Market Talk – August 18, 2020

ASIA:

China’s ByteDance is planning a U.S. initial public offering of TikTok Global, the new company that will operate the popular short video app, should its proposed deal be cleared by the U.S. government, Reuters reported. ByteDance is racing to clinch an agreement with the White House that will stave off a U.S. ban on TikTok that President Donald Trump has threatened could happen as early as next week.

Indian automakers should reduce royalty payments to foreign partners to bring down costs instead of seeking tax cuts, a finance ministry official said on Thursday, days after reports that Toyota would halt expansion in the country due to high taxes. Having suffered a 50% fall in passenger vehicle sales in the five months through August as a result of the coronavirus pandemic, automakers have lobbied the government to lower taxes. Taxes on cars sold in India are as high as 28% and after additional levies can rise to up to 50% for some models. The Society of Indian Automobile Manufacturers (SIAM) has urged the government to cut the tax on cars, motorbikes and buses to 18% while warning that it would take three to four years for sales to return to their peak levels of 2018.

Japan’s core consumer prices fell at their fastest pace in almost four years in August, dragged mostly by government-sponsored discounts for domestic travel aimed at supporting the battered tourism sector. The core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, fell 0.4% in August from a year earlier, government data showed on Friday.

Japan’s new premier Yoshihide Suga on Wednesday pledged to contain COVID-19 and retain his former boss’s “Abenomics” growth policies while pushing reforms such as deregulation and digitalization.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 40.93 points or 0.18% to 23,360.30
  • Shanghai increased 67.65 points or 2.07% to 3,338.09
  • Hang Seng increased 114.56 points or 0.47% to 24,455.41
  • ASX 200 decreased 18.70 points or -0.32% to 5,864.50
  • Kospi increased 6.23 points or 0.26% to 2,412.40
  • SENSEX decreased 134.03 points or -0.34% to 38,845.82
  • Nifty50 decreased 11.15 points or -0.10% to 11,504.95

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00009 or 0.01% to 0.73175
  • NZDUSD increased 0.00154 or 0.23% to 0.67794
  • USDJPY decreased 0.31 or -0.30% to 104.42
  • USDCNY increased 0.01882 or 0.28% to 6.77045

Precious Metals:

  • Gold increased 14.52 USD/t oz. or 0.75% to 1,957.12
  • Silver decreased 0.14 USD/t. oz or -0.51% to 26.962

Some economic news from last night:

Japan:

CPI, n.s.a (MoM) (Aug) increased from 0,1% to 0.2%

National Core CPI (YoY) (Aug) decreased from 0.0% to -0.4%

National CPI (YoY) (Aug) decreased from 0.3% to 0.2%

Some economic news from today:

India:

FX Reserves, USD decreased from 542.01B to 541.66B

EUROPE/EMEA:

Britain is entering a second wave of coronavirus; Boris Johnson has said as scientists expressed fears the death toll could be as high as in the first spike without a rapid change in public behavior. Speaking during a visit to Oxfordshire, Johnson said: “We are now seeing a second wave coming in. We’ve seen it in France, in Spain, across Europe. It’s been absolutely inevitable, I’m afraid, that we would see it in this country.”

Amal Clooney, the high-profile human rights lawyer, has resigned from her position as the UK’s special envoy on media freedom in protest at the government’s intention to breach international law through the internal market bill. Her resignation letter, sent to the foreign secretary, Dominic Raab, on Friday says: “I have been dismayed to learn that the government intends to pass legislation – the internal market bill – which, if enacted, would, by the government’s own admission, “break international law.”

German industry leaders are urging the European Union to strike a trade agreement with the UK amid growing fears of an economic catastrophe in the event of a no deal Brexit. Officials have warned of huge financial losses unless a deal is signed before Britain leaves the transition period on December 31. And Germany’s car-makers say they would be among the losers once the dust had settled on a no deal departure. Martin Wansleben, chief executive of the German Chamber of Commerce and Industry (DIHK), said: “For the automotive industry alone – which has the largest share of the trade volume between Germany and Great Britain – there is a risk of tariffs of at least £1.83billion in less than four months without an agreement.

