Market Talk – April 27, 2020

ASIA:

India’s Nifty 50 index could soon see Bharti Infratel, Vedanta Ltd, Zee Entertainment, Tata Motors, and GAIL India exit from the index owing to the low average free-float market capitalization, and replaced with other heavyweights. Top contenders to replace these shares in the Nifty 50 index include Radhakishan Damani’s Avenue Supermarts, API manufacturer Divi’s Laboratories, private insurer HDFC Life, FMCG player Dabur, and PSU stock SBI Life, brokerage and research firm ICICI Direct said in a report.

A group of around 50 people from India’s Revenue Service, which plays a role in the collection of direct taxes for the income tax department, recommended raising the highest tax rate to 40% for people earning above 10 million Indian rupees (about $131,090) a year. They also called for a wealth tax for those with a net worth of 50 million rupees or more. India’s income tax department said that no such paper has been received and dismissed taxing the super-rich as part of government efforts to stave off the economic crisis brought on by the coronavirus pandemic.

Post India made changes in its Foreign Direct Investment from countries sharing a land border, Chinese firms have raised concerns about their investments they have bet on India. Advisors to big Chinese firms such as Alibaba, MG Motor, and Great Wall said they are concerned the process could take several weeks and hit deals and investment timelines. The Chinese Embassy in New Delhi has called the new screening policy discriminatory. After this, India has assured to fast track the review of some investment proposals.

China’s biggest cities, such as Beijing and Shanghai, have opened schools and colleges as the country has largely curbed the spread of the disease. Shanghai welcomed back pupils in their final years of middle and high school, while Beijing allowed students preparing for China’s university entrance exam in July to return. China has reported an increase of just 26 confirmed cases since Friday, bringing the total number to 82,830. All coronavirus patients in Wuhan have now been discharged, Beijing says.

China’s foreign ministry spokesperson Geng Shuang denied claims that Beijing spread disinformation about the coronavirus. This news comes after a European Union report said there was “significant evidence” of covert Chinese operations on social media. “China is opposed to the creation and spreading of disinformation by anyone or any organization. China is a victim of disinformation, not an initiator,” Geng said at a regular press briefing on Monday.

The Japanese central bank, Bank of Japan, announced a series of measures on Monday to enhance its monetary policy easing measures to combat the hit on Japan’s economy as a result of the coronavirus pandemic. These included the increase in purchases of commercial paper and corporate bonds and further active buying of Japanese government bonds and treasury discount bills.

The major Asian stock markets had a green day today:

  • NIKKEI 225 increased 521.22 points or 2.71% to 19,783.22
  • Shanghai increased 6.97 points or 0.25% to 2,815.49
  • Hang Seng increased 448.81 points or 1.88% to 24,280.14
  • ASX 200 increased 78.80 points or 1.50% to 5,321.40
  • Kospi increased 33.76 points or 1.79% to 1,922.77
  • SENSEX increased 415.86 points or 1.33% to 31,743.08

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00721 or 1.13% to 0.64633
  • NZDUSD increased 0.00428 or 0.71% to 0.60554
  • USDJPY decreased 0.22 or -0.21% to 107.24
  • USDCNY increased 0.00323 or 0.05% to 7.09207

Precious Metals:

  • Gold decreased 12.6 USD/t oz. or -0.73% to 1,715.35
  • Silver increased 0.012 USD/t. oz or 0.08% to 15.2140

Some economic news from last night:

China:

Chinese Industrial profit (YoY) (Mar) decreased from -6.30% to -34.90%

Chinese Industrial profit YTD (Jan) increased from -38.3% to -36.7%

Some economic news from today:

Japan:

BoJ Interest Rate Decision remain the same at -0.10%

Hong Kong:

Exports (MoM) (Mar) decreased from 4.3% to -5.8%

Imports (MoM) (Mar) decreased from -0.1% to -11.1%

Trade Balance increased from -38.6B to -34.7B

EUROPE/EMEA:

European major indices had a good day today, CAC, FTSE, and DAX all moving up, with the DAX moving up in excess of 3%. The markets responded well to news from the French, Spanish, and Italian governments, as they prepare plans this week for easing their lockdowns due to the coronavirus.

Micheal Gove of the UK has said that the post-Brexit timetable should remain and that the coronavirus should, in fact, be helping concentrate minds to get the deal done quickly. Later in the day, he also mentioned that there was no need for an EU embassy in Belfast after the transition period.

The EU released a report suggesting China is to blame for a lot of disinformation regarding the coronavirus. A Chinese foreign minister later denied China has any wrongdoing.

The EU tourism ministers are discussing plans as to when they should start opening their borders to allow for tourists, with Greece keen to open up for the summer.

