 Index, which tracks blue chips listed on the Shanghai and Shenzhen exchanges, added 2.5%. These gains come just one week after both indexes closed at their lowest levels in nearly four months.

The Week Ahead

There are a couple of key drivers that will light up the headlines this week in the markets: first and foremost is a rate decision from the Federal Reserve that comes out on Wednesday. Another important focus will be the U.S. housing data, which details housing starts and building permits in a report issued on Tuesday, with existing home sales released this coming Friday. Tensions are increasing in China and could see more unrest in Hong Kong, where protesters are planning more demonstrations.

Key Topics to Watch

–           Fed Rate released Friday

–           Gold moves based on fed rate indicators

–           Increased tension in China’s internal policies

–           U.S. housing starts report

–           U.S. home sales numbers issued Friday

Markets Index Wrap Up

Stock Markets

Stocks declined for the 4th straight week impacted by rising trade tensions and continued geopolitical uncertainty. With the White House announcing that the U.S. will impose tariffs on Mexico in order to quell illegal entry, concerns increased on unresolved U.S.-China trade issues. These have a serious impact on global growth. May showed the largest stock market pullback this year, but in counterpoint, bonds rallied significantly.  Overall, both the U.S. and global yields showed declines; the 10-year Treasury ended at its lowest point in 21 months at just 2.13%. German yields followed suit moving into negative territory.

U.S Economy

The leading US economic news surrounded the proposed tariffs on all imports from Mexico in a bid to force Mexico to deal with its illegal immigration problem. It’s hard to tell if higher tariffs on China and Mexico are short-term tactics aiming to spur on specific actions, or they are more long-term strategies that could stay in place after any goal is achieved. Both of those things have occurred in past tariff bouts. Higher tariffs on U.S. imports generally lead to higher prices in the U.S. and slower economic growth for the countries involved. But the impacts are also typically small when compared to the overall U.S. economy. Most analyst are still looking at economic growth to continue at 2% to 2.5% in 2019. That’s thanks to strong job numbers, slowly rising wages, low inflation, low interest rates and aggressive fiscal policy.

Tariffs on Mexican Imports

The surprise tariff increase on Mexican imports is a 5% tariff slated to begin June 10 and to increase monthly to cap at 25%. The plan is to pressure Mexico over its inaction in dealing with stopping illegal immigration flows to the U.S. Leading imports from Mexico include autos and electronics, with the overall import figure at about $350 billion. Stocks in the leading sectors declined in response. It’s hard to tell if these tariffs will prompt a response from Mexico, but most analysts don’t expect tariffs to rise to 25% on imports from Mexico. However, ongoing threats of higher tariffs and trade disruptions are expected to add to stock market volatility.

Metals and Mining

The gold market is living up to its potential as a safe-haven asset this week with prices pushing back above $1,300 an ounce. Gold is seen as attractive because it is considered one of the cheapest safe-haven assets out of all the financial markets. The U.S. dollar index has struggled to hold gains above 98 points, but it continues to trade near a two-year high. Meanwhile, the U.S. 10-year bond yields are trading at around 2.16%. The inverse is true for gold, which is trading at a two-week high. The August gold futures last traded at $1,309.20 an ounce. That is up over 1% from last week. Geopolitical tensions always come to bear on the metals markets, and especially gold. Some analysts think they have reached a tipping point with President Donald Trump adding a 5% tariff on Mexico in his efforts to halt illegal immigration into the U.S.

Energy and Oil

U.S. oil futures dropped by more than 5% on Friday to settle at their lowest since February as another market saw affects of the Trump administration’s plans for tariffs on Mexican goods. The concern is that the tariffs may affect economic growth and therefore, energy demand. Overall, energy shares performed worst for the second consecutive week as domestic oil prices tumbled to their lowest level since February. The prices were dragged lower by a smaller-than-expected decline in U.S. crude inventories. In a move not widely reported, the Trump administration has decided to approve expanded use of ethanol fuel. That is expected to help corn farmers hurt by the trade conflict with China. According to data from PointLogic Energy, the average total supply of natural gas rose by 1% compared with the previous week. Dry natural gas production grew by 1% compared with the previous report. Average net imports from Canada were down 2% from last week.

