Market Talk – February 21, 2020

 

ASIA:

China ‘s powerful State Council has decided to waive some business contributions to social insurance plans through June, and emphasized that “stable employment” must be a priority. The policy moves also come as the country begins a gradual return to work in manufacturing, technology, and other major industries.

China Passenger Car Association (CPCA) said in a report that car sales in China fell 92% in the first half of February due to coronavirus outbreak. Nationwide car sales in the first week of February fell to a daily average of just 811 vehicles. Dealers have gradually restarted operations this month, and the automobile trade body is hoping sales will improve during the second half of February.

Due to coronavirus outbreak in China, Apple warned of a global iPhone supply shortage. This is due to the production delays in China as Apple was forced to stop their manufacturing plants amid the coronavirus outbreak.

Former Indian ambassador to the US Meera Shankar has said that a US-India trade deal is difficult but not impossible. President Trump’s “America First” policy and Prime Minister Modi’s ”Make in India” campaign will make the trade deal between the two countries more difficult. Given the patience and time, both countries have the desire to resolve their differences in a way that is mutually beneficial, Shankar said. Experts have also raised concerns that India’s plans to introduce a comprehensive data privacy law may complicate matters for US tech companies. The bill is currently under review in parliament and would prohibit companies from processing sensitive personal information outside India.

Ahead of President Trump’s visit to Inia next week, India is currently completely free of coronavirus infections. Screening for symptoms of the coronavirus is going on in India on a large scale.

The major Asian stock markets had a mixed day today:

  • NIKKEI 225 decreased 92.41 points or -0.39% to 23,386.74
  • Shanghai increased 9.51 points or 0.31% to 3,039.67
  • Hang Seng decreased 300.35 points or -1.09% to 27,308.81
  • ASX 200 decreased 23.50 points or -0.33% to 7,139.00
  • Kospi decreased 32.66 points or -1.49% to 2,162.84
  • SENSEX closed

The major Asian currency markets had a mixed day today:

  • AUDUSD increased 0.0016 or 0.24% to 0.6632
  • NZDUSD increased 0.0017 or 0.27% to 0.6351
  • USDJPY decreased 0.4210 or -0.38% to 111.61
  • USDCNY decreased 0.0104 or 0.15% to 7.0365

Precious Metals:

  • Gold increased 27.69 USD/t oz. or 1.71% to 1,648.23
  • Silver increased 0.152 USD/t. oz or 0.83% to 18.5803

Some economic news from last night:

Australia:

Manufacturing PMI increased from 49.6 to 49.8

Services PMI decreased from 50.6 to 48.4

Japan:

CPI, n.s.a (MoM) (Jan) decreased from 0.1% to -0.1%

National Core CPI (YoY) (Jan) increased from 0.7% to 0.8%

National CPI (YoY) (Jan) decreased from 0.8% to 0.7%

National CPI (MoM) decreased from 0.1% to 0.0%

Manufacturing PMI (Feb) decreased from 48.8 to 47.6

Services PMI decreased from 51.0 to 46.7

All Industries Activity Index (MoM) decreased from 0.9% to 0.0%

Some economic news from today:

India:

FX Reserves, USD increased from 473.00B to 476.09B

EUROPE/EMEA:

Google is debating whether to exclude UK citizens from the general data protection regulation (GDPR) that EU citizens currently enjoy.

Angela Merkel rejected the idea where richer nations will stump up more of their budgets to fill the 75 billion euro hole from Brexit. The seven-year budget will be difficult to pass as nations such as the Netherlands and Austria are refusing to spend more on the budget. Irish PM Varadkar said that the budget proposal was unacceptable.

There has been a backlash amongst the public in Switzerland over the planned 5G network, as the public is concerned due to the radiation from the antennas. Geneva is the first canton to buckle under the pressure of the public and halt the development of antennas. Swisscom, the main telecom provider, believes 90% of the population will have 5G by the end of the year.

The major Europe stock markets had a negative day today:

  • CAC 40 decreased 32.58 points or -0.54% to 6,029.72
  • FTSE 100 decreased 32.72 points, or -0.44% to 7,403.92
  • DAX 30 decreased 84.67 points or -0.62% to 13,579.33

The major Europe currency markets had a mixed day today:

  • EURUSD increased 0.0068 or 0.63% to 1.0856
  • GBPUSD increased 0.0097 or 0.75% to 1.2979
  • USDCHF decreased 0.0060 or 0.61% to 0.9779

Some economic news from Europe today:

France:

French Manufacturing PMI (Feb) decreased from 51.1 to 49.7

French Markit Composite PMI (Feb) increased from 51.1 to 51.9

French Services PMI (Feb) increased from 51.0 to 52.6

Germany:

German Composite PMI (Feb) decreased from 51.2 to 51.1

German Manufacturing PMI (Feb) increased from 45.3 to 47.8

German Services PMI (Feb) decreased from 54.2 to 53.3

Italy:

Italian Industrial New Orders (MoM) (Dec) increased from -0.2% to 1.4%

Italian Industrial New Orders (YoY) (Dec) increased from -4.3% to 6.0%

Italian Industrial Sales (MoM) (Dec) decreased from 0.00% to -3.00%

Italian Industrial Sales (YoY) (Dec) decreased from 0.20% to -1.40%

Italian CPI (MoM) (Jan) remain the same at 0.1%

Italian CPI (YoY) (Jan) remain the same at 0.5%

Italian CPI Ex Tobacco (MoM) (Jan) increased from 0.4% to 0.5%

Italian HICP (MoM) (Jan) remain the same at -1.8%

Italian HICP (YoY) (Jan) remain the same at 0.4%

Euro Zone:

Manufacturing PMI (Feb) increased from 47.9 to 49.1

Markit Composite PMI (Feb) increased from 51.3 to 51.6

Services PMI (Feb)  increased from 52.5 to 52.8

Core CPI (MoM) (Jan) remain the same at -1.7%

Core CPI (YoY) (Jan) remain the same at 1.1%

CPI (MoM) (Jan) decreased from 0.3% to -1.0%

CPI (YoY) (Jan) remain the same at 1.4%

CPI ex Tobacco (MoM) (Jan) decreased from 0.3% to -1.0%

CPI ex Tobacco (YoY) (Jan) increased from 1.2% to 1.3%

HICP ex Energy & Food (YoY) (Jan) remain the same at 1.3%

HICP ex Energy and Food (MoM) (Jan) decreased from 0.3% to -1.3%

UK:

Composite PMI remain the same at 53.3

Manufacturing PMI increased from 50.0 to 51.9

Public Sector Net Borrowing (Jan) decreased from 3.46B to -10.54B

Public Sector Net Cash Requirement (Jan) decreased from 16.768B to -18.754B

Services PMI decreased from 53.9 to 53.3

US/AMERICAS:

St. Louis Fed President James Bullard believes the coronavirus will be a “temporary shock” to the US markets that will likely “blow over” as other virus scares have in the past. Bullard does not believe that the coronavirus is a justifiable reason to lower rates. The markets have to price in the risk, however, Bullard expects the Fed will return to “the on-hold scenario” once fears over the virus dissipate. “A lot of the news on the U.S. economy has been good in the last couple of months. I’ve been arguing we’re in good shape for a soft landing in the U.S. economy,” the Fed president told reporters at CNBC. However, his words did little to comfort the US markets this Friday.

L Brands announced that they sold off a 55% stake in its popular women’s lingerie store Victoria’s Secret. Private equity firm Sycamore Partners purchased the retail chain and associated brands in a $525 million cash deal. “We believe that, as a private company, Victoria’s Secret will be better able to focus on longer-term results,” commented L Brands chairman and CEO Leslie H. Wexner.

In opposition to the pipeline expansion, protestors have blocked off the railroad system in Canada spanning across British Columbia, Ontario and Quebec. The railway standstill has begun to impact the Canadian economy, and Prime Minister Trudeau is calling for an end to the protests. “The damage inflicted on the Canadian economy and on the welfare of all our citizens mounts with each hour that these illegal disruptions are allowed to continue,” Trudeau said on Tuesday. Via Rail train service announced that they will now need to temporarily lay off 1,000 employees. CN Rail announced a temporary layoff of 450 workers. Today, Trudeau publicized that he is concerned the situation will become violent once the barricades are removed. However, he said he will not call in the army to handle the situation.

US Market Closings:

  • Dow declined 227.57 points or -0.78% to 28,992.41
  • S&P 500 declined 35.48 points or 1.05% to 3,337.75
  • Nasdaq declined 174.38 points or -1.79% to 9,576.59
  • Russell 2000 declined 17.46 points or -1.03% to 1,678.61

Canada Market Closings:

  • TSX Composite declined 100.53 points or -0.56% to 17,843.53
  • TSX 60 declined 6.43 points or -0.6% to 1,062.86

Brazil Market Closing:

  • Bovespa declined 904.82 points or -0.79% to 113,681.42

ENERGY:

Russia has made it clear that they are not going to cut production further than they currently have. However, countries such as Saudi Arabia, the UAE, and Kuwait are leaving the possibility on the table. The coronavirus has failed to push the OPEC+ meetings up from early March.

The oil markets had a mixed day today:

  • Crude Oil decreased 0.42 USD/BBL or -0.78% to 53.2999
  • Brent decreased 0.88 USD/BBL or -1.48% to 58.5183
  • Natural gas increased 0.0122 USD/MMBtu or 0.65% to 1.9038
  • Gasoline decreased 0.004 1USD/GAL or -0.24% to 1.6540
  • Heating oil increased 0.0025 USD/GAL or 0.15% to 1.6831
  • Top commodity gainers: Gold (1.71%), Coffee (4.87%), Rubber (1.93%), and Sugar (1.10%)
  • Top commodity losers: Bitumen (-5.30%), Cocoa (-1.77%), Wheat (-1.74%), and Brent (-1.48%)

The above data was collected around 14:15 EST on Friday.

BONDS:

US government 30-year bond yields hit an all-time low today as investors are worried about the future of the economy.

Japan -0.06%(-1bp), US 2’s 1.34% (-5bps), US 10’s 1.47%(-6bps); US 30’s 1.91%(-6bps), Bunds -0.44% (+0bp), France -0.21% (+1bp), Italy 0.92% (+0bp), Turkey 11.81 % (+10bp), Greece 0.96% (-2bp), Portugal 0.19% (-0bp); Spain 0.23% (+4bp) and UK Gilts 0.57% (-1bp).