Market Talk – August 4, 2020

ASIA:

US President Trump’s suggestion that the US government take a cut from the forced sale of the viral Chinese app TikTok sparked a new round of anger and reflection in China, as TikTok’s founder warned employees about “rising anti-Chinese sentiment.” On Tuesday, a number of prominent figures in China, including Google’s former country head, lambasted the US as unfairly stifling China’s first global internet hit- while defending China’s own restrictions on American technology giants.

The Chinese government has also said that it will not accept an acquisition of TikTok’s US operations by Microsoft and may take action to prevent the deal if a sale is forced by the Trump administration, China Daily, a state-controlled media outlet in Beijing, said in its Tuesday editorial.

Around two-thirds of economists in a Reuters poll expect India’s central bank, Reserve Bank of India (RBI), to cut the repo rate by another 25 basis points (bps) on Aug. 6 to a record low of 3.50%, and once more next quarter. Annual retail inflation rose in June to 6.09% from 5.84% in March, remaining above the RBI’s medium-term target range of 2%-6%.The RBI has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in an easing cycle last year, from 6.50%, responding to slowing growth. Some economists, however, feel it may be prudent for the RBI to pause in August before resuming its rate-cutting cycle once inflation has stabilized.

India’s factory activity contracted in July as renewed lockdown measures to contain surging coronavirus cases weighed on demand and output, raising the chances of a sharper economic contraction, a private business survey showed on Monday. Reinforcing that grim outlook, the Nikkei Manufacturing Purchasing Managers’ Index compiled by IHS Markit, fell to 46.0 last month from 47.2 in June, below the 50-level separating growth from expansion for a fourth straight month and marking its longest spell of contraction since March 2009. A further decline in new orders and output signaled weakness in overall demand despite factories again cutting their prices, leading firms to reduce their workforces for a fourth month in a row.

The Japanese government is considering tougher rules to address the risk of foreign interference in scientific research, such as more thorough vetting of visa applications from international students and researchers and requiring institutions to declare foreign sources of income. Last month, Japan’s cabinet approved an innovation strategy for 2020, which asks government agencies, research institutes and companies to strengthen codes of conduct around research integrity and conflicts of interest, and prevent the outflow of sensitive research and technologies linked to national security, such as quantum computing, artificial intelligence and semiconductor manufacturing. The strategy also proposes that government agencies consider withholding funding from institutions that fail to declare foreign income. The Japanese strategy does not name any countries, but researchers say the government is mostly concerned about the activities of Chinese institutions, including those with ties to the military.

The major Asian stock markets had a green day today:

  • NIKKEI 225 increased 378.28 points or 1.70% to 22,573.66
  • Shanghai increased 3.72 points or 0.11% to 3,371.69
  • Hang Seng increased 488.50 points or 2.00% to 24,946.63
  • ASX 200 increased 111.50 points or 1.88% to 6,037.60
  • Kospi increased 28.93 points or 1.29% to 2,279.97
  • SENSEX increased 748.31 points or 2.03% to 37,687.91
  • Nifty50 increased 203.65 points or 1.87% to 11,095.25

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0049 or 0.69% to 0.71644
  • NZDUSD increased 0.0013 or 0.20% to 0.66247
  • USDJPY decreased 0.3900 or -0.37% to 105.66
  • USDCNY decreased 0.0089 or -0.13% to 6.97397

Precious Metals:

  • Gold increased 42.80 USD/t oz. or 2.17% to 2,016.55
  • Silver increased 1.78 USD/t. oz or 7.36% to 26.001

Some economic news from last night:

Japan:

Tokyo Core CPI (YoY) (Jul) increased from 0.2% to 0.4%

Tokyo CPI (YoY) (Jul) increased from 0.3% to 0.6%

CPI Tokyo Ex Food and Energy (MoM) (Jul) increased from -0.2% to 0.2%

Monetary Base (YoY) increased from 6.0% to 9.8%

South Korea:

CPI (YoY) (Jul) increased from 0.0% to 0.3%

CPI (MoM) (Jul) decreased from 0.2% to 0.0%

Australia:

Exports (MoM) (Jun) increased from -4% to 3%

Imports (MoM) (Jun) increased from -6% to 1%

Trade Balance (Jun) increased from 8.025B to 8.202B

Retail Sales (MoM) (Jun) decreased from 16.9% to 2.7%

Retail Sales (QoQ) (Q2) decreased from 0.7% to -3.4%

Indonesia:

Loans (YoY) (Jun) Loans (YoY) (Jun) decreased from 3.04% to 1.49%

 

Some economic news from today:

Australia:

RBA Interest Rate Decision (Aug) remain the same at 0.25%

Commodity Prices (YoY) decreased from -10.6% to -12.0%

New Zealand:

GlobalDairyTrade Price Index decreased from -0.7% to -5.1%

EUROPE/EMEA:

The UK government will invest nearly 1.3 billion pounds ($1.7 billion) in building projects and provide 2 billion pounds in energy efficiency grants in an effort to create jobs and rally the pandemic-hit UK economy. Housing Secretary Robert Jenrick said 300 “shovel-ready” projects will receive a share of a 900 million pound Getting Building Fund, and a further 360 million pounds will go toward homes on previously developed “brownfield” land.