World Markets

This week, both the U.S.-China trade tensions and President Trump’s new plan to impose tariffs on Mexico pushed equity markets in Europe down as investors moved to lessen risk. The pan-European STOXX Europe 600 fell about 2%, the UK’s FTSE 100 lost about 1.6%, and the export-heavy German DAX index dropped 2.4%. Tensions are increasing in Italy between the euroskeptic government and the European Union (EU). As a sign, the FTSE MIB Index lost almost 3%. Investors sold Italian government debt likely due to growing fears of a showdown between Rome and Brussels over Italy’s high debt levels. Over the week, the benchmark Shanghai Composite Index added 1.6%, and the large-cap CSI 300 Index added just under 1%. The CSI 300 is notable as it tracks all bluechip stocks listed on the Shanghai and Shenzhen exchanges.

The Week Ahead

There’s plenty of economic data to watch this week: the Manufacturing Purchasing Managers’ Index comes out, along with auto sales and construction spending from the month of May. A bigger factor will be May’s jobs report, which will be released this week, with most market watchers and economist expecting the unemployment rate to stay right in line with the cyclical lows.

Key Topics to Watch

• Mexican Tariffs by the US
• China Trade War with the US
• ADP National Employment Report
• U.S. International Trade in Goods & Services Report
• ISM Manufacturing Report on Business
• Revised Productivity & Costs

Markets Index Wrap Up

Walking into any concert venue, sports arena, or secure government building today, and the first thing you now must do is empty your pockets and walk through a metal detector. Thanks to a rise in mass shootings and terror alert levels, this clumsy and cumbersome process has slowly become the new normal for any entry into a busy place.

However, this era of slow security entry may finally be coming to an end, as the future of security could soon merely involve a casual stroll through a gate that safely and swiftly scans waves of people in real time.

Meet HEXWAVE^TM from Liberty Defense Technologies – a brand new threat detection technology developed at MIT that uses real-time Active 3D Image processing to detect metallic and non-metallic threat objects and location, such as a gun, or guns, carried near a school or place of worship prior to the criminal even entering the building. The detection system, can now be as overt as a typical screening gateway, or covert as installing devices into the walls or other hidden fixtures on the way into the venue.

“What we’re targeting is the urban security market,” said Bill Riker, CEO of Liberty Defense in an interview with WIRED. 

Developed to provide a key part of a layered threat detection defense  Liberty Defense is looking beyond airports to other scenarios where people need to be scanned quickly and unobtrusively—such as concerts, sporting events, and large outdoor gatherings.

Upon detection, the system can tie into security infrastructure to instantly begin setting off alarms, locking doors and putting people inside on alert to enhance safety in a scenario where every second counts.

“What we’re offering is an attack prevention system,” said Liberty Defense COO and President of US Operations, Aman Bhardwaj, in an interview with Forbes. “We’re preventing someone with a weapon from entering.”

Speed + Stealth = Safety

The Liberty Defense Technologies HEXWAVE^TM system is the racing to become the security protection of the future—and it couldn’t come soon enough.

Since 2015 there have been over 1,700 mass shootings in the USA, with an average of over 350 shootings happening per year. In high-traffic scenarios, dense gatherings of people are soft targets. Currently there are no means to counter threats beyond entry point solutions, which have limitations in terms of a combined criteria for accuracy, throughput and even location around or within the perimeter of a facility.

Beyond just sporting events and concerts, places like hotels, schools, and places of worship tend to have a lot of patrons always entering and exiting.

A system such as HEXWAVE^TM might have prevented a scenario such as the Las Vegas shooter successfully bringing a cache of weapons up to his room, veiled under common luggage pieces. HEXWAVE^TM is designed to discreetly spot metallic and non-metallic objects of interest, such as guns or other weaponry.

