Market Talk – August 25, 2020

ASIA:

Top US and Chinese trade officials have reaffirmed their commitment to a Phase 1 trade deal, which has seen China lagging on its obligations to buy American goods, giving a boost to financial markets on Tuesday. China’s commerce ministry confirmed that the two sides had a “constructive dialogue” and agreed to continue pushing forward the implementation of the Phase 1 trade deal. This is their first formal dialogue since early May – amid concern the deal could be on shaky ground because of worsening US-China ties.

TikTok, on Monday, sued US President Donald Trump’s administration over his executive order banning transactions in the United States with the popular short-form video-sharing app, calling it a pretext to fuel anti-China rhetoric as he seeks re-election. In a blog post, TikTok said it strongly disagreed with the White House’s position that the company was a national security threat, saying it had “taken extraordinary measures to protect the privacy and security of TikTok’s US user data.”

India’s main opposition Congress party on Monday rejected a request from its leader, Sonia Gandhi, that she be allowed to step down, after a rare challenge to the Nehru-Gandhi dynasty, which has dominated the party for seven decades. Earlier on Monday, the Italian-born widow of former prime minister Rajiv Gandhi had offered to resign as interim leader after almost two dozen senior figures called for better decision-making in the party. Her request was rejected by the party’s top decision-making body, the Congress Working Committee, which wants Gandhi and her son, Rahul, to remain in control.

India’s central Bank, the Reserve Bank of India, said in its annual report on Tuesday Indian government consumption will continue to support current economic demand while private consumption will likely lead the recovery when it takes hold after the COVID-19 outbreak eases. More protracted spread of the coronavirus pandemic, deviations of the monsoon from the predicted normal rains and global financial market volatility are key downside risks to growth, the central bank said.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 increased 311.26 points or 1.35% to 23,296.77
  • Shanghai decreased 12.06 points or -0.36% to 3,373.58
  • Hang Seng decreased 65.36 points or -0.26% to 25,486.22
  • ASX 200 increased 31.80 points or 0.52% to 6,161.40
  • Kospi increased 36.90 points or 1.58% to 2,366.73
  • SENSEX increased 44.80 points or 0.12% to 38,843.88
  • Nifty50 increased 5.80 points or 0.05% to 11,472.25

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.00148 or 0.21% to 0.71799
  • NZDUSD increased 0.00106 or 0.16% to 0.65342
  • USDJPY increased 0.42 or 0.39% to 106.39
  • USDCNY decreased 0.00069 or -0.01% to 6.91033

Precious Metals:

  • Gold decreased 11.65 USD/t oz. or -0.60% to 1,920.80
  • Silver decreased 0.23 USD/t. oz or -0.85% to 26.380

Some economic news from last night:

South Korea:

Consumer Confidence (Aug) increased from 84.2 to 88.2

Some economic news from today:

Japan:

BoJ Core CPI (YoY) decreased from 0.1% to 0.0%

EUROPE/EMEA:

The Israeli prime minister, Benjamin Netanyahu, has urged Britain and other EU states to end what he described as their “outrageous and absurd” support for the Iran nuclear deal. The US, with the support of Israel and the Gulf states, wants to ensure that a UN conventional arms embargo is not lifted in October as set out in the Iran nuclear deal signed in 2015. The recent agreement between Israel and the United Arab Emirates to normalize relations was, in part, driven by a joint animus towards Iran, but the UK has refused to abandon the nuclear agreement partly in the hope that it can renegotiated and revived after the US elections in November.

French authorities will, in the coming days, reciprocate Britain’s decision to impose a 14-day quarantine on all arrivals from France, the junior minister for European affairs said on Monday (24 August). Britain’s imposition of quarantine conditions have hit Briton’s favorite holiday destinations in mid-summer and have been called unnecessary by authorities in some of those countries.

Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed and the US secretary of state have discussed how to strengthen the UAE’s peace deal with Israel. Sheikh Mohammed spoke with Mike Pompeo on the phone ahead of his visit to the Emirates this week and after he met Benjamin Netanyahu in Israel on Monday. The agreement, brokered by Donald Trump, makes the UAE the third Arab country to have full diplomatic relations with Israel in return for an end to Israeli threats to annex Palestinian land.