The major Europe stock markets had a negative day:

  • CAC 40 decreased 61.32 points or -1.22% to 4,978.18
  • FTSE 100 decreased 42.87 points or -0.71% to 6,007.05
  • DAX 30 decreased 91.87 points or -0.70% to 13,116.25

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00091 or 0.08% to 1.18607
  • GBPUSD decreased 0.0047 or -0.36% to 1.29293
  • USDCHF increased 0.00171 or 0.19% to 0.91001

Some economic news from Europe today:

UK:

Core Retail Sales (YoY) (Aug) increased from 3.1% to 4.3%

Core Retail Sales (MoM) (Aug) decreased from 2.1% to 0.6%

Retail Sales (MoM) (Aug) decreased from 3.7% to 0.8%

Retail Sales (YoY) (Aug) increased from 1.4% to 2.8%

Italy:

Italian Industrial New Orders (YoY) (Jul) increased from -11.6% to -7.2%

Italian Industrial New Orders (MoM) (Jul) decreased from 23.7% to 3.7%

Italian Industrial Sales (MoM) (Jul) decreased from 13.60% to 8.10%

Italian Industrial Sales (YoY) (Jul) increased from -16.40% to -8.10%

Germany:

German PPI (YoY) (Aug) increased from -1.7% to -1.2%

German PPI (MoM) (Aug) decreased from 0.2% to 0.0%

Euro Zone:

Current Account (Jul) decreased from 20.7B to 16.6B

Current Account n.s.a. (Jul) increased from 17.3B to 25.5B

US/AMERICAS:

The US government announced today that it will cease all business with Chinese-owned TikTok and WeChat over international security concerns. ByteDance, TikTok’s parent company, will need to secure their deal with Oracle to carry out their US operations in a government-approved manner. A representative from TikTok called the executive order “unjust,” saying it was “enacted without due process.” A representative from WeChat said that they plan to work with the US government to determine a long-term solution.

Deepening tensions with China, US lawmakers are considering two bills that will restrict imports on Chinese goods made with forced labor. One bill would require US companies to provide detailed information on where their Chinese supply chains. Both Republicans and Democrats have condemned China’s treatment of Uighur Muslims who are said to be held in concentration camps. Accused of being soft on China, the Democrats are also perusing tougher action against China, with House Speaker Pelosi voicing her concerns over China’s human rights abuses today. China has vehemently denied these claims and has warned the US not to interfere in their domestic affairs.

Minneapolis Fed President Neel Kashkari decreed fears of runaway inflation as “ghost stories.” The Federal Reserve announced that they will allow inflation to slightly rise above the 2% target. “Month-to-month and quarter-to-quarter, the elements of the CPI are showing wide swings…so its hard to know what signal we’re seeing right now,” Bolstic said in an interview with Bloomberg. Bolstic said that the Fed will allow inflation to rise until it reaches 2% on a “sustained basis,” which he defines as one year. Furthermore, he said the Fed has more tools to combat higher levels of inflation as opposed to lower levels.

US Market Closings:

  • Dow declined 244.56 points or -0.88% to 27,657.42
  • S&P 500 declined 37.54 points or -1.12% to 3,319.47
  • Nasdaq declined 117 points or -1.07% to 10,793.28
  • Russell 2000 declined 5.82 points or -0.38% to 1,536

Canada Market Closings:

  • TSX Composite declined 47.75 points or -0.29% to 16,198.97
  • TSX 60 declined 2.16 points or -0.22% to 968.21

Brazil Market Closing:

  • Bovespa declined 1,806.3 points or -1.8% to 98,291.53

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil decreased 0.13 USD/BBL or -0.32% to 40.8400
  • Brent decreased 0.38 USD/BBL or -0.88% to 42.9200
  • Natural gas increased 0.066 USD/MMBtu or 3.35% to 2.0370
  • Gasoline decreased 0.001 USD/GAL or -0.08% to 1.2203
  • Heating oil decreased 0.0027 USD/GAL or -0.23% to 1.1552

The above data was collected around 13:29 EST on Friday.

  • Top commodity gainers: Natural Gas (3.35%), Wheat (3.10%), Cocoa (2.42%), and Oat (3.48%)
  • Top commodity losers: Coffee (-5.29%), Brent (-0.88%), Platinum (-1.09%), and Lumber (-3.20%)

The above data was collected around 13:35 EST on Friday.

BONDS:

Japan 0.00%(-1bp), US 2’s 0.13% (-1bps), US 10’s 0.69%(-0bps); US 30’s 1.44%(+1bps), Bunds -0.50% (-1bp), France -0.23% (+1bp), Italy 0.95% (-0bp), Turkey 13.04% (-20bp), Greece 1.02% (-3bp), Portugal 0.29% (+2bp); Spain 0.25% (+5bp) and UK Gilts 0.17% (-1bp).