Tourism in Las Vegas took a noticeable hit in the aftermath of the shooting atrocity. Hotels have been forced to look at new methods to protect their patrons, while refraining from installing obtrusive gate of entry checkpoints that would further add to the feeling of uneasiness left after the horrible event.

Where HEXWAVE^TM aims to help such venues, is to utilize discreet hidden sensors amid entry points, that could perhaps be hidden behind posters, in hotel furniture or in the light fixture—allowing people to be scanned unaware. Through communication from the sensors to central controls, a tripped alarm could alert police or local security officers, while giving its clients instant notification in order to act accordingly, based on the information provided by the scanners.

Advanced Privacy

Much of the resistance towards security systems, such as those employed by the TSA in airports and terminals, is directed towards the intrusiveness of their nature. Privacy advocates and civil libertarians have raised concerns about some of the more prominent systems in places such as Dulles International Airport, where facial recognition scanners are in use.

“Right now, there is very little federal law that provides any type of protections or limitations with respect to the use of biometrics in general and the use of facial recognition in particular,” said Jeramie D. Scott, national security counsel for the Electronic Privacy Information Center in an interview with the Washington Post. Scott’s organization has filed Freedom of Information Act requests seeking details about the program.

Unlike visual recognition technology that is currently in use at many venues, the HEXWAVE^TM offers a much less intrusive solution.

This is achieved by several “game changing” advancements in the technology, which were developed at MIT Lincoln Labs and are exclusive to Liberty Defense Technologies.

Due to its unique antenna design and embedded computing power, HEXWAVE’s^TM  creates 3D images that are virtually analyzed in real time using an artificial intelligence architecture.. The system’s advanced antenna design provides the capability for the sensors to  be distributed in a way that is covert.  Further, the modular, self-contained design can be deployed across the entry paths of a venue thus enabling it to be scalable to the needs of a responsive security operation.

Personnel for Rollout

Beyond developing an effective technology, the challenge for stakeholders such as Liberty Defense Technologies is to get their system into as many venues as possible. Key to the company’s future successes are the people behind the scenes.

Bill Riker was brought on as CEO in August 2018, after a storied career with Smiths Detection, DRS Technologies, General Dynamics, and the US Department of Defense. COO and President of US Operations, Aman Bhardwaj compliments Riker’s security background, with a tech and manufacturing career that includes over 20 years of experience working with leading global teams for both major and startup companies, including Panasonic, Flextronics/Imerj, Educo and Hisense.

Riker and Bhardwaj are joined by a highly-qualified management team of leaders from the security industry, product development, government technology and manufacturing sectors. Assisting the management team is a highly experienced advisory board.

Notable among the advisory board is Francesco Aquilini, owner of the Vancouver Canucks NHL hockey team, and the team’s home, Rogers Arena which seats nearly 19,000 people. Aquilini also sits as the team’s main representative on the NHL Board of Governors, among a group that has at least 13 arenas privately owned by members of the board.

Aquilini is not the lone sports presence on the advisory board, as current President of Concacaf (the continental soccer governing body in North and Central America) Victor Montagliani is also advising the company.  As well, John May, former member of the Live Nation Canada management team, helped grow that event promotion company through to a successful joint venture with Maple Leaf Sports and Entertainment—owners of all the major professional sports teams in Toronto (NBA, NHL, MLB, MLS, CFL).

Meeting Demand

Liberty Defense has an exclusive license with MIT and a Technology Transfer Agreement with MIT Lincoln Laboratory for active millimeter imagining technology originally developed in the MIT Lincoln Laboratory for weapon detection.  They are continuing to support the effort through a cooperative research and development agreement for both the commercialization of the design and that includes other development to continue progressing the technology.

This capability was developed.   in response to the growing threat from terrorism, especially after a wave of subway and train attacks witnessed around the world in places like Madrid and London.  Prior to the HEXWAVE^TM innovation, it was practically impossible to develop security systems with existing technology for busy public spaces without grinding pedestrian traffic to a near halt.