Researchers from the University of Sydney created a report on the detailed model of the global economy. The study says that the coronavirus pandemic and measures to slow its spread cost the global economy $3.8 trillion and put 147 million people out of work. The sector to be hit the hardest is the travel industry – due to canceled flights and countries closing their borders to visitors – particularly in Asia, Europe, and the US.

France’s top scientific body has said the country risks losing control of its Covid-19 outbreak, and the head of the doctors’ union in Germany has said it is already facing a second wave, as the number of infections rises across Europe. The French government’s scientific council said a second wave was highly likely this autumn or winter, and that the situation was “under control, but precarious. We could at any moment tip into a scenario that is less under control.”

The major Europe stock markets had a mixed day:

  • CAC 40 increased 13.59 points or 0.28% to 4,889.52
  • FTSE 100 increased 3.15 points or 0.05% to 6,036.00
  • DAX 30 decreased 46.11 points or -0.36% to 12,600.87

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.00413 or 0.35% to 1.18001
  • GBPUSD decreased 0.00068 or -0.05% to 1.30694
  • USDCHF decreased 0.00427 or -0.47% to 0.91341

Some economic news from Europe today:

Swiss:

SECO Consumer Climate (Q3) increased from -56 to -30

France:

French Government Budget Balance (Jun) decreased from -117.9B to -124.9B

Spain:

Spanish Unemployment Change decreased from 5.1K TO -89.8k

Euro Zone:

PPI (YoY) (Jun) increased from -5.0% to -3.7%

PPI (MoM) (Jun) increased from -0.6% to 0.7%

US/AMERICAS:

Democrats and Republicans are at odds on how to proceed with the next round of coronavirus stimulus aid. The federal moratorium on evictions has expired, although certain states have independently extended their eviction period. The extra $600 weekly federal unemployment benefit has expired as well. Senate Majority Leader Mitch McConnell announced this Tuesday that he is ready to back nearly any plan “even if I have some problems with certain parts of it.” Both sides have agreed to issue a second round of $1200 stimulus checks to Americans who qualify, but little else has been agreed upon.

The Global Times, a Chinese state-run tabloid, ran the headline “Banning TikTok reflects Washington’s cowardice.” Beijing is offended that Washington banned the social media platform TikTok, and suggested that Washington’s pressure to move the company to the US is “robbery.” Global Times editor-in-chief Hu Xijin declared, “This is an open robbery. The world is watching and God is watching that how President Trump is turning the once great America into a rogue country.” President Trump is currently open to allowing Microsoft to acquire TikTok, but would like to see the US government profit from that deal.

Brazilian Army General Walter Souza Braga Netto, President Bolsonaro’s chief of staff, has tested positive for the coronavirus. This is the seventh member of Bolsonaro’s administration to contract COVID-19. Brago Netto told the press that he is not experiencing any symptoms but will continue to self-distance. Bolsonaro is permitting people to be treated with hydroxychloroquine, which he personally took while recovering. Brazil has the second-highest number of cases, with the US being first, after 2.75 million people contracted COVID-19 with 94,665 deaths.

US Market Closings:

  • Dow advanced 164.07 points or 0.62% to 26,828.47
  • S&P 500 advanced 11.9 points or 0.36% to 3,306.51
  • Nasdaq advanced 38.37 points or 0.35% to 10,941.17
  • Russell 2000 advanced 10.41 points or 0.69% to 1,517.21

Canada Market Closings:

  • TSX Composite advabced 198.83 points or 1.23% to 16,368.08
  • TSX 60 advanced 12.21 points or 1.26% to 980.88

Brazil Market Closing:

  • Bovespa declined 1,614.09 points or -1.57% to 101,215.87

ENERGY:

The UAE’s crude oil exports to Japan fell by 30.43% to 20.13 million barrels per day (bpd) in June from 28.899 million bpd in the same month a year earlier, according to data released by the Japanese Agency of Energy and Natural Resource (AENR). These exports represent around 35.1% of Japan’s total crude imports in June, the agency said.

The oil markets had a green day today:

  • Crude Oil increased 0.56 USD/BBL or 1.37% to 41.5700
  • Brent increased 0.19 USD/BBL or 0.43% to 44.3400
  • Natural gas increased 0.04 USD/MMBtu or 1.87% to 2.1840
  • Gasoline increased 0.0054 USD/GAL or 0.45% to 1.2093
  • Heating oil increased 0.0224 USD/GAL or 1.82% to 1.2556

The above data was collected around 16:07 EST on Tuesday.

  • Top commodity gainers: Silver (7.36%), Aluminum (2.32%), Palladium (2.35%), and Gold (2.17%)
  • Top commodity losers: Ethanol (-2.80%), Wheat (-2.35%), Corn (-2.68%), and Orange Juice (-3.82%)

The above data was collected around 16:12 EST on Tuesday.

BONDS:

Japan 0.02%(-1bp), US 2’s 0.11% (-0bps), US 10’s 0.52%(-4bps); US 30’s 1.20%(-5bps), Bunds -0.55% (+0bp), France -0.23% (-3bp), Italy 1.02% (-6bp), Turkey 13.12% (+42bp), Greece 1.06% (-4bp), Portugal 0.31% (-5bp); Spain 0.29% (+2bp) and UK Gilts 0.08% (-2bp).

  • Japan 10-Year JGB Auction decreased from 0.058% to 0.018%