The major Europe stock markets had a mixed day:

  • CAC 40 increased 0.38 points or 0.01% to 5,008.27
  • FTSE 100 decreased 67.72 points or -1.11% to 6,037.01
  • DAX 30 decreased 4.92 points or -0.04% to 13,061.62

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.0025 or 0.21% to 1.18174
  • GBPUSD increased 0.0068 or 0.52% to 1.31384
  • USDCHF decreased 0.00332 or -0.36% to 0.90861

Some economic news from Europe today:

Germany:

German GDP (YoY) (Q2) decreased from -1.8% to -11.3%

German GDP (QoQ) (Q2) decreased from -2.0% to -9.7%

German Business Expectations (Aug) increased from 96.7 to 97.5

German Current Assessment (Aug) increased from 84.5 to 87.9

German Ifo Business Climate Index (Aug) increased from 90.4 to 92.6

Norway:

GDP (QoQ) (Q2) decreased from -1.7% to -5.1%

GDP Mainland (QoQ) (Q2) decreased from -2.2% to -6.3%

Swiss:

Employment Level (Q2) decreased from 5.132M to 5.095M

Spain:

Spanish PPI (YoY) increased from -5.9% to -4.8%

UK:

CBI Distributive Trades Survey (Aug) decreased from 4 to -6

US/AMERICAS:

The S&P 500 rose to a record closing high of 3,443.62 this Tuesday. The clothing retailer Gap led the index’s performance after advancing 10.26%. J M Smucker advanced 6.57%, followed by Amgen at 5.44%, and Starbucks at 4.91%. Apple shares fell by -0.8% today, breaking the tech giant’s five-day rally, but did not hinder the index’s bullish performance.

US consumer confidence sank to a six-year low in August according to the Confidence Board, an independent research organization based in New York. The Consumer Confidence Index fell to 84.8 in August, showing a steepening decline from July’s reading of 91.7, and the lowest figure since May 2014. “Consumer spending has rebounded in recent months but increasing concerns among consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead,” according to Lynn Franco, senior director of indicators at the Conference Board.

The US has agreed to cut tariffs by 50% on $160 million in trade products to the EU in exchange for the EU eliminating tariffs on Maine lobsters. Maine’s lobster industry was hit hard by Chinese tariffs, causing exports to China to decline by nearly 50%. Previously, the US had been exporting $111 million annually to the EU. The Trump administration would like this deal to lead to further tariff reductions and increased trade with Europe. “We intend for this package of tariff reductions to mark just the beginning of a process that will lead to additional agreements that create more free, fair, and reciprocal transatlantic trade,” US Trade Representative Robert Lighthizer reported.

The Bank of Nova Scotia reported a surge in loan losses during the third quarter. The bank posted a net income of C$1.3 billion on July 31, in comparison to C$1.98 billion during July 2019. Per share, the bank gained C$1.04 compared to analysts’ expectations of C$1.10. Additionally, the bank had set aside C$2.18 billion in anticipation of losses during Q3. CEO Brian Porter announced today that they are experiencing, “strong capital and liquidity ratios,” but due to current conditions “reserved conservatively for estimated future loan losses.”

US Market Closings:

  • Dow declined 60.02 points or -0.21% to 28,248.44
  • S&P 500 advanced 12.34 points or 0.36% to 3,443.62
  • Nasdaq advanced 86.75 points or 0.76% to 11,466.47
  • Russell 2000 advanced 2.74 points or 0.17% to 1,571.21

Canada Market Closings:

  • TSX Composite declined 9.16 points or -0.06% to 16,617.48
  • TSX 60 advanced 0.55 of a point or 0.06% to 998.34

Brazil Market Closing:

  • Bovespa declined 180.31 points or -0.18% to 102,117.64

ENERGY:

The oil markets had a mixed day today:

  • Crude Oil increased 0.78 USD/BBL or 1.83% to 43.4000
  • Brent increased 0.9 USD/BBL or 1.99% to 46.0300
  • Natural gas decreased 0.058 USD/MMBtu or -2.30% to 2.4590
  • Gasoline increased 0.0287 USD/GAL or 2.10% to 1.3958
  • Heating oil increased 0.0168 USD/GAL or 1.35% to 1.2644

The above data was collected around 12:13 EST on Tuesday.

  • Top commodity gainers: Wheat (2.40%), Gasoline (2.10%), Coffee (2.16%), and Rubber (2.83%)
  • Top commodity losers: Lumber (-2.34%), Natural Gas (-2.30%), Coal (-2.48%), and Palm Oil (-1.75%)

The above data was collected around 12:15 EST on Tuesday.

BONDS:

Japan 0.04%(+1bp), US 2’s 0.17% (+1bps), US 10’s 0.69%(+5bps); US 30’s 1.40%(+5bps), Bunds -0.44% (+6bp), France -0.14% (+5bp), Italy 1.10% (+9bp), Turkey 14.04% (+12bp), Greece 1.10% (+2bp), Portugal 0.41% (+4bp); Spain 0.39% (+6bp) and UK Gilts 0.25% (+4bp).

  • Spanish 3-Month Letras Auction decreased from -0.501% to -0.516%
  • German 2-Year Schatz Auction decreased from -0.680% to -0.690%