The demand is there: According to a Homeland Security Research Corp. study, the global explosives and weapons systems market is projected to be more than $8 billion by 2020 and more than $11 billion by 2025.

Liberty Defense Technologies is targeting the urban security which generally consists of 4 vertical markets.   The market is segmented into four verticals that include public venues, secured perimeters and buildings, land transportation and a category called “other” that includes everything from schools through places of worship, hospitality fclities and even hospitals.  Thesehave been projected to reach $1.5-$2.0B in North America by 2020.

Projections for each component include: Public Venues ($283-$428M, CAGR to 8.8%); Secured Perimeters ($820M-$1.03B, CAGR to 4.7%); Land Transportation ($174-$257M, CAGR to 8.2%); Other/Schools/Hotels ($201-$228M, CAGR to 2.7%).

In late 2018, Liberty Defense Technologies secured a C$7 million fundraising, in order to commercialize the HEXWAVE^TM system.

“The response from the investment community has been overwhelmingly positive,” said Bill Riker, CEO of Liberty Defense. “There is real commitment to solve the issues surrounding public safety that have proliferated in recent years, and this detection system offers an innovative approach for this challenge with the HEXWAVE product.”

Electric Car Makers, Electrameccanica Vehicles Corp. (NASDAQ:SOLO), Are Riding SOLO, Hitting Market with Innovative 3-Wheel Micro EV.

Demand for Electric Vehicles (EVs) is sharply on the rise, leading to initiates both private and publicly-backed to incentivize an electric revolution on the roads, including a $50 billion pledge from Volkswagen to embark on an electric car ‘offensive’.[1]

In the United States, there are currently approximately 840,000 EVs on the road, according to the Edison Electric Institute’s report from June 2018. Between Q1 of 2017 and Q1 of 2018, sales increased 32%.[2]

The proportionate number of EVs on the road is set to increase, with electric options becoming more economic to own and run—even compared to gasoline and diesel engines.[3]

That gap is about to widen more so, with the launch of the SOLO from veteran Italian carmakers, Intermeccanica, which in 2017 was acquired by Vancouver-based Electrameccanica Vehicles Corp. (NASDAQ:SOLO).

Meet the Market’s Lowest Cost Electric Vehicle

Eye catching with its unique three-wheeled, single-seat design,[4] the game-changing EV currently has another advantage that even the majors can’t currently touch—its price.

Retailing at ~$15,500 USD, the SOLO is the least expensive EV on the market. Now with a manufacturing agreement with China’s largest motorcycle manufacturer in place, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) is set to further reduce its production risk, and capex, and increase it profit margins.

“Electrameccanica has a total of 64,154 vehicle pre-orders across all models, representing $2.4 billion in potential sales orders”

The company has two other EV’s in various stages of development, including the Tofino, an all-electric two-seat sports car, and the eRoadster, an electric evolution of Intermeccanica’s widely renowned classic vehicle design.

With the SOLO and Tofino, Electra Meccanica brings a unique, winning EV formula for 2019.

Pre-Orders Galore: Billions in Potential Sales in Play

As of December 20, 2018, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) had a total of 64,154 vehicle pre-orders across all models, representing $2.4 billion in potential sales at the targeted MSRP.

Pre-orders consist of 23,030 pre-orders for the SOLO single-passenger electric vehicle, which has a $15,500 target MSRP, and 41,124 pre-orders for the Tofino two-seat roadster sports car, which has a $50,000 target MSRP. 

Over a three-year period commencing Q1 2019, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) anticipates the delivery of 75,000 SOLOs. Capitalizing on an established sales, distribution and service model, the company will partner with existing dealership networks to drive sales of the SOLO in non-core markets where the company doesn’t maintain a dealership presence.

Electrameccanica Vehicles Corp. (NASDAQ:SOLO) will begin its deliveries through existing dealerships in Los Angeles, and Vancouver. So far there has been significant dealer interest worldwide—evidenced by dealer letters of intent for over 21,000 SOLOs.

