Market Talk – August 18, 2021

Posted Aug 18, 2021 by Martin Armstrong |

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ASIA:

President Xi Jinping of China is considering raising taxes on wealthy citizens to create a “common prosperity.” In a Tuesday meeting, the president urged for a “reasonable adjustment of excessive incomes and encouraging high income groups and businesses to return more to society.” However, exact tax figures or plans were not revealed. The top 10% of China’s 1.4 billion population owned 41% of all wealth in 2015, marking a drastic increase from 27% in 1978. The poorest half of the population saw an income decline of 15% in 2015, compared to an on par level of 27% in 1978.

Huawei announced plans to reclaim the smartphone “throne” after a chip shortage combined with a US blacklisting caused the company’s revenue to plunge 29% in the first half of the year. In 2019, the company was deemed a national security threat by the US under the Trump administration. Huawei Chairman Guo Ping said that his company has the ability to create advanced technology chips “but no one can help us build it” due to sanctions. “Huawei will continue to exist in the field of mobile phones and with continuous progress in chip production, the smartphone throne will eventually return,” Ping said.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 161.44 points or 0.59% to 27,585.91
Shanghai increased 38.31 points or 1.11% to 3,485.29
Hang Seng increased 121.14 or 0.47% to 25,867.01
ASX 200 decreased 8.90 points or -0.12% to 7,502.10
Kospi increased 15.84 points or 0.50% to 3,158.93
SENSEX decreased 162.78 points or -0.29% to 55,629.49
Nifty50 decreased 45.75 points or -0.28% to 16,568.85

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00240 or -0.33% to 0.72330
NZDUSD decreased 0.00430 or -0.62% to 0.68863
USDJPY increased 0.39800 or 0.36% to 109.99
USDCNY decreased 0.00460 or -0.07% to 6.48653

Precious Metals:

Gold decreased 1.94 USD/t oz. or -0.11% to 1,784.02
Silver decreased 0.17 USD/t. oz or -0.70% to 23.470

Some economic news from last night:

Japan:

Adjusted Trade Balance increased from -0.06T to 0.05T

Core Machinery Orders (MoM) (Jun) decreased from 7.8% to -1.5%

Core Machinery Orders (YoY) (Jun) increased from 12.2% to 18.6%

Exports (YoY) (Jul) decreased from 48.6% to 37.0%

Imports (YoY) (Jul) decreased from 32.7% to 28.5%

Trade Balance (Jul) increased from 384.0B to 441.0B

South Korea:

Exports (YoY) (Jul) remain the same at 29.6%

Imports (YoY) (Jul) decreased from 38.2% to 38.1%

Trade Balance (Jul) increased from 1.76B to 1.77B

Australia:

MI Leading Index (MoM) remain the same at -0.1%

Wage Price Index (QoQ) (Q2) decreased from 0.6% to 0.4%

Wage Price Index (YoY) (Q2) increased from 1.5% to 1.7%

RBNZ Interest Rate Decision remain the same at 0.25%

New Zealand:

PPI Input (QoQ) (Q2) increased from 2.1% to 3.0%

PPI Output (QoQ) (Q2) increased from 1.2% to 2.6%

Some economic news from today:

Indonesia:

Export Growth (YoY) (Jul) decreased from 54.46% to 29.32%

Import Growth (YoY) (Jul) decreased from 60.12% to 44.44%

Trade Balance (Jul) increased from 1.32B to 2.59B

Hong Kong:

Unemployment Rate (Jul) decreased from 5.5% to 5.0%

EUROPE/EMEA:

The Eurozone CPI report for July revealed that consumer prices reached 2.2% on the yearly level, consistent with analysts’ expectations. On the monthly level, the Eurozone’s CPI level declined -0.1%, beneath expectations of a 0.3% rise. “The lowest annual rates were registered in Malta (0.3%), Greece (0.7%) and Italy (1.0%). The highest annual rates were recorded in Estonia (4.9%), Poland and Hungary (both 4.7%). Compared with June, annual inflation fell in nine Member States, remained stable in two and rose in sixteen,” Eurostat reported. “In July, the highest contribution to the annual euro area inflation rate came from energy (+1.34 percentage points, pp), followed by food, alcohol & tobacco (+0.35 pp), services (+0.31 pp) and non-energy industrial goods (+0.17 pp).”

UK-based asthma drug developer Vectura has sold 22.61% of its company to Tobacco group Philip Morris International. The moves comes as an unwelcomed partnership to many, such as the British Thoracic Society who cited the partnership as an “unresolvable ethical conflict.” Philip Morris CEO Jacek Olczak insists the acquisition will “accelerate the development and delivery of inhaled therapeutics.” Furthermore, he stated the acquisition will help his company move toward becoming “smoke free” with aspirations to stop selling cigarettes in the UK within the next decade. Vectura will sell for 165 pence ($2.27 per share).