The major Europe stock markets had a green day today:

  • CAC 40 increased 111.94 points or 2.55% to 4,505.26
  • FTSE 100 increased 94.56 points, or 1.64% to 5,846.79
  • DAX 30 increased 323.90 points or 3.13% to 10,659.99

The major Europe currency markets had a green day today:

  • EURUSD increased 0.00066 or 0.06% to 1.08305
  • GBPUSD increased 0.00598 or 0.48% to 1.24249
  • USDCHF increased 0.00254 or 0.26% to 0.97536

Some economic news from Europe today:

France:

France Jobseekers Total increased from 3,245.6K to 3,488.6K

US/AMERICAS:

Kevin Hassett, a White House economic adviser, suggested over the weekend that the unemployment rate could spike to 16% and dubbed the lockdown “the biggest negative shock that our economy I think has ever seen.” Prior to the pandemic, unemployment levels maintained a historically low rate of 3.5% before increasing to 4.4% in March. The unemployment figure for April is expected to drastically increase. “During the Great Recession we lost 8.7 million jobs in the whole thing. Now we’re losing that many every 10 days, so the lift for economic policy makers is an extraordinary one,” Hassett warned reporters.

House Speaker Nancy Pelosi told reporters at MSNBC this Monday that the idea of a minimum guaranteed income may be worthy of attention. Other Democrats have proposed legislation to pay out a guaranteed monthly income to Americans until the pandemic has passed. Reps. Ro Khanna and Tim Ryan introduced the Emergency Money for the People Act, which if passed would provide citizens over the age of 16 who earn under $130,000 annually a guaranteed payment of $2,000 per month.

Dave Calhoun, Boeing CEO, announced he anticipates a two to three year recovery the company’s annual shareholders meeting. Calhoun anticipates a drastically decreased demand for air travel even after the coronavirus passes. Boeing had issues regarding manufacturing prior to the pandemic, with the MAX 737 aircraft forced to remain grounded after defective features caused two separate plane crashes that claimed the lives of 346 people.

After weeks of closing automotive factories deemed non-essential, Mexico is ready to begin reopening several plants. The US placed pressure on Mexico to begin reopening factories, claiming that a prolonged closure could disrupt their supply chain and the USMCA deal. In a statement issued on Friday, the Mexican government said they are “empathetic about health protections” for their workers and will “ensure that the reopening will be orderly, gradual, and cautious.”

US Market Closings:

  • Dow advanced 358.51 points or 1.51% to 24,133.78
  • S&P 500 advanced 41.74 points or 1.47% to 2,878.48
  • Nasdaq advanced 95.64 points or 1.11% to 8,730.16
  • Russell 2000 advanced 48.82 points or 3.98% to 1,281.88

Canada Market Closings:

  • TSX Composite advanced 221.75 points or 1.54% to 14,642.11
  • TSX 60 advanced 11.39 points or 1.30% to 884.53

Brazil Market Closing:

  • Bovespa advanced 2,907.99 or 3.86% to 78,238.60

ENERGY:

Another huge crash in the oil markets today as WTI dropped 22.43% (at time of writing) as more storage fears are resurfacing. Brent also followed dropping to 20 USD per barrel (-6.39%).

The oil markets had a mixed day today:

  • Crude Oil decreased 3.9 USD/BBL or -23.02% to 13.0400
  • Brent decreased 1.43 USD/BBL or -6.67% to 20.0100
  • Natural gas increased 0.115 USD/MMBtu or 6.71% to 1.8280
  • Gasoline decreased 0.0131 USD/GAL or -1.87% to 0.6869
  • Heating oil decreased 0.0424 USD/GAL or -5.65% to 0.7078

The above data was collected around 15.41 EST on Monday.

  • Top commodity gainers: Natural Gas (6.71%), Orange Juice (1.30%), Live Cattle (2.55%), and Feeder Cattle (0.72%)
  • Top commodity losers: Crude Oil (-23.02%), Brent (-6.67%), Coal (-6.91%), and Heating Oil (-5.65%)

The above data was collected around 15.41 EST on Monday.

BONDS:

Japan -0.03%(-2bp), US 2’s 0.22% (+1bps), US 10’s 0.65%(+6bps); US 30’s 1.25%(+7bps), Bunds -0.45% (+2bp), France 0.02% (-1bp), Italy 1.78% (-11bp), Turkey 11.42% (-9bp), Greece 2.22% (-9bp), Portugal 1.04% (-6bp); Spain 0.90% (-5bp) and UK Gilts 0.31% (+2bp).

  • French 3-Month BTF Auction decreased from -0.451% to -0.454%
  • French 6-Month BTF Auction decreased from -0.414% to -0.427%
  • French 12-Month BTF Auction decreased from -0.388% to -0.403%
  • US 2-Year Note Auction decreased from 0.398% to 0.229%
  • US 6-Month Bill Auction increased from 0.145% to 0.150%
  • US 3-Month Bill Auction decreased from 0.125% to 0.120%
  • US 5-Year Note Auction decreased from 0.535% to 0.394%