Electrameccanica Offers First Look From Its China Facility

Adding Major Industry Experience to Its Board

Electrameccanica has begun adding strategic members to its board to strengthen its automotive industry experience. Most recently, the company appointed Peter Savagian as an Independent Director.

Mr. Savagian is a pioneer in automotive electrification, with a broad expertise in the technology, development, launch and production of electric vehicles. In 1990 he began work on the General Motors EV1, the first modern electric vehicle and was named Chief Engineer of Electric Propulsion Systems in 1998. Later, as General Director of Electrified Propulsion, he built and led multiple teams to innovate, engineer and execute the full range of electrified vehicle propulsion systems. His accomplishments at General Motors include 13 electrified autos brought to production. Notably, these include the first modern Electric Vehicle, the GM EV1, the first plug-in hybrid, the Chevy Volt, and the industry’s first long-range value EV, the Chevy Bolt.

Strong Macroeconomic Markers for the EV Market

As the world begins to make the steady shift into the EV market, some jurisdictions are more eager than others.

There’s likely no market more eager to get rolling than the state of California. As the nation’s largest EV market, the Golden State has recently considered nearly doubling its subsidy for each pure electric vehicle sold in the state—moving up to $4,500 from $2,500. This is on top of the federal government’s currently offered $7,500 tax credit on each electric vehicle sold.[5]

Given this environment, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has targeted California as the ideal Initial Target Market.

California is a trend-setter market, with a predilection towards adopting new technologies and adhering to increasingly progressive policies. With its extremely high cost of commuting, California has a state-wide goal for EV adoption, supported by subsidies and investment in charging infrastructure.

With its $15,500 USD price tag, a buyer in California could possibly see up to $12,000 USD in tax incentives already taken care of for the SOLO—an overall out-of-pocket discount of more than 77%.

Manufacturing a Chinese EV Advantage

In order to scale production to achieve a strong margin profile, automakers seeking an advantage in the EV market are looking for a Chinese manufacturing advantage. Even industry leader Tesla Motors is becoming forthright in its need for China, the world’s largest auto market, in order to succeed.

Not only is Chinese customer demand and government support for EVs skyrocketing, but the economic advantage of producing in the country is major.

Tesla CEO Elon Musk has expressed his concern that without manufacturing in China, Tesla won’t be able to produce the company’s goal of 10,000 Model 3 electric sedans per week nor be able to offer the eagerly awaited base model at a price of $35,000.[6]

“Bottom line is we need the Shanghai factory to achieve that,” said Musk.

There’s been a lot of interest for EV makers surrounding China. Volkswagen’s and GM’s SAIC Motor, Warren Buffett-backed BYD, and the recently public NIO are a few among the companies that are already up and running in the country.

For Electrameccanica Vehicles Corp. (NASDAQ:SOLO), a deal with shareholder and strategic partners, Chongqing Zongshen Automobile Co., Ltd, has set the SOLO manufacturing line in motion.

Zongshen is China’s largest manufacturer of motorcycles and motorcycle engines. The company already produces over 2 million units annually, across 130 models of two-wheeled and three-wheeled motorcycles, including electric models.

Together, the Electra Meccanica and Zongshen agreement should yield a level of scalability that would deliver a massive manufacturing advantage for SOLO and the other models. Zongshen has already constructed the SOLO manufacturing line, and has been contracted to produce 75,000 vehicles over a three-year period, with initial deliveries commencing in Q1 2019.

The economic advantage of this arrangement is quite clear, with scaled gross margins expected in the ~25% range.

This industry-leading contract with a manufacturing partner reduces production risk for Electrameccanica Vehicles Corp. (NASDAQ:SOLO), while accelerating production, and notably minimizes capital expenditures.

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MAJOR EV-AUTOMAKER COMPARABLES

So far, the majors in the EV space are working diligently to secure production for their upcoming lines of vehicles. Each has a unique struggle in the lead-up to the eventual EV revolution, including getting costs down, making profitable lines, and securing materials

With a simple line of two offerings, and more to come in the future, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has already hit the ground running with the lowest cost EV on the market.