The major Europe stock markets had a mixed day:

CAC 40 decreased 49.73 points or -0.73% to 6,770.11
FTSE 100 decreased 11.79 points or -0.16% to 7,169.32
DAX 30 increased 44.02 points or 0.28% to 15,965.97

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00095 or -0.08% to 1.16993
GBPUSD increased 0.00119 or 0.09% to 1.37506
USDCHF increased 0.00318 or 0.35% to 0.91820

Some economic news from Europe today:

UK:

House Price Index (YoY) increased from 9.8% to 13.2%

Core CPI (YoY) (Jul) decreased from 2.3% to 1.9%

Core CPI MoM (MoM) (Jul) decreased from 0.5% to 0.0%

Core PPI Output (YoY) (Jul) increased from 3.1% to 3.9%

Core PPI Output (MoM) (Jul) increased from 0.6% to 0.7%

Core RPI (MoM) (Jul) decreased from 0.7% to 0.5%

Core RPI (YoY) (Jul) remain the same at 3.9%

CPI (MoM) (Jul) decreased from 0.5% to 0.0%

CPI (YoY) (Jul) decreased from 2.5% to 2.0%

CPI, n.s.a (Jul) remain the same at 111.30

PPI Input (MoM) (Jul) increased from 0.5% to 0.8%

PPI Input (YoY) (Jul) increased from 9.7% to 9.9%

PPI Output (YoY) (Jul) increased from 4.5% to 4.9%

PPI Output (MoM) (Jul) remain the same at 0.6%

RPI (MoM) (Jul) decreased from 0.7% to 0.5%

RPI (YoY) (Jul) decreased from 3.9% to 3.8%

Eurozone:

Construction Output (MoM) (Jun) decreased from -0.36% to -1.72%

Core CPI (MoM) (Jul) reman the same at -0.4%

Core CPI (YoY) (Jul) decreased from 0.9% to 0.7%

CPI (YoY) (Jul) increased from 1.9% to 2.2%

CPI (MoM) (Jul) decreased from 0.3% to -0.1%

CPI ex Tobacco (MoM) (Jul) decreased from 0.3% to -0.1%

CPI ex Tobacco (YoY) (Jul) increased from 1.9% to 2.2%

CPI, n.s.a decreased from 107.70 to 107.60

HICP ex Energy & Food (YoY) (Jul) remain the same at 0.9%

HICP ex Energy and Food (MoM) (Jul) decreased from 0.2% to -0.3%

US/AMERICAS:

The highly anticipated minutes report from the Federal Reserve was released this Wednesday highlighting the events of the July 27-28 Federal Open Market Committee (FOMC). The decision-making branch of the Federal Reserve determined that they were “close to being satisfied” with declining unemployment, but has not met “substantial further progress” to warrant a rate increase. “Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the report noted. Some members believe early 2022 will be an appropriate time to taper the Fed’s bond buying program. Members are seeking to “reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate,” according to the report. Other members see tapering occurring “relatively soon in light of the risk that the recent high inflation readings could prove to be more persistent than they had anticipated.” The delta variant is also of concern, adding uncertainty to the future trajectory of the global economy.

Housing starts in the US retracted by -7% in July after posting a 3.5% increase in June, according to data published by the US Department of Housing and Urban Development as well as the US Census Bureau. Building permits increased by 2.6% in July after declining -5.3% the month prior.

US-Afghanistan pressures are reaching a dangerous point after the Taliban is reportedly preventing civilians from fleeing the country despite promising to allow a safe departure. “We have seen reports that the Taliban, contrary to their public statements and their commitments to our government, are blocking Afghans who wish to leave the country from reaching the airport,” Deputy Secretary of State Wendy Sherman stated this Wednesday. Both Republicans and some Democrats are now seeking to investigate the Biden Administration’s handling of deployment from the country, with some members seeking to file impeachment against President Biden.

US Market Closings:

Dow declined 382.59 points or -1.08% to 34,960.69
S&P 500 declined 47.81 points or -1.07% to 4,400.27
Nasdaq declined 130.27 points or -0.89% to 14,525.91
Russell 2000 declined 18.39 points or -0.84% to 2,158.78

Canada Market Closings:

TSX Composite declined 61.48 points or -0.3% to 20,302.11
TSX 60 declined 4.04% or -0.33% to 1,221.68

Brazil Market Closing:

Bovespa declined 1,261,19 points or -1.07% to 116,642.62

ENERGY:

The oil markets had a mixed day today:

Crude Oil decreased 0.89 USD/BBL or -1.34% to 65.7000
Brent decreased 0.63 USD/BBL or -0.91% to 68.3900
Natural gas increased 0.021 USD/MMBtu or 0.55% to 3.8580
Gasoline decreased 0.0193 USD/GAL or -0.89% to 2.1463
Heating oil decreased 0.0138 USD/GAL or -0.68% to 2.0223

The above data was collected around 12:50 EST on Wednesday

Top commodity gainers: Rubber (0.93%), Lumber (1.73%), Feeder Cattle (1.20%) and Sugar (0.70%)
Top commodity losers: Palladium (-2.70%), Copper (-2.07%), Palm Oil (-2.38%), and Oat (-1.77%)

The above data was collected around 12:55 EST on Wednesday.

BONDS:

Japan 0.014%(+1bp), US 2’s 0.2235%(+0.01%), US 10’s 1.2851%(+1.84bps); US 30’s 1.9311%(+0.01%),Bunds -0.4750% (-0.8bp), France -0.1270% (-1bp), Italy 0.5537% (-2.49bp), Turkey 16.85% (+5bp), Greece 0.5480% (-0bp), Portugal 0.105% (-3bp); Spain 0.240% (+7.35bp) and UK Gilts 0.576% (+1.2bp).