Here are a few of the ongoing stories in the EV space happening right now:

Tesla, Inc. (NASDAQ:TSLA)

Market Cap: $52.516 billion

Recent Headline: Tesla is staking its future on China — here’s what it’s up against

The Nevada-based Tesla Motors gigafactory made headlines over the last few years, as the premiere EV brand name became an American success story. However, the company has recently made clear its intentions to enter the Chinese market, and attempt to compete with foreign and Chinese automakers that are already manufacturing and selling EVs in the country. CEO Elon Musk admits his company won’t be able to produce 10,000 Model 3 electric sedans per week, as originally aimed. Ahead of Musk’s company, Electra Meccanica has ramped up production at a new Zongshen factory, for both its SOLO and Tofino models.

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Kandi Technologies (NASDAQ:KNDI)

Market Cap: $276.77 Million

Kandi Technologies Group, Inc., through its subsidiaries, designs, develops, manufactures, and commercializes electric vehicle (EV) products and parts and off-road vehicles in the People’s Republic of China and internationally. It offers off-road vehicles, including go-karts, all-terrain vehicles, utility vehicles, and other vehicles for sale to distributors or consumers; and EV parts comprising battery packs, EV drive motors, EV controllers, air conditioners, and other electric products. 

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NIO Inc. (NYSE:NIO)

Market Cap: $1.461 billion

NIO Inc. designs, manufactures, and sells electric vehicles in the People’s Republic of China, Hong Kong, the United States, the United Kingdom, and Germany. The company offers five, six, and seven-seater electric SUVs. It is also involved in the provision of energy and service packages to its users; marketing, design, and technology development activities; manufacture of e-powertrains, battery packs, and components; and sales and after sales management activities.

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General Motors Company (NYSE:GM)

Market Cap: $54.621 billion

Recent Headline: GM is going ‘all-electric,’ but it doesn’t expect to make money off battery-powered cars until early next decade

The largest US automaker, General Motors,is committed to eventually make its entire vehicle lineup “all-electric,” but doesn’t expect to make them profitably until “early next decade”. While pouring money into EV technology, looking to capture a market that’s garnered much excitement thanks to Tesla, General Motors has made it clear that the company is committed to an all-electric future, with its luxury brand Cadillac being the lead brand for its electrification efforts. While such changes are cumbersome for massive automakers, groups like Electra Meccanica are able to capture the early market advantage with pre-orders and an early run at scalability. As of October, 2018, Electra Meccanica has booked pre-orders in excess of CAD $2.4 billion and is growing.

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Strong Leadership Team At The Cutting Edge Of The EV Space

“I am very pleased with our team’s progress to date. Having driven the 2019 SOLO myself, I’m convinced we have a winning car on our hands.”

 – Electra Meccanica Founder and President, Henry Reisner

On the road to achieving its goals, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has been steered by an experienced leadership team. In order to navigate the rollout of both the SOLO and the Tofino to a customer base that’s hungry for a new experience behind the wheel, the Electra Meccanica team has been crucial to the brand’s successes.

Paul Rivera joined Electra Meccanica as Chief Executive Officer in August 2019. Before joining Electra Meccanica, Rivera most recently served as President of Ricardo, USA, a division of Ricardo, PLC (LON: RCDO), a 100-year-old global engineering, strategic, and environmental consultancy business with a value chain that includes the design, engineering, testing, and product launch, of vehicle systems, as well as the niche manufacture of high performance products.  Previous to that, as Executive VP of Hybrid & Electric Systems at Ricardo, Rivera led the company’s evolution towards an efficient and sustainable low carbon future. Ricardo’s engineering and design solutions have had a significant impact on technical developments throughout the auto sector, providing innovative solutions across engines, drivelines and hybrid systems, as well as supporting the development of emerging technologies such as autonomous and connected vehicles.

Henry Reisner has served as the President of Intermeccanica since 2001. Intermeccanica is an Italian automobile manufacturer in operation for over 60 years, which Electrameccanica acquired in 2017. Reisner’s background includes extensive experience in the automotive industry with a background in manufacturing. Having overseen early production of the SOLO, he’s expressed his confidence in the company achieving its goals.

With the international aspirations and multinational production and sales goals for the company, Rivera and Reisner are joined by Chief Administrative Officer Isaac Moss. With over 27 years of international business, multi-jurisdictional investment banking and corporate finance experience, Moss’ expertise has ranged across several industries, including specialty chemicals, tech and green energy.

The management team is rounded out by CFO Bal Bhullar, and General Manager Ed Theobald. Bhullar is an accomplished financial executive with over 25 years of experience, that includes CFO experience at several public and private companies. Theobald has over 40 years of experience across several industries, including 19 years as General Manager at Envirotest Canada, a subsidiary of ESP Global.

5 Reasons Investors Should Put Electrameccanica Vehicles Corp. (NASDAQ:SOLO) on Their Radar

1. Lowest-Cost EV on the Market: In this new era of electric vehicles, to hold the distinction of the lowest cost EV on the market is a significant advantage for Electrameccanica Vehicles Corp. (NASDAQ:SOLO). Where the next lowest cost EV at the moment is the Smart Electric, which is nearly double the price at $28,750, the EMV SOLO stands in an economic class of its own at an MSRP of $15,500 USD.

2. Over 64,000 Pre-Orders, Worth Billions in Value: As of December 20, 2018, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has accrued a total of 64,154 vehicle pre-orders across all models, representing $2.4 billion in potential sales at the targeted MSRP. With delivery commencing in Q1 2019, the company will begin with deliveries through existing dealerships in Los Angeles, and Vancouver—with significant dealer interest worldwide, evidenced by dealer letters of intent for over 21,000 SOLOs.

3. Strong Macroeconomic Markers for EV Market: The EV market is growing at a rapid pace, supported by government incentives, and increased customer demand to move away from fossil fuels. Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has targeted California as the IDEAL Initial Target Market. California is a trend-setter market, with a predilection towards adopting new technologies and adhering to increasingly progressive policies. With its $15,500 USD price tag, a buyer in California could possibly see up to $12,000 USD in tax incentives already taken care of for the SOLO. 

4. Industry-Leading Contract with Chinese Manufacturing Partner: Ahead of major comparables, such as Tesla, Electrameccanica Vehicles Corp. (NASDAQ:SOLO) has secured a major manufacturing contract with leading Chinese motorcycle manufacturer, Zongshen. As per the contract, Zongshen will produce 75,000 vehicles over a three-year period, with initial deliveries commencing in Q1 2019. The economic advantage of this arrangement is expected to return gross margins of ~25%  at scale.

5. Strong Leadership Team At The Cutting Edge Of The Lithium Technology Space: The Electrameccanica Vehicles Corp. (NASDAQ:SOLO) team is built to produce vehicles on an international scale. Led by founders CEO Jerry Kroll, and President Henry Reisner, the Intermeccanica/Electrameccanica team has the experience to compete in the automotive industry. With several decades of experience that span multiple industries and countries, the Electrameccanica team is set to rollout both the SOLO and the Tofino models and to exploit deep connections within the automobile industry built through over 60 years of automobile legacy through Intermeccanica.

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[1] https://www.cnn.com/2018/11/16/business/volkswagen-electric-cars/index.html

[2] https://www.eei.org/resourcesandmedia/energytalk/Pages/Issue-In-Depth.aspx?i=5-1-2018

[3] https://www.theguardian.com/environment/2019/feb/12/electric-cars-already-cheaper-own-run-study

[4] https://www.digitaltrends.com/cars/three-wheel-evs-motorcycles-work-like-cars/

[5] https://www.bloomberg.com/news/articles/2018-09-25/california-mulls-an-additional-2-000-subsidy-for-electric-cars

[6] https://www.cnbc.com/2019/02/11/tesla-faces-steep-competition-in-china.html